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What Will the World Look Like in 100 Years?

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China is in serious trouble. That is the conclusion of Dr. George Friedman, president of STRATFOR, a geopolitical strategy consulting firm. While it has had a great 30 year run, that performance will not extrapolate 30 years into the future, as many China (FXI) bulls believe. Of the Middle Kingdom’s 1.3 billion citizens, only 60 million earn a $20,000 middle class annual income, while 440 million make $3-$6/day and 600 million take in under $3/day. The people’s liberation army, which is manned predominantly by the under classes from the hinterlands, could move the country away from its modernizing trend at anytime, especially if a recession leads to starvation in the countryside.

The problem is that the Chinese are investing their massive reserves anywhere but in China, which they fear may lead to an overheating of the economy. Are they aware if risks invisible to foreign investors? The future direction of the country may be decided by its next election, the first open one in history.

Dr. Friedman much prefers investing in Japan (EWJ), which has the benefit of a stable society, immense industrial plant, advanced technology, and the largest military force in Asia. Demographic challenges can be met by offshoring labor intensive industries in China, which they have been doing aggressively for three decades. Japan is a classic case of a nation with strong fundamentals, but lousy management which can be solved with a simple change of government.

The largest threat to the nascent global economic recovery is a breakdown of back channel negotiations between the US and Iran, which could lead to a blocking of the Straits of Hormuz. This would cause oil to spike to $500 a barrel, trigger a global depression, lead to widespread sovereign debt defaults, and send Western governments toppling. That’s why neither the US or Israel will not bomb the rogue nation’s nuclear program, which in any case can only produce impractical, unusable weapons.

The greatest threat to US power would be the coalescing of a pan Middle Eastern super power. US policies that triggered a Sunni/Shiite civil war can be viewed as a success in that they prevent this from happening. The war’s trillion dollar price tag is a bargain as long as we can still buy gas at home for $3/gallon.

George likes Poland (EPOL), which he describes as the South Korea of Europe. It will greatly benefit from closer relations between Russia and Germany (click here for my own recent Poland piece at http://www.madhedgefundtrader.com/june-10-2010.html ). Turkey (TUR) is another buy, with a rising middle class, an economy that is not dependent on exports, and a robust banking system (click here for “Turkey is on the Menu”  at http://www.madhedgefundtrader.com/july-23-2010.html ).

Russia (RSX) is moving towards a stable economic platform built around its resource riches, moving on from the kleptocracy of the nineties. It is creating integrated energy majors which are establishing a global footprint and present a potent oil weapon. Monopolies in wood, grain, and diamonds are moving in the same direction.

Dr. Friedman started out life as a refugee from Hungary, his parents rowing him across the Danube in 1949 under glaring searchlights. He obtained his BA from the City College of New York and his PhD in government from Cornell. He then spent two decades teaching political science at Dickinson College in Pennsylvania. Dr. Friedman has recently published a New York Times best seller entitled The Next 100 Years: A Forecast for the 21st Century.

In the book Friedman claims the current Islamic assault on the West is failing, and will cease to be a factor on the international scene within the decade. Russia will take another run at becoming a superpower, which will fail by 2020, and leave the country even more diminished than it is today. When standards of living in China level off or reverse in the 2020’s, chronic resource shortages could cause the Middle Kingdom to implode and break up. China is far more fragile than we realize.

Japan may deal with stagnant economic and population growth the same way it did during the 1930’s by invading China as early as 2030. Japan may also take a bite out of indefensible Siberia when it remilitarizes. Poland, a unified Korea (click here for “The Economic Miracle that is South Korea” at http://www.madhedgefundtrader.com/april_29__2010.html ) , and Turkey will develop into regional military and economic powers in their own right.

Friedman then describes a theoretical war by a coalition of Turkey and Japan against the US in 2050, resulting in an American victory, which leads to a new US golden age in the second half of the century. Scramjet engines make possible the development of unmanned hypersonic aircraft which can launch a precision attack any place on the planet in 30 minutes. Warfare will move into space and be fought from “battle stars,” which will also become major energy sources for earth. Friedman kind of lost me when he predicted that the next Pearl Harbor could come from Japan, but not from the sea going aircraft carriers of old, but from caves on the moon.

