As is explained extensively in the rest of this book the world economy develops itself in waves, in economic seasons. The economic winter which has begun in 2008 with the mortgage crisis in the US and the collapse of Lehman Brothers, was the start. For a while it looked that the world economy was on the recovery, but it is not time for recovery yet. The glas full of the bitter drink of crisis has to be drank first, than we can start the real recovery. Many economists came with the wrong diagnosis. This crisis is major and will lead to a massive contraction of the world economy, which has been built too heavily on debts.The former chief economist of the IMF therefore calls this period of the next ten years the period of The Great Contraction. I prefer the term of The Great Stagnation, for reasons to be explained later.
The world economy accelerated its growth since Richard Nixon in the 197s let go of the gold standard for the US Dollar, at that time the world currency. Other regions followed suit and in Europe too we entered an economic phase of tremendous growth and massive government spending, for example on welfare states which have been unsustainable from the start. All of this has been built on debts. We borrowed much more than was good for us and became enslaved to credit, debts became normal. Mst of these debts we owe to banks, pension funds and other financial institutions. Many people made money with money with several operations which now prove to be Ponzi schemes. Many traders inthe financial industry were high on coke and other drugs and therefore took much more risks then they’d usually take in sober circumstances. We all bear responsibility forthis: citizens, polticians and the financial industry which after all only delivered what the people wanted: a fairy tale.
Part of the fairy tale was the European integration. We wanted have open borders. But it was already forseeable that mass migration from North-Africa would be a trend of the21st century. The demographic circumstances in North Africa with fast population growth and high unemployment, combined with a rotten sex life (where should all the testosterone of the young muslim boys go if the girls should stay virgin andyou can only marry when you have a steady job and good income?). To revolution and migration of course. And Europe is only a short boat trip away. The Danes are the first to adress this fact and re-intruduced border patrols. Other European countries will follow suit. No open borders anymore within the EU. That grand project is stagnating now.
The second grand project of the EU was the Euro, the single common currency for totally different economies. France and Brittain pushed the idea and blackmailed Germany wit hit, at the eve of reunification of West and East Germany. Germany would only get their permission for reunification if the strong German economy would be tied closely to weaker others in the form of a monetary union. The Germans bowed for this blackmail. The Greek government at that time was helped by Goldman Sachs to make it’s economic situation look better that it was in reality. The Italian government was helped to do the same by the current president of the European Central Bank, who happens to be a former top executive of the same Goldman Sachs bank. How cynical.
Everybody involved knew that this grand project was not sustainable. Investor George Soros, who now says that he protects the Euro, has been hedging against the Euro for years. The current austerity measures won’t help either. The Euro will implode, sooner or later, as its predecessor did, the Taler, which was the currency of the Danube monarchy, which was the predecessor of the EU. We had a EU before, yet it imploded. We had a single European currency before, yet it imploded. Some economists now promote the introductions of Eurobonds. But this would mean that Germany alone would have to pay 47 billion Euroes annually on extra interests. With inflation on the rise (5% annually from 2011 on for the next ten years, I expect), and knowing the German historic fear for high inflation, the German voters will force their politticians to disband the Euro and introduce the own national currency again. Others will follow suit. Some economists say that Germany would do its utmost to save the Euro because it exports so much to weaker European economies in the South and East. This may be true, but the population in southern and eastern Europe is shrinking and ageing so fast that these debt-laden markets won’t be able to buy any substantial amount of German cars, TV’s, dishwashers or other products anyway. So why should Germany finance dying and debtburdened countries?
Sweden and Brittain were very smart to stay out of the European Monetary Union. Yet they too will feel the consequences of The Great Stagnation. These governements too have been spending too much, these countries too are debtladen. The welfare state can not be financed, retirement age has to go up and people have to learn to live with less income. The economies all over the world will shrink, and this contraction will lead to a new adagium: Small is the new big. Since people are spoilt and will revolt against all of this, we will see a lot of social unrest as recently in Greece and Great Brittain. There is a market for communism again.
Another grand project will fall prey to The Great Stagnation, and that is globalization. We’ve had waves of globalization before in history. The global elite which orchestrated globalization as we know it now, has achieved a lot and should be praised fort his. We have less hunger, more middle class people and higher productivity figures than ever as humanity. On the other hand all of this is not making people that much happier. Many people feel less at home in todays economic world order. One of the aspects of globalization is mass migration. This has disupted families and societies and has not made many people happy. Therefore the rejection of mass migration by the majority of citizens is something which can’t be neglected by politica land economical leaders anymore. So globalization will turn into slowbalization. It will not end, but slow down.
All of this might lead to the end of democracy as we know it today. In all democracues where I’ve been lately the citizens feel wary, cynic and distrustful about politicians of whichever poltical colour. Weak leadership is to be seen in Europe, Japan, India and the US, yet not in China. Maybe the “Chinese democracy” is the next step? Or is the next state a medieval one? Will the 2.000 regions in Europe each form city states again, and give their citizens a real homely feel again? Time will tell. For now: prepare yourself for The Great Stagnation!
