Here’s My Geopolitical Forecast For 2015: “Good Luck Everybody!”

 “Good luck everybody. Gird your loins and fasten your seat belts!” Below is my geopolitical forecast (Part 2) for 2015 covering Russia, China, Japan, USA, Europe & the Islamic State. Read my forecasts regarding banking & oil (Part 1) and U.S. domestic matters (Part 3) in seperate posts.

By James Howard Kunstler (kunstler.com) as originally* entitled Forecast 2015 — Life in the Breakdown Lane. Read Part 1 here; Part 3 here.

Geopolitics

The signal event of 2015 will be the disintegration of Tom Friedman’s global economy, the trade and banking relations we have known for about a quarter century, especially the frictionless flow of goods and capital between East and West.

• The tactical blunders of the USA and its Euro-partners have driven the so-called emerging markets, led by China’s Shanghai Cooperation Organization, into a skein of work-arounds to undermine and avoid the US dollar trade. They don’t exactly replace the dollar as the world’s reserve currency but the workarounds lead to a period of worldwide currency turmoil that can only be resolved by monies being at least partially backed by gold.
• Both China and Russia will continue to work to convert their dollar reserves into Gold whenever possible.
• Meanwhile, America and Great Britain’s campaign to discredit and devalue gold will only permit their rivals to acquire more at a cheaper price…

[In addition:]

• The U.S. will now abandon Ukraine having completely botched the operation, and misplayed the game against Russia’s Putin — and Russia’s legitimate interest in a stable next-door neighbor…Eventually, the Russians will have to care for the dying Ukraine. They will not be enthusiastic about it. They will do little and do it slowly.
• Likewise, our economic sanctions campaign against Russia (including the attack on the ruble)…[will] blow back on the Eurozone’s export economy with the loss of their access to imported oil and gas from Russia [just as] the North Sea fields and the Dutch Groningen gas field are dying. Russia, on the other hand, has survived much worse than Western sanctions in recent history…[and] will survive by turning east to Asia. This is already happening and is well publicized. Good luck staying warm, Europe.
• The blowback of Europe’s foolish partnership with the U.S. campaign to punish Russia can only discredit the ruling parties and boost new right-wing parties such as France’s National Front and Britain’s UK Independence Party, both deeply nationalistic, anti Euro Union, and anti endless immigration.
• The Islamic State was another legacy of blowback from American foreign adventurism. It was spawned out of the remnants of Al Qaeda in poor, broken Iraq and…has vast potential to recruit the population of idle, under-employed young men all across North Africa and the Middle East, and beyond to Europe and the band of Islamic society that stretches below Russia across mid-Asia. The catch is, if and when they come to actually rule most of these territories, they will be running economies reduced to Dark Age levels.
• The tanking of crude oil prices has critically impaired…Saudi Arabia’s economy that depends on oil sales for more than 80 percent of its operating revenue. Much of that revenue goes to a national welfare system that pays just about everybody to not work. There will be a lot less money to go around now and a lot of grievance over it.
  • The population of the Arabian Peninsula is so far beyond critical overshoot that the situation can only get ugly, especially since a large part of that excessive population consists of testosterone-jacked young men under 30 with nothing to occupy their hours but chitchat over tea and religious mummery.
  • Consider also that when King Abdullah goes, there is liable to be a deeply destabilizing fight for the throne among the hordes of princes and competing clans — despite whomever Abdullah has named as his successor. You may be sure the Islamic State will be standing by to add fuel to those fires. That, in and of itself, could bring on a fast end of the oil age.
  • Bear in mind, too, that the eastern side of Saudi Arabia, where most of the oil infrastructure is, contains a majority Shi’ite population. In a conflict between Sunni IS and Iran-backed Arabian Shia, a lot of stuff could just get blown up. At the least, it could badly interrupt 30 percent of the world’s oil supply.
• China will work sedulously to try for a soft landing in the great economic contraction that looms. Chinese banking being non-transparent, overly subject to blundering central control, and deeply corrupt, may not bode well for that project.
  • China has many cushions to fall back on short-term in the form of foreign money reserves and stockpiles of raw materials but, sooner or later, they have to reckon with their dependence on continued oil imports. That is clearly the basis of China’s current flirtation with Russia — but with Russia arguably past its own oil production peak, that’s not a long-term strategy.
  • China has cranked up the world’s mightiest production line of photovoltaic hardware, but solar won’t replace oil the way things currently run, and whatever they rig up may not last more than one generation if there’s no supporting platform of an oil economy for the manufacture of solar replacement parts.
• Japan’s suicidal experiment with hyper-turbo ZIRP and QE is not accomplishing much except exacerbating global currency carry trades and driving down the nation’s standard of living. It may succeed in destroying the Yen and what remains of its economy in 2015.
  • Fukushima remains unresolved and Japan’s energy future looks plain dismal. They have no energy resources of their own whatsoever. Any serious mischief in the Middle East oil fields will finish them off. The nation has been on the fast track to become the first post-industrial neo-medieval society. They could be fortunate to land back there and set up their shop while there are still residual riches in the world to work with. They might also go cuckoo and start a war with China for control over the oil fields of the South China sea. It is hard to see any other outcome from such a conflict other than China kicking Japan’s ass.