The big challenge towards the end of the 21st century will be the emergence of a Hispanic nation in the Southwest, which is culturally isolating itself by not integrating with the rest of the country. This could lead to the secession of several states, or a new war with Mexico, which by then, will develop into a major power in its own right. I think to avoid a second Civil War and offload some huge state deficits, Washington just might say “¡Adios!”

You can argue that someone making many of these predictions is looney. But if you had anticipated in 1970 that China would become America’s largest trading partner, the Soviet Union would collapse, Eastern Europe would join NATO, the US would enter a second Vietnam War in Afghanistan, and oil would hit $150 a barrel, you would have been considered equally nutty. I know because I was one of those people. It does seem that long term forecasters have terrible track records.

All in all, the book is a great armchair exercise in global realpolitics, and an entertaining contemplation of the impossible. More than once, I heard myself thinking “He’s got to be kidding.”

To listen to my interview with George Friedman on Hedge Fund Radio in full, please go to my radio archives by clicking here at http://www.madhedgefundtrader.com/hedge-fund-radio-archives , and click on the “PLAY” arrow. Or you can download it to your IPod or your pc for free. To learn more about Dr. Friedman and STRATFOR, please visit their website at http://www.stratfor.com/ .

Where would Dr. Friedman focus his investments now? In the US, which with a 25% share of world GDP and the most powerful military in history is in an ideal position to dominate the global economy for another century.

To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free.

 


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Wed, 08/04/2010 - 11:31 | Link to Comment eccitante
eccitante's picture

"but lousy management which can be solved with a simple change of government."

 

That's the funniest thing I have heard in quite some time....Since when is it easy to change a government???? Well, at least it is easy to get "change you can believe in." But actual change? HAHAHAHAHAHAHA

Wed, 08/04/2010 - 12:11 | Link to Comment Ripped Chunk
Ripped Chunk's picture

There will be armed Chinese troops at the entrance to Yosemite and Kings Canyon (just to name a few)

You will be granted entance for $2,500 if you submit to the installation of (an additional) tracking chip into your body.

You can enjoy the "park" as long as you do not look at the areas that are being clear cut for timber. 

 

Wed, 08/04/2010 - 11:16 | Link to Comment Bankster T Cubed
Bankster T Cubed's picture

given current trends, in 100 years the world will have zero people living

but the markets will continue to trade exactly as they do, powered by solar/wind/hydro combo

hell, at this rate earth might look this way in 3 years

Wed, 08/04/2010 - 10:57 | Link to Comment GeoFizz
GeoFizz's picture

Stratfor didn't see the 2008 financial crisis coming.  They're top-rate when it comes to geopolitical analysis, but have a bit of a blind spot when it comes to financial expertise.

Wed, 08/04/2010 - 10:34 | Link to Comment CrazyCooter
CrazyCooter's picture

I dont want to come across as an ass, but anyone that makes predictions about 100 years into the future better have an extremely narrow view of the future (e.g. how much mass will my radioactive piece of matter have).

How about the officla Strategic Estimates in the Twentieth Century to base line this piece of crap post:

