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The next 18 months a forecast of Geopolitical events

September 13, 2017

The next 18 months

by LushFun

Kurdish referendum will set off a large scale change in the Middle East. It is very likely that in a sense delineation of border with Syria and the emerging Kurdistan will lead to U.S. and Iran coming closer together. This may sound counter intuitive but the fragility of each others proxies creates a necessity to push forth bilateral relations that would create a stable front at least on one perimeter of the states in question.

Turkey will be between the choice of attempting to go into a large scale conflict where it will most likely be cut off both from European and Dollar sources of funding. Not because Europe and U.S. want it replaced or gone but because it’s politics in the region are too autonomous and have begun to clash with the wider implications that are necessary to reboot the region as a whole.

North Korea is probably in the last year of existence. One day we will wake up to multi-spectrum air attacks and a landing into the jugular of the north. It is very likely that China will have no choice but to watch from the sidelines. In the event it does intervene the economic decimation will be the most likely long term side-effect. Pretending that China would not be cut off from maritime trade and simultaneously be in the position of insolvency in its’ ability to buy on the world market and be able to clear those transactions is a dream. Upon reunification China will receive more contentious Korea-Japan-U.S. alliance that will be seen as extremely credible. In all likelihood other actors like Vietnam, Indonesia, and Philippines will assert themselves in their territorial waters.

China does not understand that the reason Soviet Union could contest Western influence is due to ability to share its’ resources globally to create strategic partnerships that did not always favor itself. We can see this with U.S. giving market access to Japan and South Korea as an example. China wants influence without paying for it, via pure dominance in a one on one relationships. Long term this simply antagonizes the counter parties and they form a coalition against you. This is seen from the times of Ancient Greece to WW2 to today. It is fascinating that a country with such lengthy history does not understand this basic tenet.

De-dollarization may continue but not because countries want to get rid of the dollar. It continues because the debts they made in dollar denominated liabilities are coming due and there is no circulation of new credit to restock the investments of dollars that are flowing out. What this is doing is taking the cover of all mal-investments and white-elephant projects that are worthless globally and pushing those whom made them to eat the losses without the ability to push out further the day of reckoning via ‘refinancing’ windows.

Russia will likely have a major internal purge. This will most likely coincide with a ruble devaluation. The problem is internal division of resources and the ability to muster than in order to either reform, rebuild, or restart society on a new path. Part of the problem rests on the fact that there is no vision of the future at least publicly that may be reflected by the populous at large.

South Africa is in a very similar position to Russia in this regard. It is in some sense worse because the agricultural sector has been shrinking at an accelerated rate. For anyone interested one can look at white maize production their staple more or less and other grains and in some sense see that the import and export balance is shifting. Importing foodstuffs not only puts pressure on the balance of trade and the stability of the currency, with things as they are today it is theoretically possible for supply chain disruptions to create increasing pressure for people on the ground. This is different from Russia since there the purge will most likely be at the top. In South Africa it may permeate society as a whole.

Brazil has been in dire straits for the past two years and nobody noticed. What is increasingly ignored is the lack of refinery retooling that can take place as they lose market share to U.S. refineries due to price differentials. In a way this is most likely the picture of the Brazilian market as a whole lack of capital investment with attempts to squeeze out last amount of capital from equipment that is past its’ depreciation life. When this equipment starts to give out there will not be enough capital in their economy to replace it due to the housing bubble being popped and covered up. Ergo the funds are essentially lost but the refinancing of the banks is propping them up, but their lending is frozen since their tangible capital doesn’t really exist. On the façade though they are showing terrific growth. In a way this is seen through lending growth turning negative. One can argue about terrific loan growth on the whole, however I would assume those are old credits being refinanced with the unpaid interest balances to keep perceptions alive. The banks in Brazil hope to gain on the capital equipment loans side since that area is tuned into the export monetary flows, but those are cut off since the rates they are charging are unsustainable for the added value those capital goods produce.

Europe is on the whole being spun out of control. This is not due to refugees but the monetary policies which are creating a negative supply of Euros and propping it up into the Euro-Dollar market where dollar denominated debt is issued. In a way one can understand the need for Europe to have a strong Euro since otherwise its’ insolvency will become apparent on the international stage. Internally quiet a few banks in Europe are essentially insolvent and the question everyone should ask is: what is it waiting for? A major event that would freeze debt payments can only occur if there is a large scale war. The problem Europe faces is that it has no access nor ability to an ideological construct that could resolve the issue without it recurring a few decades down the road. All that debt will be destroyed and the claims it is attached to are simply pushed down into the cemetery as their ability to compete on the global stage is impaired daily. Europeans as a whole do not seem to understand that when the clearance occurs the system is a whole will break down. Ergo on the fringe of Europe, one will not trust the Euro because its clearance will be tied to an insolvent system that may not honor your holdings due to qualitative factors such as you being “corrupt”, or gaining it in a “black market” operations. In a sense this defensive posture for the banks and the financial system as a whole to keep everyone inside will backfire longer term. Simply because defecting from it is cheaper than staying with it. Ergo when your minimum capital is frozen, putting more into the system makes no sense and staying outside of the system permanently becomes the norm. This essentially puts the monopolization of licensing and other permits in Europe at risk and creates a huge black market since that will be the only way to survive. Theoretically national currencies could emerge to fill the clearance void at this time and most likely will be the ones that are pushed into the void.

Scandinavia is slowly but surely changing. The social contract in those countries has been broken. People as a whole are abandoned by their government and will eventually challenge the system. Once one of the countries takes charge in rebooting the others will follow.

India still has not brunt the full cost of the economic game it has played. The government nor the financial actors have realized what their ‘experiment’ has wrought. The conflict in the North was essentially a diversionary tactic. It will not clear out the long term consequences. Population will in a way switch to barter which will shift the real division of exchange in its’ favor. However, the need for gov’t to expand the budget will further push for taxes and other measures to prevent trade from escaping the financial sphere.


Be well dear reader.

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