Wednesday, December 30, 2009

GammaBoy's 10 Outrageous Predictions for 2010 - PART 2

Sayonara 2009! Considering the financial turmoil that accompanied your arrival, you were a comparatively gentle and unremarkable year. You gave a frenzied welcome to our first black president and a frenzied goodbye to our first sort-of-black, sort-of-white, sort-of-alien pop star, but between those high and low moments, you kept Americans convinced that, despite their woes, everything was just about to get better. Alas, in the view of future generations, you will be little more than a footnote, a year of quiet, stubborn hopefulness than unleashed a torrent of outrageous and mostly unhappy events in 2010.

As I mentioned in my 2009 report card, I think some of those predictions were not wrong, but early, so I won't bother to reiterate them. Fortunately, that gives me the freedom to crow about any successes come December 2010 without having to explicitly admit the failure, or rather, continued delay, of the rest.

Now then, 2010 in an outrageous nutshell....

U.S. stock markets put in new lows

You heard it here. The stock market will give back all the gains of 2009 and more, as a second and more sinister wave of the still continuing financial crisis comes ashore. My guess is that when the decline gets going, it will be faster and scarier than anything we saw in late 2008 or early 2009. The essential problem is that none of the issues that led to the decline in 2008 have been fixed. They have been papered over with government largesse and the loosest federal credit in history, but these salves will actually make things worse as the U.S. Ponzi economy begins to unwind. Many other markets, such as most commodites, will join in the selling, and we may see new multi-year lows in crude and even gold. Mid-level luxury goods will get wiped out, as the few extraordinarily rich benefactors of administration policies reach new heights of consumption even as the other 98% of the population gives up any hopes of ever leasing a Beemer and is simply thankful they can afford a single family car at all.

Saudi Arabia catches fire

The Saudis finally get their due. Pinched between the Iran/Israel conflict, which will likely go hot, and accompanied by more general Shia/Sunni violence, Saudi will get bombed by somebody. U.S. protectorate or not, the Saudi will discover that the love for the sheikhs from its many poor serfs does not run deep, and when the going gets tough for Saudi, the people will stand down and watch things collapse. The event might lead to a short-term pop in energy prices, until people realize that cheap energy is a necessity for the world economy, and the world economy tumbles down a staircase with energy prices sliding along in its wake. The worst case scenario is that the events that unfold in the Middle East in 2010 lead to World War III. Hopefully, saner minds will someow prevail, but the dominos are certainly set up to make 2010 a more likely candidate for world war than any of the previous twenty.

U.S. Bond Market Failure

The U.S. bond market is completely out of control and will come to a head in 2010. There is simply not enough money in world to fund the deficits that are envisioned, and one of two things will happen. Either interest rates will rise precipitiously, destroying any hope of a short-term U.S. recovery, or the Federal Reserve will be forced to print money to buy bonds from the Treasury to extend the Ponzi scheme, thereby setting off very real fears of hyperinflation. I've given up trying to understand the machinations of the Treasury and the Fed, so let's just say that any way it plays out, it will be bad.

Real unemployment touches 25%

The current official unemployment rate is hovering around 10%, but if you use the calculations that were in use in the U.S. up until a series of beautification adjustments were made by the Reagan and later administrations, the comparable unemployment rate is already closer to 20%. The unemployment rate will get worse, and the effect will get more noticeable as more people are no longer eligible for unemployment insurance. The federal government has been working to extend this insurance, but the bond issue listed above will stymie their efforts. Moreover, many state unemployment funds have been emptied. Unemployment is much less of a social problem when you are able to keep people on some sort of income, but there is no money left in the kitty, and we are about to see how people behave when the government is no longer writing them emergency checks.

Many cities and several states either default on bonds or declare bankruptcy

Municipal budgets are in the worst shape in recent history, and for many municipal entities there is no way to make the math work. Potentially, the federal government will sweep in with its unlimited checkbook and bailout these states and cities, but short of that, there will be a wave of defaults and bankruptcies. The biggest issue for most of these places is spiraling health care costs and the absurdly generous deals that were inked with public unions in better times. Most of these deals, laden with sizable salaries, free health insurance, and ridiculously sweet pensions, are simply untenable, and there will be increasing conflict between these unions and the taxpayers being asked to pony up. The defaults will force the issue into the public, and it will get very rancorous.

Domestic terrorism re-emerges

Keeping with my failed riot call for 2009, let me double down with a prediction that there will be one or more serious domestic "terrorist" events this year. These will be completely unrelated to the Islamic terror threat and more in line with the Timothy McVeigh kind of threat. An assassination of a major politician would also fit into this prediction.

Republicans have a very good mid-term election

This isn't particularly outrageous, as the out-of-power party historically always does well in mid-term elections. But I think this cycle will be particularly dramatic, as the above events will crystallize a lot of anger and lead Republicans to make significant inroads on the Democratic majorities.

Many major retailers fold

A few retailers folded after the crappy Xmas season of 2008, but I think the numbers will be much worse in the first half of this year. Headline numbers for Xmas 2009 have been touted in the media as pretty solid, but I think beneath the headlines, the numbers were actually quite weak. Look for a lot more open storefronts in your local mall. In fact, some malls will close down altogether, and you will see stories by the end of the year suggesting using some large, previously commercial, space such as malls as emergency housing for many of the emergent poor.

Severe violence in the UK, Italy, and China

As the global economic crisis progresses, you will see severe domestic violence emerge in a number of nations. The UK is ready to blow at any moment, as the economy there is a full-blown disaster and the Islamic population is restive and a convenient target for native anger. Look for the BNP to strengthen. In fact, as Europe goes down the tubes over the next couple of years, the BNP might emerge as the most reactionary group in Western Europe. Italy has similar disfunctionality, but unlike a resurgence in the UK, Italian disfunction has a long history. Nonetheless, 2010 seems like a good year for some of the tension in that country to explode. China is the most interesting and dangerous of the three. China's economy is in an amazing bubble at the moment, with virtually every company and many individuals involved in real estate development. When the bubble explodes, which I am guessing will happen in 2010, there will be a lot of angry people in the cities to get violent alongside the already various rioting rural populations. Since the Chinese government is much more ruthless than its Western counterparts, it's difficult to guess how things will play out, but some sort of violence seems assured.

The United States wins the World Cup

With all the deeply pessimistic predictions above, I figured I throw in one outrageously optimistic prediction. The U.S. squeaks out of the first round, shows sparks of brilliance in victories in the rounds of 16 and 8 and then shocks Brazil in the semis before soundly trouncing a stunned Spanish team in the finals. Seriously, though, isn't the World Cup a prime potential target for terrorism? I mean, how good can the security really be in South Africa? I was thinking that if I was an ambitious Al-Qaeda group, and I was scanning the global calendar looking for targets, the World Cup would look like a jackpot. Western celebrities, global audience, and a deeply third-world civic administration. So as a pessimistic footnote, I'll add the potential for a Munich style terrorist act against a Western squad.

No comments: