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10 Geopolitical Predictions for 2010 & Short Term Strategic OutlookA great - and still growing - divergence appeared in 2009 between public statements by leaders and their public performance. The politicized, romanticized theater of increasingly populist “democratic” leaders and media seemed to be of a different planet from activities taking place in the real world.
While a large part of the global population appears still transfixed by words, there is a growing perception that great fissures already rend the global strategic architecture.
This is a trend which will compound during 2010.
There is a widespread belief that the world has “ducked the strategic bullet” of global economic collapse, but this is merely the delusionary euphoria of the severely wounded patient. Severe structural damage has occurred to the key driver of global economic stability, the United States. Most major economies of Western Europe and Asia, although in plight, have been protected in their fall by a complex web of structures and the fact that they were not, in many respects, as leveraged as the US. Britain and Japan, however, remain leveraged in their debt-to-asset ratio, to a death-defying degree.
All of this has been long in coming, and brought to a speedy climax by the unprecedented recklessness of inflationary spending by US Pres. Barack Obama, and, in the UK by Prime Minister Gordon Brown. The modern world (East and West, but prompted by the West) is at a junction point in a long process of constantly growing — but poorly-defined — obsession with “rights” (entitlements). This had its origins with the halting, but consistent, rise in global prosperity which began with the early stages of the Second Industrial Revolution (1700-1900).
Changing the Balance of Power: 16 Geopolitical Megatrends Affecting Every Aspect of your LifeSubstantial and unmistakable signs of profound change in the global strategic framework have become concrete in the past year. The stress in the structure has already developed into fissures. The transformation, in reality, has been underway since the end of the Cold War, and will continue and compound for at least another decade.
The balance of power is changing. Apart from the wave of globalization, which was really a precursor event, what is now emerging is the first truly fundamental change since the end of the Cold War, and, in global terms, it is a change which may redefine entire civilizational blocs. It is the most profound geopolitical change since the end of World War II, and part of possibly the most profound change in human history since the Industrial Revolution.
Within this context, energy is the driving physical factor. It has been the critical physical component of economic, military, and social strength since the Bronze Age. The Industrial Revolution, however, beginning in the 18th Century spurred an increasingly intense use of, and dependency on, more and more varieties and quantities of energy, culminating with the present situation in which no society can remain se-cure, or competitive, without access to cheap, high-volume energy. Given the present needs for energy, and the indicators of changing megatrends, which I will discuss shortly, the questions of how society will use and need energy, and, conversely, how energy forms and trade will affect societies are the vital components of economic wealth and security going forward.
Unlike the West, Asia rises above crisis - February 9, 2010Little risk of default among even heavily indebted countries
(MUMBAI) While rising government debt is a growing concern in Europe and the United States, Asia's economies remain remarkably resilient, even buoyant, underscoring how economic might is shifting from West to East.
Prosperous: China, with more than US$2 trillion in foreign reserves, can well afford to repay some of its small external debt as it comes due
China has been repaying some of what little foreign debt it owes, even as economists wonder whether Greece will require an international bailout and ask how long the United States can sustain record budget deficits.
'We took a pass on the economic crisis,' said Philip Carmichael, president of Asian operations at Haier, China's biggest appliance maker.
Even the Asian economies that have shrunk during the recession, like Malaysia and Cambodia, escaped the worst ravages - with the notable exception of Japan, Asia's first industrialised country.
Because of the Asian financial crisis of 1997, many Asian countries have been more conservative about borrowing and spending over the last decade than Western nations, which went on a debt binge during the good times and continued to increase their borrowing during the recession to try to turn around their economies.
Many economists say countries have to spend during recessions, increasing deficits and debts. But investors and economists alike worry about the long-term effect of mammoth debt on the vitality of Europe and the United States. The longer it takes Western capitals to confront their overspending, the higher and more rapid Asia's rise will be, many economists say.
Even though Asian stock markets fell last week, analysts say there is no obvious Asian equivalent to, say, Greece. Investors see little risk of default among even heavily indebted countries like India and Japan.
In India, the government's debt is nearly 80 per cent of the gross domestic product, but it owes more than 90 per cent of that money to its own citizens. Of the rest, a big chunk is held by agencies like the World Bank, which, are not likely to press for quick repayment.
Compared to Greece, 'the threat of these two defaulting is nowhere close, and the reason is that, thanks to high domestic savings rates, their debt is almost all domestically financed,' said Kim Eng Tan, a sovereign debt analyst in the Singapore office of Standard and Poor's.
'If you sell bonds to your own citizens, and you do it in your own currency, you don't have much of a problem,' said Ajay Kapur, the chief global strategist for Mirae Asset, a big South Korean financial services company.
China has been repaying some of its small external debt as it comes due, a luxury that a country with more than US$2 trillion in foreign reserves can afford.
China showed a government budget surplus for the first 11 months of last year, but Western economists still expect a small deficit for the entire year because agencies tend to go on spending binges every December to avoid returning unspent money.
A few smaller Asian nations have had difficulties in the last year and a half. But they have been hurt more often by political strains than by economic troubles. Like Greece, Pakistan and Sri Lanka have relied heavily over the years on overseas borrowing. That started to dry up in late 2008, as fighting with insurgents in both countries began to scare off foreign lenders. Both ended up receiving assistance from the International Monetary Fund, and that has shored up their finances, at least for now.
Thailand and the Fiji Islands both had ratings downgrades last year because of civil unrest as well, although neither required IMF assistance.
The Asian country hurt the most by the global financial crisis was arguably Mongolia, where a steep but temporary decline in world copper prices prompted the government to obtain a US$224 million IMF loan in March.
Though the risk of a full-blown sovereign debt crisis in Asia may seem remote, economists say there are other reasons that investors and policymakers should be concerned about high deficits.
In India, the growing fiscal deficit - which reached 8 per cent of GDP last year, up from 3.3 per cent in 2008 - could dampen growth by making it harder and more expensive for corporations and individuals to borrow money, said Ila Patniak, a senior fellow at the National Institute of Public Finance and Policy in New Delhi.
India's policymakers have signalled that they intend to pare the deficit by selling stakes in government-owned companies and reducing subsidies on fuel and fertilisers. Analysts point out that Indian governments have long promised those reforms but have struggled to deliver them because of internal political pressures.
China, too, has internal conflicts - between rural and urban populations and between Beijing and the disparate governments in the provinces - that make fiscal policy more difficult.
But the debt problems faced by Asian nations are neither as immediate nor as far-reaching as the growing debt in Europe and the United States. -- NYT