Geopolitical forecast particulars for 2015:

1. Russia toughs out sanctions imposed by the USA;
2. European partners drop their sanctions against Russia as self-evidently counter-productive.
3. Russia threatens to postpone debt repayments to Western banks.
4. The Russian ruble stabilizes.
5. Russia endures Islamic terrorist attacks and responds very harshly, embarrassing the wimpy West.
6. Baghdad falls to Islamic State forces. Years of American endeavor are lost just like that.
7. The IS attempts to use Iraqi oil reserves to fund its operations.
8. IS has a hard time keeping the infrastructure in repair.
9. The USA refrains from bombing Iraqi oil installations, a decision viewed as weakness by IS.
10. The Islamic State makes inroads across North Africa. Libya, Egypt, Algeria, Tunisia, Morocco are all susceptible.
11. Formerly marginal political parties win big across Europe, forcing nations to rethink wide-open immigration policies.
12. Neo-liberalism sinks into deep Weimar-style discredit.
13. Open ethnic warfare breaks out in France, Britain, the Netherlands, Sweden.
14. European economies continue to sink for the simple reason that the growth era of techno-industrialism is over, along with affordable oil, and no amount of debt production will bring it back. All the machinations of the EU and the ECB are dedicated to overcoming this implacable reality, and thus will only lead to deeper and more intractable problems.
15. Beginning with the late January elections, which Alexis Tsipras’s Syriza party wins, Greece plays hardball with the EU for debt restructuring that amounts really to forgiveness of utterly unpayable €322 billion ($398 billion). If the EU calls Greece’s bluff and kicks them out, a European banking meltdown is almost certain. If Greece stays, then other hopelessly indebted nations of the EU declare they want the same deal. Pretty much a rock and hard place. Impossible to call except to say the situation promises mucho turmoil in 2015. ¡Hay problema!
16. Ebola contagion persists and rips across sub-Saharan Africa. Other nations are forced to pass severe travel restrictions to-and-from Africa.
17. Nigeria descends into bloody political turmoil as its oil industry falls apart in response to low prices. UN intervention accomplishes nothing. In wartime conditions, Ebola gains a foothold in Lagos, one of the world’s most overpopulated slum cities.
18. Pakistan and Afghanistan both continue to melt down into ungovernability. India is forced to take over administration of Pakistan and remove nukes.
19. America continues to pretend that its mission in Afghanistan has some purpose, but it only remains a black hole of military expenditure and becomes a rancorous issue in the run-up to the 2016 Presidential election.

Good luck everybody. Gird your loins and fasten your seat belts.

[The above article is presented by  Lorimer Wilson, editor of  www.munKNEE.com and www.FinancialArticleSummariesToday.com and the FREE Market Intelligence Report newsletter (sample here – register here) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. This paragraph must be included in any article re-posting to avoid copyright infringement.]

*Original Source: http://kunstler.com/forecast/forecast-2015/ (KUNSTLER © 2015. All Rights Reserved.)

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