 |
||||||||||
|
|
|
|
Chapter2: The Global Economy
By the middle of the first decade of the 21st Century Chinas economy had grown to such an extent that it matched that of the ‘old school powerhouse’: Great Britain. Awash with money from the spending of Western Nations massive credit (read debt) expansion in the early part of that decade it effectively funded the ramp up of US Government spending and in turn the whole credit (read debt) cycle spiraled ever upwards. National debt, housing debt, personal debt: debt enabled the banking system to ‘create money’ on an unprecedented scale While China seeks to leverage its raw manufacturing prowess India is leveraging it’s knowledge pool and grasp of the de-facto global business language to muscle in on Western Service Industries. The global communication network has shrunk the world and enabled out-sourcing of business processes and people on an industrial scale. The Elephant in the Room of global peaking oil supply and the subsequent supply side crunch will cause such a huge global contraction that the preceding decade (2000-2009) will be seen by many as ‘the golden decade of humanity’. When the global economies went into a deflationary spiral in the early 1930s governments did not have the ability to expand the money supply due to them being on the gold standard. This time around they can ‘throw money’ at the problem and they will. The inevitable result will be a series of increasingly violent and short lived swings of economic activity and stagflationary economic conditions reminiscent of the 1970s. In short in terms of finances the coming decade will not be a pretty one in which to do business, generate wealth or prosper. Indeed it is highly likely that it will be one of wholesale wealth transfer to those nations with remaining fossil resources and wealth ‘evaporation’. In the early Post Peak years Governments will seek to mitigate the depressionary effects of the supply demand gap by pump priming economies -expansion of the money supply and lowering of rates to stimulate with care due to inherent risks of stimulating inflationary pressures. We have already seen one cycle after the Dotcom bust but this is only a taste of the volatility in store)
Some specific details
|