1900 :: If you are a strategic analyst for the world’s leading power, you are British, looking warily at Britain’s age old enemy, France.
1910 :: You are now allied with France, and the enemy is now Germany.
1920 :: Britain and its allies have won World War I, but now the British find themselves engaged in a naval race with its former allies, the United States and Japan. For the British, naval limitation treaties are in place, the Great Depression has started, and defense planning for the next five years assumes a “ten year” rule – no war in ten years. British planners posited the main threats to the Empire as the Soviet Union and Japan, while Germany and Italy are either friendly or no threat.
1936 :: A British planner now posits three great threats: Italy, Japan, and the worst, a resurgent Germany, while little help can be expected from the United States.
1940 :: The collapse of France in June leaves Britain alone in a seemingly hopeless war with Germany and Italy, with a Japanese threat looming in the Pacific. The United States has only recently begun to scramble to rearm its military forces.
1950 :: The United States is now the world’s greatest power, the atomic age has dawned, and a “police action” begins in June in Korea that will kill over 36,500 Americans, 58,000 South Koreans, nearly 3,000 Allied soldiers, 215,000 North Koreans, 400,000 Chinese, and 2,000,000 Korean civilians before a cease-fire brings an end to the fighting in 1953. The main opponent in the conflict is China, America’s ally in the war against Japan.
1960 :: Politicians in the United States are focusing on a missile gap that does not genuinely exist; massive retaliation will soon give way to flexible response, while a small insurgency in South Vietnam hardly draws American attention.
1970 :: The United States is beginning to withdraw from Vietnam, its military forces in shambles. The Soviet Union has just crushed incipient rebellion in the Warsaw Pact. Détente between the Soviets and Americans has begun, while the Chinese are waiting in the wings to create an informal alliance with the United States.
1980 :: The Soviets have just invaded Afghanistan, while a theocratic revolution in Iran has overthrown the Shah’s regime. “Desert One” – an attempt to free American hostages in Iran – ends in a humiliating failure, another indication of what pundits were calling “the hollow force.” America is the greatest creditor nation the world had ever seen.
1990 :: The Soviet Union collapses. The supposedly hollow force shreds the vaunted Iraqi Army in less than 100 hours. The United States has become the world’s greatest debtor nation. Very few outside of the Department of Defense and the academic community use the Internet.
2000 :: Warsaw is the capital of a North Atlantic Treaty Organization (NATO) nation. Terrorism is emerging as America’s greatest threat. Biotechnology, robotics, nanotechnology, HD energy, etc. are advancing so fast they are beyond forecasting.
2010 :: Take the above and plan accordingly! What will be the disruptions of the next 25 years?

Stolen from:

www.zerohedge.com/sites/default/files/JOE2010.pdf

Regards,

Cooter

Wed, 08/04/2010 - 11:19 | Link to Comment Bankster T Cubed
Bankster T Cubed's picture

pulling the strings throughout: Rothschilds/BOE syndicate

Wed, 08/04/2010 - 10:42 | Link to Comment Temporalist
Temporalist's picture

And most of that time the UK and US are plundering oil from countries and their people for profit...

Wed, 08/04/2010 - 10:20 | Link to Comment Temporalist
Temporalist's picture

All I have to say is "Where are my damned flying cars already!"

http://www.youtube.com/watch?v=8aTjof5fqQo

 

Home of tomorrow:

http://www.youtube.com/watch?v=-vPJkQsP20A&feature=related

Wed, 08/04/2010 - 09:33 | Link to Comment AchtungAffen
AchtungAffen's picture

"In the book Friedman claims the current Islamic assault on the West is failing"

 

The islamic assault on the west? Or the western assault on islam?

Again, predictions from a very US-centric vision.

Wed, 08/04/2010 - 09:09 | Link to Comment sethstorm
sethstorm's picture

Demographic challenges can be met by offshoring labor intensive industries in China, which they have been doing aggressively for three decades

That policy neglects the fact that they have tons of homeless people without work that they could use for work.

Or they could actually start hiring their own people from the street on a more permanent basis.  Pay them a respectable wage, and be able to give the finger to China.

 

Wed, 08/04/2010 - 09:04 | Link to Comment Leo Kolivakis
Leo Kolivakis's picture

"The problem is that the Chinese are investing their massive reserves anywhere but in China"

Really? China's Development Bank has been lending billions to solar companies. And China's national pension fund is investing in overseas PE and stocks. I wouldn't worry so much about China, they're in much better shape than most people think. But I do like STRATFOR and believe they provide one of the best geopolitical services around.

Wed, 08/04/2010 - 09:04 | Link to Comment George the baby...
George the baby crusher's picture

That, unfortunately, was a very shallow analysis of future events.  I would love the world to be that simple, but I'm afraid simple events can cause major outcomes.  I for one won't let a hedge fund trader, mad or not, interpret my crystal ball.

