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What Will the World Look Like in 100 Years?
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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i like guiness; its not bad for a commercial brew.
You are correct, the global islamic assault is in full swing with no signs of any weakness. It is an 'overrrun', not a war. In a democracy, there is nothing that anybody can do about it, except kick them out. In any other scenario, they win. They have realized this a long time ago already, while the West is still living in lalaland about what's really happening in their own countries.
Well they will not be the westerner's own countries soon anymore. Expect sweeping changes the moment the muslims reach 50.1% voting majority. Muslims are conquering West with West's own tools and even blessing, which is rather quickly turning into a damning curse (for the westerners themselves).
What countries are overrun? France? The UK? The UK is drastically reducing non-EU immigration, say goodbye to Eurabia there. There are barely any immigrants in Sweden, if any country has been overrun with immigrants recently it is the U.S. and Canada. Not the "West."
>>>There are barely any immigrants in Sweden>>>
Immigration to Sweden reaches new record21 December 2006
http://www.workpermit.com/news/2006_12_21/sweden/record_high_level_immigration_2006.htm
It's something like 1.62 per 1000 each year which is really not that much.
have you been to france or england lately? its pretty obvious just walking around. the french government has a website telling people where the no go areas are, even the police cannot enter. even if they cut off all immigration now its too late. native birthrates are near 1 to 1.2 but immigran birthrates are nearly 4 to 4.4. That means, at best, two more generations and its game over.
Native birthrates are closer to 1.8, non-native are more a long the times of 2.-something in England.
http://www.youtube.com/watch?v=SUAG8S_hlrk
What's the address of that website?
we get a lot of swedes and scandanavians visiting us here in Thailand. they are all buying houses here and trying to get out. The tell me it is too late to save their cultures from the eu that let all the muslims in. they have already taken over and are making it unlivable for the natives. it makes me wonder what will happen to all the nuclear weapons and culture in those countries. Here in asia they pretty much erased most of the monuments and history of the preislamic past wherever they came to power except where there is some tourist income potential. I wonder what will happen to europe?
I did not read the article.
I assert that it is almost surely wrong.
He doesn't understand peak oil. Therefore all of his predictions are void
If it is only at this point he lost the author, well...
He lost me as soon as he claimed to work the 100 years away limit.
A unified Korea under what terms? We are 2010.
Germany experimented a re-unification under much more favourable terms than Koreas experience. It is not yet digested. And it is the result of a concerted efforts by European nations which absorbed a large share of the costs of the process.
Looking at the Korean assets give what term, 10 years, 20 years, 30 years?
I wish Iran good luck in trying to hold control of the Straits of Hormuz with the U.S. Navy in the nearby vicinity.
I don't think they have to hold it, nor fight the US navy, but merely make a credible threat to shipping traffic for a matter of a couple of months.
There is a relatively narrow corridor of roughly a mile where SuperMax tankers must pass. It's easily reachable even by shore artillery from the small islands off Bandar Abbas. The ocean floor is defended with rocket-propelled antishipping mines. The hills around Bandar Abbas house dug-in antiship missile launchers, including possibly 300 SS-N-22 variant ASMs. Of course, each of these threats can be defeated in time. But how long can the west live with $9 gasoline? Weeks, I'd say, a couple of months at most.
If it comes to conflict with the US, who says they have to go for shipping exclusively? They'd have nothing to lose at that point so they may as well threaten the world's oil. Green Zone is 100 miles away from their border. I'd have to think about dropping a few chemical warheads in there. Their missiles can also reach the Saudi shipping terminals, Basra and Karg island; give them something to worry about.
Also, if they had The Suitcase from Allah, it'd be a good time to bring that in through the port at Haifa.
Looking at the map it doesn't seem an unbearable task even for Iran.
The problem would be much more that of the US to keep the strait open, the task of Iran would not be to control it, but just to shut it down.
If they manage to successfully attack and only just damage a few supertankers what will the oil price do? You just need a swarm of little fast speedboats full of explosive (remember the British against the invencible armada?): quick, cheap, expendable with enough people ready to die on them...
But what is exactly the link between your comment and this article? Do I miss something?
Regards
@Luigi: "But what is exactly the link between your comment and this article? Do I miss something?"
My comment was in reference to the following comment in the article: "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"
I don't believe Iran would be able to hold the Straits of Hormuz or disrupt the flow of oil through it for any meaningful length of time. While a conflict with Iran may occur, traders anticipating a shutdown in the Straits of Hormuz leading to $500 a barrel oil are dreaming.
Ah, ok, thank you for enlightening me: i should be more careful at reading :o)
you guys really don't grasp modern warfare, do you?
The Straits cannot be controlled by Iran. They will control neither the seas nor the skies nor the ground. All their shore-based assets would be bombed in the first portion of the engagement. Their naval assets would be suppressed. Our CVNs will guarantee theatre air supremacy. We'll have choppers and planes and even drones (serious lifespan these give from smaller carriers) roaming the skies looking for speedboats anchored or at sea and just blowing them up.
