My previous post, I suppose, simply pointed up the 'bleedin' obvious' that 200 years ago the world, and this small Island, were very, very different entities. Even so, to quote a hackneyed phrase, 'power abhors a vacuum' and so as our power has declined others have grown. What they will do with their new-found strength is for the future. What we Brits need to do is decide what to do about our old-age infirmities. Not that all is lost. Our economy remains fairly robust, well, fairly robust in comparison to the basket-cases around us. And our economy is, or should be, our one sole concern because it is now the only 'weapon of influence' available to us. Whatever else governments do over the rest of this century they should concentrate on making commerce as easy and as lucrative as possible.
There-in, of course, exists a festering pit-full of problems. Until now we have benefited from a mass of cheap labour, much of it immigrant, but just beginning to loom over the far distant horizon science and technology are combining to produce new methods of manufacture which will slash the demand for labour. Suddenly, and the politicians are always the last to find out, all those millions of immigrants, plus the home-grown labour force, will be surplus to requirements. I do not totally despair because one should never underestimate the ability of Man to adapt but even so there could be, shall we say, difficult times ahead.
We can, I believe, forget about tanks and ships and 'infantry boots on the ground'. Those days are gone and from now on " it's the economy, stoopid!" You can gauge the geo-strategic importance of national economies by what is happening now. , the 'green stuff', along with the 'brown stuff', is about to hit the fan! By 'green stuff' I mean the 'God Almighty dollar'! Any minute now the US Federal Reserve is about to switch off the money-printing machines and start raising interest rates. You don't need to be an international economist to understand the size of the tsunami that will gradually sweep around the globe:
Contrary to popular belief, the world is today more dollarized than ever before. Foreigners have borrowed $9 trillion in US currency outside American jurisdiction, and therefore without the protection of a lender-of-last-resort able to issue unlimited dollars in extremis. This is up from $2 trillion in 2000. [My emphases]
Suddenly those cheap-as-dirt dollar loans are going to start costing eye-watering amounts of interest:
The [...] ominous implications are already visible as the dollar rises at a parabolic rate, smashing the Brazilian real, the Turkish lira, the South African rand and the Malaysian Ringitt, and driving the euro to a 12-year low of $1.06.
The dollar index (DXY) has soared 24pc since July, and 40pc since mid-2011. This is a bigger and steeper rise than the dollar rally in the mid-1990s - also caused by a US recovery at a time of European weakness, and by Fed tightening - which set off the East Asian crisis and Russia's default in 1998.
Whilst the governments of many emerging market nations learned the hard way in 1998 not to borrow in dollars, their domestic and private, or semi-private, companies did not and it is these companies that are going to put on the rack as the dollar appreciates. China is a particular example because after 1998 their central government foreswore raising loans in dollars but their regional governments, hand-in-glove-and-pocket(!), with local 'entrepreneurs' borrowed 'zillions'. How else do you think their 'property developers' found the money to build all those 'ghost cities' in which barely 10% of the properties available are actually inhabited? That potential crash will keep the Party apparatchiks busy for a while because it will result in mass unemployment. Shame!
Meanwhile, closer to home, we need to watch events in Europe. It is now more likely than not that Greece will exit the EU which will only add enormous impetus to the anti-EU parties vying for power in various EU nations. Already the euro currency is falling like a stone and parity with the dollar is almost inevitable. This, of course, will suit Germany, an exporting nation, but will damage us because the 40% of our export trade which goes to Europe will become very expensive.
So, I repeat, "it's the economy, stoopid!" Forget everything else and just concentrate on that!