Wed, 08/04/2010 - 08:39 | Link to Comment Gully Foyle
Gully Foyle's picture

During the early Eighties I bought a book of predictions, everything from Psychics to top ranked people in Scientific and Economic fields.

I think two were vaguely close twenty years later.

I trust Charles Stross and his scifi way maore thany of these assholes.

Someone has read The Moon is a Harsh Mistress if they are predicting war based from Lunar caves.

Wed, 08/04/2010 - 12:07 | Link to Comment Ripped Chunk
Ripped Chunk's picture

Really?  I thought you were in grade school in the 80's because of the way you carry on. I stand corrected (maybe)

Wed, 08/04/2010 - 08:48 | Link to Comment snowball777
snowball777's picture

Yeah, I'm pretty sure the Japanese aren't working on a Mycroft and giant slingshot.

 

Wed, 08/04/2010 - 08:45 | Link to Comment snowball777
snowball777's picture

Psychics Convention cancelled due to unforeseen circumstances.

Wed, 08/04/2010 - 08:56 | Link to Comment Gully Foyle
Gully Foyle's picture

snowball777

There is a 90's HK action film where some guy tests a psychic by punching him in the face.

Pretty funny.

Wed, 08/04/2010 - 08:37 | Link to Comment Wyndtunnel
Wyndtunnel's picture

US policies that triggered a Sunni/Shiite civil war can be viewed as a success in that they prevent this from happening. The war’s trillion dollar price tag is a bargain as long as we can still buy gas at home for $3/gallon.

Too bad Obama et al. can't just come out and say it.  

Wed, 08/04/2010 - 08:35 | Link to Comment rapier
rapier's picture

Just look at the 80's movies of future dystopias for your best clues. From Soylent Green to Blade Runner to Alien. You know, the kind they don't make anymore, because in all of them corporations rule.   They rule over blighted landscapes where the majority schlep about in semi anarchic chaos. I don't know about all those last parts but corporations will rule.  It isn't like government for 10,000 has given us heaven.  But it's over for government.

Wed, 08/04/2010 - 15:58 | Link to Comment jakeman
jakeman's picture

Personally, my money is on Idiocracy. (Yes, I know that's technically set 500 years into the future, but I could easily see us accelerating our plans a bit. Brawndos all around!)

Wed, 08/04/2010 - 12:14 | Link to Comment Blankman
Blankman's picture

I would disagree about Soylent Green.  I just went to Mc D's for the first time in over a year and swear what I was fed was soylent green.  There sure was no cow meat in it.

Wed, 08/04/2010 - 10:40 | Link to Comment Rogerwilco
Rogerwilco's picture

@rapier

Some were closer than others. Terry Gilliam's movie "Brazil" hit the nail on the head.

Wed, 08/04/2010 - 09:00 | Link to Comment Zina
Zina's picture

The world will be lucky with a Blade Runner future... Blade Runner had no global warming.

Wed, 08/04/2010 - 08:40 | Link to Comment Gully Foyle
Gully Foyle's picture

rapier

I would trade Alien, not based on Earth, for the original Rollerball. Throw in Logan's Run for good measure.

Wed, 08/04/2010 - 08:34 | Link to Comment Zina
Zina's picture

Futurism is a dangerous sport. Just check the forecasts made in 1910 about how the world would be in 100 years. Miserable fail...

Anyway, I think in 2110 there will be no "world" as we know it. Only a few sparse stone age civilizations, trying to survive in a harsh environment.

 

Wed, 08/04/2010 - 08:43 | Link to Comment Gully Foyle
Gully Foyle's picture

Zina

If you graph invention you will see a straight vertical line.

It is possible to say technology will be more prevelant in our lives, and much more subtle than today.

At the same time fewer and fewer people will comprehend the nuts and bolts of what they use daily.

Wed, 08/04/2010 - 08:31 | Link to Comment Goldenballs
Goldenballs's picture

Meanwhile down on the farm ............................. bugger all had changed ............... 

Wed, 08/04/2010 - 08:30 | Link to Comment Astute Investor
Astute Investor's picture

No mention of Global Idol (orginally American Idol) celebrating its 100th season....

