I am loathe to make specific predictions about future events, the reason is lack of adequate information and the unpredictable behaviors of humans. And I have seen very few attempts at prediction future events, usually on the national or world stage ever remotely come to pass. It is one thing to say that this piece of legislation will be made law or that some new technology will shock the world. Those kinds of predictions tend to be relatively easy. When Bell Labs was working on a telephone that would transmit both voice and video one would never have envisioned a hand Held mobile cell phone that would easily do both as well as take photographs and videos at the same time. Back then the telephone was an analog device dependent on twisted copper wire connections to central office equipment, much of which was analog crossbar equipment. Back about 1963 the laboratory of Corning Glass was working on a new transmission medium that could transmit analog signals faster and longer with out power loss. To have imagined the idea of high speed digital communications networks was a bit of a stretch. On the other hand we had well intentioned university professors prediction the world’s population growth so totally beyond control that we would be in a period of famine and death five or ten years ago. Today we have those who predict the doom of climate change and the end of the world in the next couple of decades. Maybe so, unfortunately their models have horrible failures when it comes to predictive powers. The labeling of anyone who challenges their predictions, their modified data, and the less than successful models are now climate deniers. Well, seems that anyone who disagrees with your theories is a denier. Is the world’s climate changing? Yes, it changes every year in a great many ways, not all of them bad. Are we all going to die in twenty years? I most likely will since I am 67 this year. As for the rest of you, no, no great die off will happen due to climate change. I understand that sometime around 2030 the sun will cool for a period of five to ten years, causing global warming to become a global ice age during that time. So much for man made climate change.
So on with the first prediction. Will there be a period of world financial and economic destruction? Most certainly, the math makes that an easy prediction. Sum up the corporate debt, the banking debt, the government debt, and the consumer debt and then match that against world income. Notice I didn’t say world GDP since that would include government spending and so much of the worlds government spending is accomplished by debt, not tax income. As a whole the world is spending in the neighborhood ten to twenty times its income, depending of the reliability of the figures one uses. That means every man, woman, child, government, corporation, and bank is insolvent. Debt is always repaid, either by the debtor and by the creditor. Or to put it another way, debt is either repaid or defaulted. It’s like being pregnant, either one is or one is not, there is no inbetween state. The numbers don’t lie, politicians and quite a few economist do lie. But when will all this debt problem come crashing down? Ah, now there is the rub. In ten years time most of the debt will be defaulted. But don’t worry too much, the beginning is just starting and that much debt default does not happen over night. You won’t go to bed one night having a job, a house, and a car only to find that when you wake up everything is gone. The three major starter of the default scenario are The EU, China, and Japan. China is already bankrupt as a country. They are no longer the worlds manufacturing center. I could go on about the great reduction in energy use, the vast reduction in raw and intermediate materials use, and various sectors of construction, but it’s the debt that matters most. Their stock market has started down from the all time highs due to a great ovaluation of the individual companies listed. The COP has tried to stop the fall of prices but it can’t. The amount of hidden debt finally coming to light in corporate structures as well as various levels of government structures is insane. They might beat Europe in the race to the bottom. On the other hand Greece will default by the end of the year. The EU has badly misplayed its hand. Greece will never pay its debts, never. The problem is that the private banks, the government central banks, and the ECB hold far too much debt. When the defaults start happening then those derivatives held against those defaults will be called and there is literally no money behind them. These dominoes will start slowly and speed out of control. Japan could be the first to go. The timing is critical. What will push them off the edge? A rise in interest rates, the interest rates that the Bank of Japan can’t control. You see, the BOJ bonds and the corporate bonds come to maturity at different times, according to when they were issued. Those bonds have to either be repaid, and the corporations and government do not have to money to do so, or the bonds have to be rolled over. That is, new bonds issued to take their place. If you bond matures today and you want your money the the issuer can only pay the principle by having someone else, or you, if you are willing, buy a new bond. The current bonds are close to zero interest rate. A rise to one quarter percent would not break the bond market, but a rise of half a percent would. The BOJ may issue bonds that have almost no coupon rate, that is, the interest rate may be 0.001. But the yield in the effective interest rate. A thousand dollar bond that only brings a price of 750 dollars means that the effective yield is far greater than 0.001%. I’ll let you work out the math. What does that mean for the BOJ? To retire three bonds at maturity it must sell four of the same face value. The bonds have then been discounted, the interest paid up front. And if the BOJ increases the coupon rate for the bond to reduce the discount, the government now must pay out more of its tax revenue to service those new bonds (pay the interest quarterly or semiannually).