We've got a few hundred thousand troops in theatre and a MAJOR air base in Bahrain with hundreds of terrestrial aircraft.
People just think the US is just going to let Iran have those silkworm and sunburns intact on their shoreline?!?! The opening stages of such a war would be to clear Iran's naval and antiship assets from the board.
The point is not to control the strait, it is to make difficult for the oil tankers to go through: it would suffice for Iran to manage just a couple of hits on some big tanker with neither major damage to make the traffic stop and/or the insurances run so high that you need a TARP program for yourself to fill the tank of your car.
With all the technology available it is still difficult to spot a little speedboat and to repel the attack of a major wave thereof aimed at commercial vessels rather than military ones. Remember that after the onslaugh on Iraq it was found that the attacking airplanes destried on the ground, among others, a great deal of decoys. Take a look at the map: you had to pull lead on every corner of the coast h24 to try to destroy all possible menace sources and still after that you could not be that sure.
I hope it will not come so far as to verify who's opinion is wrong, but I think a full scale war against Iran would be a very very hard matter for whoever wants to mess with.
Closing the straits of Hormutz is out of the cards for Iran. The move would alienate them most of the world.
People will want the conflict to end quickly so the gas price falls.
All this misinterpretation stems from the belief that in the western world, a legitimate right to self defense is acknowledged.
It is not. Some have a legitimate right to attack, others has no right to defend themselves when attacked by some.
The closure of the strait might come as a last ditch effort, if ever.
Remember the first week of the invasion of Iraq. The Iraqis were supposed to engage in all kind of fumsy plans, one per day. Was funny to follow. I still have them somewhere on one HD. None of course happened.
All it stated is what people in charge in our countries would do if faced with a similar situation.
We now know that if they take charge of Iran, they will attempt to close the strait when under pressure.
I beg to differ: if attacked (I mean an attack similar to the onslaugh on Iraq, not som hornet stings on some installation) I think this would be among the first moves they would try and half of the world would blame Israel and the US as attackers for this: there are few moves who could hurt the attackers more than shut down the oil flow.
Otherwise they would retaliate on Israel, US and EU via terrorist attacks.
As for your reference to the right to attack and no right to defend oneself, I hope you have "sarcasm mode" on :)
But the relevant Western powers are fully aware that this is Iran's only feasible counterattack. Therefore, I would expect there to be thorough strikes and/or covert ops all along Iran's coast, taking out its naval presence (such as it is), contemporaneous with the strikes on the nuclear facilities.
luigi
I'm reading Dervish house by Ian McDonald.
His scenario is Iran gets hit with hyperbaric bombs at a secret nuke site. The resulting steam from the reactors coolant disperses down wind over Irans oil/gas field.
Radioactive and unusable.
"Warfare will move into space and be fought from “battle stars,” which will also become major energy sources for earth."
"the next Pearl Harbor could come from Japan, but not from the sea going aircraft carriers of old, but from caves on the moon."
Wow, far out. It also says "Dr. Friedman started out life as a refugee from Hungary, his parents rowing him across the Danube in 1949 under glaring searchlights". That would put him about the right age to have taken to much acid in the late 1960's.
Here on Earth we sit at the bottom of a deep gravity well. The moon has plenty of rocks, no atmosphere, and a far side we can't monitor. Throw a container full of rocks at the Earth on the correct trajectory and it will do a lot of damage when it strikes -- damage equivalent to a small nuclear weapon. Is it easy to launch rocks from the moon? No, but scifi writers have proposed various ways to do it since the 1950s. Electric- powered rail launchers are the most practical method and the technology to build one exists today. A small base with a nuke power generator would make it possible.
Defense against this kind of weapon is difficult because anything we launch from Earth has to climb out of the gravity well, and that is expensive given the current technology of rockets. Lasers or interception in the atmosphere would be ineffective against a heavy, inert target. On the flip side, defense against attacks from Earth-based weapons is much easier because it takes 2-3 days for them to reach the moon, and they're vulnerable, fragile high-tech stuff.
A lunar-based mass launcher would be the ultimate strategic weapon. The best strategic weapons are never used, the potential of their use guides the actions of adversaries.
Yep, The Moon Is a Harsh Mistress.
mmh... round? wet? devoid of humans?
Merely five and a half words and yet still more illuminating and plausible. Bravo!
So, there's going to be an alliance between the Shinto of Japan and the Muslims of Turkey against the US in 2050. But the US won't do anything about Japan invading China and Siberia in 2030.
That's a pretty good argument for loony right there.
I have a hard time taking any of this seriously. I'm going to withdraw $500 from the MHFT bank on Aug 12.
+1000
A few sensible ideas in a tale that reads mostly like bad science fiction.