Wed, 08/04/2010 - 08:44 | Link to Comment snowball777
snowball777's picture

And the new winner of our prize of 1,000,000 special drawing rights is...<rips envelope>

Wed, 08/04/2010 - 08:14 | Link to Comment resipsaloquacious
resipsaloquacious's picture

MHFT, i.e., the most interesting man in the world, had too many Dos Equis during a voracious game of Risk last night? 

Wed, 08/04/2010 - 08:05 | Link to Comment Bruce Krasting
Bruce Krasting's picture

100 years? I am having trouble looking out to Friday.

Wed, 08/04/2010 - 08:43 | Link to Comment snowball777
snowball777's picture

It's easy, just take each of the 315,576,000,000 10ms intervals one at a time.

And you've only got to deal with 20,520,000 of them by Friday.

What could go wrong?

Amazing that we can even think about predicting that far when 'no one could predict' the demise of a gigantic asset bubble over the course of a couple decades.

Clueless monkeys. Good riddance.

Wed, 08/04/2010 - 07:40 | Link to Comment Mojo
Mojo's picture

Japan to invade China again? I knew it. China should do a nuclear preemptive strike on Japan now. Can't wait.

Wed, 08/04/2010 - 08:44 | Link to Comment Gully Foyle
Gully Foyle's picture

Mojo

That would wake Godzilla.

Wed, 08/04/2010 - 07:35 | Link to Comment akuacumen
akuacumen's picture

I love people like this. Forecasting for the unknown ... 10, 20 or more years ahead ... and making money doing it.

Yes, there are some plausible and interesting ideas in there. None of which are particularly new or original for that matter. The plausible ones have already been voiced by somebody else with less looniness mixed in.

What I would agree with is that the US's demise pretty much certain and the only question that remains is when.

China is in trouble but it is hard if not impossible to say how things will play out in such a complex country.

Turkey is indeed the happening place in Europe. I go there on a regular basis and the pace of progress is simply amazing. In 5 years time it will surpass most of the EU which will continue to be marginalized and hit even harder times as negative population demographics really start affecting the economies and government budgets even more so than now.

Russia is a wild card as it can go either way. The government is as corrupt as it has always been and if they can ever solve funds misappropriation problem then the country has potential if not then it will continue on being a mediocre superpower has been.

Wed, 08/04/2010 - 08:55 | Link to Comment Gully Foyle
Gully Foyle's picture

akuacumen

Interesting there is no mention of India. There population is still relatively young as China's starts aging. I don't think they hit the ageing population problems for another forty or fifty years after China.

http://www.chinadaily.com.cn/opinion/2010-07/07/content_10073696_2.htm

India will remain a younger country than China in 2040, with a median age of 35 years compared to 44 years in China. China's population is expected to age faster over the next three decades, with the percentage of 60-plus people in total population projected to increase from 12.3 percent in 2010 to 27.5 percent in 2040. The corresponding increase in India is expected to be from 7.5 percent in 2010 to 15.6 percent in 2040. The difference in ageing will influence the proportion of the working age population to the total population in each country.

At present, the proportions of working-age people in the China's and India's total populations are 67.8 percent and 61.7 percent. China has the "demographic dividend" of having a larger workforce today. Come 2040, the proportions are expected to reverse, to 62.4 percent for China and 64.6 percent for India.

One needs to be cautious in claiming that the change will give a decisive economic edge to the Indian economy vis--vis China. In absolute terms, the proportions imply that in 2040 there will be about 1 billion working-age people in India compared with 0.9 billion in China. Given the sizes of the two economies, the difference is marginal. But given that India will continue to experience net additions to its population well after 2040, its working age population is expected to increase further. Hence, India's expected higher returns from the demographic dividend vis--vis China are likely to grow over a three-decade-plus time horizon from now.

http://www.allbusiness.com/population-demographics/population-size-popul...

On the other hand, the population of working age defined as 20-64 in India will increase from 590 million in 2005 to 794 million in 2020 to 1,013 million in 2050, and India may well face a formidable challenge in providing employment for the growing workforce.