We still have wars to consider. The Ukraine is a thorn in the side of Russia but Putin really cannot afford to invade and try to subdue that country, the guerrilla warfare would be devastating to Russia. The middle east could always erupt into more fighting and spread to the point that it is totally out of control. And it is possible that in two to five years Iram will have a few nuclear weapons and use them. Stupidity knows no bounds as we have found with our own president. As China’s economy breaks down we may well see civil war erupt between the few major ethnic factions. We could see war between China, Japan, and possibly the Philippines siding with Japan. Meanwhile Argentina wants to start another military dispute with Britain over the Falklands/Malvinas territory. That would be a minor matter but still disruptive. North Africa could fight amongst itself (this would include Egypt, the Sudan,, and well, from west to east). There is really no data that one can use to predict wars here, but don’t be surprises if one or two come about. The new quest in the arab world is nuclear weapons and I would expect to see the use of such weapons at the end of five years. And by the end of ten years we may have seen the great showdown between Israel and the Arab world, making the last days of Pompeii look like a weenie roast.
As for America, a lot depends on the next president. Obama has done almost the most damage he can do, the final cap will be the TPP. That will kill off more employment in this country. It will also start a great deal of heard feelings against American intervention in foreign countries that sign that treaty. If Hillary is elected, or Bernie Sanders, then the intervention into the political structures of the signatories will be vast. Our government will be pushing for all manner of rights, civil and otherwise, to be implemented by fiat. Corporations will have a very free hand to rape, pillage, and other wise steal all the wealth they can carry. Already HUD, through Obama’s changes in the agencies regulations is requiring vast interference in local governments. The goal is to destroy local home rule in favor of regional governments formed around cities. There will be an end to local zoning regulations and the creating of mini city centers in the suburbs. This is the new wealth distribution program. These programs will do more to create and acerbate racial tensions and conflicts than any amount of Ku Klux Klan activity. Meanwhile the federal, the state, and the local debts continue to grow far beyond the ability to tax the people. In the next two or three years more and more public employee pension funds will begin to fail. Taxpayers will no longer be willing to pay an increasingly raise in property and use taxes to fund luxurious public employee wages and defined pension plans. More and more cities, towns, and counties will declare bankruptcy. States, on the other hand do not have this option. But they can fire public union workers and they can stop funding the pension funds. Eventually they will need to pall legislation to claw back funds and pension rules. The public unions will be disbanded as just another bad idea that didn’t work. The public will not support the right of unions to pick their pockets for the few well to do public union workers. If I have to exist on $25,000 a year Social security income and your pension says you get $80,000 puls a cadillac medical plan and now you want to take more and more of my Social Security pension to fund your pension payments, do you think I will support your efforts? American is become far more divisive. It’s just not political or racial, it is also economic. Parasites kill off the host. We have become a nation of parasites and hosts. Our next great depression, the one that no one can ignore, will come by 2020. I mean, we are sort of there. There will be little or no economic growth in the next few years. The one unemployment statistic that shows the true nature of unemployment in the US is the percentage of the working age population. It is the lowest in over 38 years. There is no recovery and we will sink even further. Government debt alone had become beyond our ability to pay by way of taxation. Remember that taxation is the government’s income base. And as we hire more minimum wage employees, the revenues continue to fall. Well, new technologies will create more high paying jobs? No, the net result is a loss. If I am a waitress or bartender there is only so much social media I can afford on my income. We are a consumer economy and when we don’t consume people lose their jobs and all the technology can’t change that condition. The mountain of debt, and by that I mean the amount of government debt, corporate debt, and consumer debt is astoundingly high and cannot be repaid in full. It will take a few years for the unwinding of such debt. Life will go on but in different ways. And I would bet that sometime after 2022 we shave have a few revolts and later on a major revolution. It has to come. The vested interest, the special interest, the free shit interest, all these are sucking the life blood out of the country. Revolts and revolutions are the reset buttons.
Now one of the ways this might play out, this destruction of the social fabric and the economic fabric would be that liberal progressives finally push the country into a fascist form of government. Inclusive diversity where we can all be different as long as we are all the same is the new model. That is, your diversity is equal to my diversity and celebrated the same. We are taught that we are all individuals and yet expected to act the same way. Private corporations are good as long as they are responsible to government interests. You can express your opinion as long as it is the correct one. We shall train our children in public classrooms how to think alike while telling them they are individuals. There are many good references for Fascism and how it operates. That type of government may well be the result if Hillary or Bernie become President. Then the cure, the revolution will be a long time in coming. I may not live to see it.
Well, those are my predictions. But what have I predicted? Largely mathematical certainty. The rest are possibilities, things that could happen, that may happen. All we know is the economics, social problems, political reforms, these things get done in one way or another. Many times the replacement is as bad in the future or perhaps worst than what was replaced. History shows us general cycles.