There are many plausible reasons for the world as we know it today, to change drastically. The generation I belong to, has grown up after the cold war, where there has been a continuous moderation of the unstable elements within the global economic and political paradigm. There have been threats time and time again, but we as a collective human race have managed to stave off many of them, and emerge unscathed. The fact that the human population has more than doubled since the 1960s and there have been no great Malthusian consequences is some indication of this moderation. However, if one were to believe the Mayans, and if the world is actually to end in December 2012 (or according to the Hindu calendar, experience the coming of a new age bringing about a palpable shift in global consciousness), it would be interesting to build a case for the same.
The repeated aftershocks of denial:
According to the United States Geological Survey, there were 6 earthquakes of magnitude greater than 8 on the Richter scale in the 1990s. Care to venture a guess as to how many of the same magnitude since the year 2000? Double the number and then add 3, and yes the correct answer is 15. So is it just me or do the world’s tectonic plates seem to agree with the Mayans? The Japanese just experienced their biggest quake in 140 years. There are tsunami warnings all across the Pacific. That is two times in the last 7 years, that there is threat across an extremely vast surface of the planet.
People, who refute Global Warming as a phenomenon, cannot be argued with. There is no body of evidence, whether it is melting glaciers, dying species or erratic weather patterns that can change their perceived reality. It would be a good idea for such people, who hopefully believe their eyes if not established scientific facts, to take a trip to the Russian Tundra, where the permafrost is mostly melted. I remember studying about the Tundra and the permafrost on it when I was in middle school. There was certainly no reference there about melting etc, so this has to be a recent and very big development, given that the Russian Tundra covers an enormous surface of the Earth. Here is an article from the Guardian that explains this well: http://www.guardian.co.uk/environment/2009/oct/20/arctic-tundra
Hungry Tiger, Thirsty Dragon:
There are many sources of the current wave of inflation in the developing world. The leading causes are the intensification of the bull-run in commodity prices from oil to steel, and rising food inflation. In countries like India, the problem is not the shortage of food, but rather the distribution and wastage of it. If one were to assume a sort of structural rate of wastage in developing countries, and then try to account for rising populations in the coming decades, it would be a very tricky task to figure out how to feed the world without some miraculous changes in farming practices (which costs money!). The threat of a global food crisis is a serious one, and is something that everybody should strive to educate themselves about, because it is not on its way, it is here.
Fact: There is already an immense shortage of fresh water on this planet. Fiction: We can use desalination techniques to overcome this problem to a great extent. The reason for this is that the shortage of water that is experienced by peoples across the planet is of varying degrees. The problem is that Asia, which is home to 60% or so of the global population, has only 30% of the world’s fresh water reserves. This skewed distribution of water resources on a planet which already is immensely skewed in terms of per capita income, is the crux of the problem. How are desalination techniques going to change the lives of the people earning less than $1 a day? They cannot afford for such expensive treatment of water. Now some of you will be thinking, governments will intervene and things will be sorted out on a mass scale when the time comes. Think about the fact that according to the United Nations, over 1.1 billion people do not have access to drinking water. Is that a small number? When will the situation get out of hand? Investment banks are ready for the ‘commodification’ of fresh water reserves, are you?
Global Economy:
There are few investors and market professionals out there, who would tell you that they are 100% confident that we are in a stable phase of the global economic cycle after the global meltdown. I write the words global economic cycle on purpose. It is truly a globalised world and Henry Kissinger is having the last laugh. The interdependence between nations eliminates the possibility of a world war ever happening again, and intensifies the possibilities of global economic downturns such as the one we experienced recently. If America looses everybody does!
There are essentially three clear threats to the global recovery as of now (and that is three more than most bulls may like). The first is on the list is the current crisis unfolding in the Middle East and the consequences on oil prices. There is no need for me to provide commentary on that because the situation is widely known. The following link is an excellent video that explains why the situation in Bahrain may be the real thing to watch out for: https://www.stratfor.com/campaign/dispatch-complexity-persian-gulf-unrest?utm_source=JMF&utm_medium=email&utm_campaign=WIPAJMF110303160409&utm_content=Freelist
The second threat is the situation unfolding in the Euro-zone. Moody’s cut Spain’s debt ratings by a notch to Aa2 on Tuesday and slashed Greece’s credit rating by 3 notches on Monday. As discussed on previous occasions on this blog, Spain will be the real deal breaker in the Euro-zone, if it were to default. The sheer size of the country and the economy means that problems there outweigh those of all the other peripheral countries (ie. Ireland, Portugal and Greece) combined. There are rumours that this weekend there will be decisions taken to widen the EFSF. It is yet to be seen whether this possible move may assuage bond vigilantes, but I think that it will just be a way of buying more time. Recapitalisation seems to be the key word for the Euro zone. In case the ECB decides to raise interest rates as they have been hinting in April, it would be a real test for the Euro, which has gained off some dollar weakness off late, but is again in a downtrend.
The third clear threat is the burgeoning debt of America. According to a recent study by Rheinhard and Rogoff; debt to GDP ratio above 90% compromises growth trajectory in a major way. And yet, there seems to be no overt steps taken to curb spending, especially on the military or entitlements. There is no way that America can overlook its debt and the Simpson-Bowles commission has recognised this fact. Yet with elections coming up next year, Obama and his team of trigger happy economists will most likely do nothing to reduce spending in a major way. This will not bode well for the dollar, and it will not bode well for most of the world that holds a majority of the share of dollar denominated assets.
And in the End:
Like the Beatles said, “in the end, the love you take, is equal to the love you make”. There is going to be little hope for the world until we do see a shift in global consciousness. We need to recognize that we are going to be up against some tough economic, geological and political challenges, and we need to come together to face up to the facts. Until then, brace yourselves for the next Tsunami and write out that bucket list!
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