 

 

Wed, 08/04/2010 - 10:49 | Link to Comment Suisse
Suisse's picture

For all we know there will be robot helpers in the future, so productivity from humans is a moot point.

Wed, 08/04/2010 - 07:33 | Link to Comment Keith Piccirillo
Keith Piccirillo's picture

I read the book two summers ago and like the ideas....Turkey especially....proximity/location is a theme he exhorts.

Wed, 08/04/2010 - 07:16 | Link to Comment primefool
primefool's picture

A frightened little boy, brains fried in the 1970s, hoping despeartely that Mommy will still be a superpower - when he's 64.

Wed, 08/04/2010 - 07:11 | Link to Comment Moonrajah
Moonrajah's picture

No mention of USA in a 100 years? Oh, right. What USA?

Wed, 08/04/2010 - 07:11 | Link to Comment Sucks_to_be_Smart
Sucks_to_be_Smart's picture

Seriously, who the F*CK cares about what happens in a HUNDRED YEARS???  can we please stop posting intellectual masturbation from this guy?  Companies can't project further than 5 years with any amount of accuracy.  This guy wants to talk about scenarios in 2050 and beyond..... WTF.

Wed, 08/04/2010 - 10:35 | Link to Comment Rogerwilco
Rogerwilco's picture

@sucks

Yeah, let's stop thinking altogether, it's so damn tiring.

Wed, 08/04/2010 - 08:28 | Link to Comment Sneeve
Sneeve's picture

Seriously, it is one thing to be dubious about some random person's prediction of what it's all gonna be like in 100 years, quite another to not give a F*CK (flying or otherwise) about what legacy we're leaving to our great-grand-children.

Wed, 08/04/2010 - 09:57 | Link to Comment FEDbuster
FEDbuster's picture

There is a bit of truth to his assesment of the Southwest.  I think there is a very good chance of a war with Mexico or some sort of stealth hispanic "revolution" in border states. 

Our recent fight against illegals here in AZ will result in a massive redistribution of many of them throughout the rest of the Country.  Many are going to CA, NM and TX, but others are heading north to IL, IA, SD, ND, etc... They are not returning to Mexico in droves as some have reported, there is nothing but death and starvation waiting for them there.

Wed, 08/04/2010 - 10:47 | Link to Comment Suisse
Suisse's picture

"Death and starvation," you have no idea what you are talking about.

Wed, 08/04/2010 - 06:45 | Link to Comment laosuwan
laosuwan's picture

>>>Friedman claims the current Islamic assault on the West is failing, and will cease to be a factor on the international scene within the decade<<<

 

I am just back from a business trip to France and England. i would say the islamic assault has already succeeded in conquoring Europe. During my layover in Canada seemed like I was in Sudan with prayer calls and footbaths at the airport. They are even building a 13 story mosque where the church that went down at ground zero in new york used to stand. I read that Mohammed is the most popular name registered on birthcertificates in England today and that within 12 -15 years France will be a majority muslim country. Nothing I saw seems like losing the assault to me.

And then there is this...

http://www.youtube.com/watch?v=qjkeWYRYgLE

http://www.youtube.com/watch?v=xnOdD46WI0M

http://www.youtube.com/watch?v=QsJJqIztPHc

http://www.youtube.com/watch?v=nI5WoXpmPiM

http://www.youtube.com/watch?v=esUQrwUyOAo

http://www.youtube.com/watch?v=vjS0Novt3X4

 

 

Wed, 08/04/2010 - 08:53 | Link to Comment tmosley
tmosley's picture

Sort of like how we were overrun by the damned Irish a hundred and twenty years ago.

Now we're all Catholics and the streets run brown with Guiness made from the blood of Protestant babies.

The more things change, the more they stay the same...

Wed, 08/04/2010 - 09:31 | Link to Comment John Self
John Self's picture

Somehow I missed the McJihad period....

Wed, 08/04/2010 - 11:35 | Link to Comment nevadan
nevadan's picture

lol

Wed, 08/04/2010 - 09:29 | Link to Comment dan10400
dan10400's picture

mmmm.   baby blood.

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