The Reckoning

For every action there is a reaction. Nothing could better describe the times we live in. There has been plenty of evidence around us for at least two years, and for the more in tuned even decades, that our way of life is coming to an end. Not our life, but our "way" of life. Our actions have caught up with us. Now comes the inevitable reaction.

While technology can build civilizations, it will also eventually alter them beyond recognition. For example, the automobile transformed the world, but it also cursed it. The car required gasoline to operate. Gasoline required oil. Oil required exploration. Exploration required environmental damage and cash. Cash required borrowing. Borrowing required capital. And therein lies the curse - there was never enough capital to cover the borrowing. Action, reaction, and on it goes. Eventually there must be a day of reckoning. A day when a house built of cards can no longer sustain another card being placed upon it. That day is today.

Today, the perfect storm, or the day of reckoning, involves unsupported financial instruments smashing against bottomed out interest rates, monopolistic oil cartels crashing against technologically caused oil gluts, grossly over inflated stock markets imploding over falsely supported bottom lines, and the world dividing between Eurasia and the Rest. There are of course other factors like demographics, and environmental concerns which are just as, or even more important. The bottom line is that all those fantastical instruments used to drive our society forward were never really built on anything at all. Imaginary sums of wealth, supported by paper contracts, but nothing else. A lawyers dream and an accountants nightmare.

In the days ahead we can expect to witness: a world-wide stock market crash; a world-wide currency crash; a world-wide crash in all goods associated with production (including oil); and mass deflation in economic activity, but mass inflation in costs. The last one is a bit of a kicker - mass deflation causing mass inflation. How is that possible? A good example of this is post-world war II  Germany. At the end of the war it took a wheel barrel full of German marks to by one loaf of bread. All economic activity had essentially come to a halt. The economy had deflated. There was nothing left to value the German mark against, so it became valueless. As it became valueless, the amount of marks needed to by one item increased. The more valueless it became, the more marks were needed to buy that item.

Essentially the world faces the same today. The economies of the world are deflating. If they were measured by a standard that didn't utilize essentially paper to back their value, then they would have been completely deflated decades ago. In essence, the world borrowed time to grow by dropping the discipline of the gold standard. That allowed growth, but it was always a "phony growth". It was always a bubble waiting to burst, or a margin waiting to be called. Now China and Russia are calling that margin. They are establishing a gold backed currency economy that will cause the rest of the world's economies to collapse. It will initially cause their's to collapse as well, but they are in a much stronger position to survive the collapse (or economic war if you like).

Russia's debt to GDP ratio is an astoundingly low 16%. China is at 55%. India is at 65%. The United States government debt to GDP ratio is 89%, while Japan's is 250%. The story then becomes not who can win an economic war, but rather who can survive an economic war. Clearly, Eurasia is far better positioned to "rise from the ashes". It is that rise that is all important. Initially, every economy in the world will collapse. However, the "New World Order" that arises from what's left will be determined by those in the best financial position when the collapse happens. That's a logical assumption given a purely gold standard to restart would not take into account that which had been previously expended, debts that been previously owed, and the fact that gold is not everywhere in the world - and this is a new world on a world scale.

Suffice it to say that Eurasia is pulling the trigger on the "Old World". It claims it isn't and that it's suffering as much as any other nation, but that's simply a mask. A mask that will provide it the legitimacy to rise to the fore front of the "New World Order", and claim its leadership. That you can be certain of. So while Eurasia gives us a friendly slap on the back, seeking a spot to put the knife into, we should remember the reason it can do so is us. We collectively built our civilization on false pretenses, and we knew it. They simply used our own gluttony against us. They simply allowed us, even facilitated in us, doing it. If you can't stop the end you might as well learn from it.  

In this province the cries are loud: "What can we do?" In truth, as I said to any number of people who have asked me that same question privately, the only thing left to do is suffer. We had a ten year window to make maximum use of oil revenues to address chronic, systemic debt. Instead, the government of the day spent like a teenager with a new, unlimited credit card. It placed us in a position of no return. As a very few of us urged people not to be kids in the candy shop, the "credible experts" said there was no tomorrow. Now tomorrow is here. It is the day of reckoning for everyone. That means you.

Predictions for 2015 - Not a Pretty Picture

Last year my New Years predictions were for a "tumultuous, history making year". So this year I thought: "Well b'y, better be more specific."

For Newfoundland:

1. Halt of the Muskrat Falls project in the Courts.

2. Resignations of  Ed Martin and Gilbert Bennet, and a large scale purging at Nalcor.

3. A Liberal government so large that it has to appoint its own members as Opposition ala Frank McKenna.

4. Large scale cuts to the civil service, and project spending.

5. A huge downturn in the economy reflected in high unemployment numbers and falling real estate prices.

6. A serious downturn in Labrador's mining, exploration, and economy as a whole.

7. Wide spread anger throughout the land.

For Canada:

1. A new Liberal dominated minority government, caused by drops of support in Ontario and BC for the Conservatives, and the NDP maintaining a strong hold in Quebec. Canadians won't trust that Trudeau is ready to run the show without the strong hand of Mulcair to keep him in check.

2. Declines of oil markets in Saskatchewan, Alberta, and here are too large to offset export gains in Ontario and Quebec, and the country enters recession.

3. Northern sovereignty is challenged by Russia, and to a lesser extent others.

4. Aboriginal rights and militancy increase dramatically over living conditions and resources.

5. Political unrest and economic decline make Canada a very unstable place to be, but then the world mirrors it.

For the World:

1. Russia and China escalate the stakes in their economic war with the US. They create formal international structures, based on the Chinese Yuan, to reduce US influence in the developing world.

2. Turkey leaves the NATO/ US sphere of influence and moves toward the Eurasian Alliance - fueled by disgust over Israeli treatment of the Palestinians and greater economic prospects with Russia and China.

3. The war in Ukraine escalates and Russia intervenes militarily. The Ukrainian government falls.

4. Europe enters a period of deflation and recession, that evolves into depression.

5. Argentina attempts to retake the Falkland Islands.

6. The United Kingdom begins the process of leaving the EU.

7. Investors in the US stock market panic over events in Europe and loss of trade markets, sell off, and cause the largest single crash of the the stock market since the 1920's.



All in all, not a very happy or positive outlook on the year 2015. Sorry for that. It's probably just as well that none of us have a crystal ball and can see the future, but, for what it's worth, this is my attempt. Seems to me that we can't avoid the economic realities that continue to unfold around us. The best we can do is try and protect our own. On the upside, every collision of history has always resulted in a better result down the line, so keep that in mind as we weather the storm that will be 2015.