After reading various articles and books plus listening to the news, and then observing the economic situation both nationally and internationally, I have arrived at some conclusions. Naturally these could be totally off base and have no relationship to reality, but then maybe not. Certainly it should be clear to everyone that not only are we in a serious economic situation but that we are in the throes of significant change politically, economically, and culturally. So these are simply my personal conclusions regarding what I think are some key areas of change and impact.
The drive within the US for many years has been to achieve independence from fossil fuels, meaning oil and natural gas, but in reality independence from oil imports. The focus has been on electric autos which to date have proven to be overly expensive and hugely unpopular. However, that is basically a technical problem which can and will be overcome so the long term problem is our electrical infrastructure. The Greens have prevented the construction of nuclear power plants while campaigning against coal powered energy. Unless the congress corrects this problem the price of electricity will skyrocket as thousands of electric vehicles hit the road. Even without these electric cars the price of electricity is already increasing and in some areas the supply struggles to meet the demand. My long range forecast is that while the demand for gasoline decreases the cost of gas in the family budget will be replaced by the cost of electricity and there will be shortages in the near term if congress allows the Greens to approve the Kyoto treaty which would reduce our supply of electricity as generating plants are forced to close.
Oil and OPEC
The price of oil is plummeting and efforts by OPEC to drive the price up will probably be futile at least in the near term. The problem is that the oil producing countries of Venezuela, Iran, Nigeria, and the Emirates have virtually no source of income outside of oil. These oil revenues support their socialist programs and as the price of oil drops their spending far exceeds their income. Consequently through OPEC they have tried to increase the cost of oil by reducing the supply. But there is no honor among thieves so while they agree to reduce the supply of oil the reality is only the Saudi’s do so the actual supply of oil continues to exceed the demand. The result of this hasn’t manifested itself yet, but within the next year OPEC will become nothing more than a hollow shell with each member going their own way while giving lip service to the agreements.
Iran & Venezuela
Both of these countries are unstable but perhaps the most unstable of the pair is Iran. The Mullahs have instituted Sharia Law and enforce it capriciously. They execute homosexuals, adulterers, and women who have been accused of “immoral conduct” – usually without trial. They are Saber rattling but as it turns out much of their vaunted military is unreliable. Their missile program turned out to be mostly an Adobe Photoshop exercise. By using Shia Iraqi soldiers as bait the managed to surround an American patrol with the objective of kidnapping them and holding them hostage in order to embarrass the US. Instead, they American officer who was surrounded by Iranian soldiers ordered his men to open fire. The Iranians turned and ran off leaving eleven dead. There is great unrest among the population and the more restrictive the government becomes the more unsteady the population and the more demands for change. In the meantime their principal source of income is oil and with the plummeting oil prices they can no longer fund their social programs much less their military machine. The best course of action for the US is inaction and possibly increased diplomatic contact. The Mullahs need us to be aggressive toward them and they will undoubtedly continue provocations but we must not allow ourselves to be provoked.
Venezuela is a little more stable but Chavez is systematically wrecking the economy with his socialist programs. The black market is rampant and Chavez is looking for some outside force that he can blame for his problems. Currently this is the US but without his oil income and with his socialized businesses dropping like stones he is driving for total power. This country is subject to an internal revolution by the military. The problem with soldiers is that they have parents and families. If they aren’t happy the soldiers become unreliable. Chavez will continue his drive for total power as dictator but as the price of oil declines he will be forced into either curtailing his social spending or continuing to pump oil in an effort to maintain his revenues. Either way Venezuela will be very unstable as well as his future. Once again our best course of action is no action.
It seems pretty clear that China as a communist nation is on very unsteady ground. As they creep more and more into capitalism the communist power structure moves ever closer to Imperial China in practice. Central planning had never worked and is not working in China. Corruption is rampant which has greatly impacted their foreign exports plus weakening the grip of the government on the people. Their exports are declining, unemployment is increasing, and their economy which depends on growth is declining. The Chinese have always been an agrarian economy and the country peasants have always been frugal as well as secretive and prone to ignoring the central government. Nothing has changed and the peasants are not spending so the revenues are dependent on foreign exchange. However, as these decline revenues decline and as these decline the government’s grip on power is threatened since they cannot continue their social programs or control the people who are moving ever more toward capitalism and individual action. It is unlikely the current communist government can continue for any extended period as it is currently structured. Most likely it will become more capitalist oriented with the central government looking more and more like Imperial China with a socialist structure similar to what you see in Europe.