The New World Order, Regionalism In Economics and Globalism in Culture
The World will adapt its global economic system caused by the Covid-19 effects, the readjustment of global business will cause the decoupling of the various economies from the Central Banking web of the US and EU . It will result in an entirely new framework, the sudden collapse of activity in all the countries of the world is producing a double impact on demand and supply that will have non-reversible effects. The answer cannot be central bank bailouts as those are deficits of trillions we are offsetting to our future children!. It’s not free money, it will lead to a massive deflation in the near term as the economy will not speed back up, it cannot be eliminated as it goes right into the global money supply and sits on the balance sheets of governments.
Stress Economics 2020
The magnitude of the combination of the decrease in output and consumption will generate changes in the economy, our behavior, our companies, and our way of understanding politics and society. We are already seeing some quick impacts of how the world has changed so quickly by witnessing for the first time in history oil going into NEGATIVE territory. Who would have thought that the “black gold” so coveted for the last 100 years, the reasons for our countless wars in the Middle East, is now, economically speaking, worthless to the investor. What this means to the world population is that it’s time to realize that with less consumption and with a generational mentality change in order for the world’s markets not to totally collapse, we will need to adjust our habits smoothly but quickly. Governments will need to allow banks to forgive debt. Currencies will need to be devalued and adjusted, even the mighty US dollar that’s based on the dollar economy will need to readjust its value to the reality of world markets. We can and I do believe will see within the next 20 years a world digital currency consisting of a basket of the major regional “block currencies”, giving the citizen and worker of each nation an ability to readjust their real working income to be able to utilize it globally and participate in a way they never have before. This collapse of the old, if the letdown of the old habits are handled well, can result in a true new age with a better balance of individual monetary value as never before seen in history and a true redistribution of wealth.
Due to its aging population the European economy will become like the Japanese, a result of the substantial financial effort to sustain the countries of southern Europe. The continent will suffer tremendous rates of unemployment, deficit, and public debt. Deflation will be the risk that Europe’s heads of state will have to fight and without an increase in population and demand, the society will adjust to more of a barter and digital asset-based economy. The only growth for Europe will be its ability to use its highly educated work force to develop a new system of exchanging personal time and assets and rebuilding local industry to support the nations within its geography and create a true block.
Germany will seize this great opportunity to tackle the situation with a pan-European vision. They will take the lead and help with strong public spending, mutualization of debts, and authorization of liquidity injections so that the architecture of the Union can reverse its decline. Europe will be hurt but more united after this crisis.
The United States will embrace Keynesian policies, with colossal public debt and strong creation of money that will, if not brought through the system, cause high inflation. The reality is if work and spending habits remain slow, actually deflation may happen instead, and society will need to carry a very heavy debt burden[HK2] linked with very slow real growth. The only way to lessen the burden will be to create a regional block, reduce military spending and bring manufacturing back to the US. As more and more dollars are printed people will begin to change their behavior, establishing inflationary psychology whereby creating a feedback loop of depreciation, inflation, and further money printing. This cannot be sustained in the US, especially if there is a repeat of this virus in a second phase or if there is a new bioterrorist attack. US Treasury bonds in this instance will decline in demand, as countries usually buy these bonds because most international trade is in dollars, making them indispensable to the global economy[HK3] and part of international trade deals. In essence, 7.2 billion people depend on the US dollar to finance their international trade. It allows the 330 million Americans to run deficits far higher than any other country comfortably. If there are regional digital currencies or alternative reserve currencies created to trade within their own systems the demand to use the dollar as the reserve will drop tremendously. Other countries will get fed up with financing the US deficit by buying their government bonds while losing value with the likely depreciation of the dollar. The current monetary system will be broken, and the dollar will lose its role as a reserve currency.
The New World Order 2020
For eighty years, the US, having the reserve currency, has been able to finance its allies (France, Germany, and the United Kingdom). It created the US-EU central banking block that has largely dictated global economy since WWII. This will change considerably now that an alternative to paying in dollars emerges from other economics wishing freedom from a system that no longer serves their purpose. China and Russia will join in to create an alternative channel of international payments that will diminish the global role of the dollar. This will then begin the complete reversal of alliance that the US has controlled since WWII. The US will need to re-focus internally and lead the North / South American region as a trading and economic block and that will be the new role of the digital Hemispheric American dollar.
Five large blocks will be consolidated in the world: Pan Sino, United States (North-South), Europe, Africa-Mid East, and Pan Eur-Asian (Indo-Russian). Both manufacturing and trade will be regionalized, returning to their places of consumption, with the help of technology which will be unique in its global dissemination. Productivity locally will increase dramatically and will have lower costs than the previous global-supply and trade economy. The fear of further breaks in supply chains after the trade war and Covid-19 will act as a catalyst to cement this matrix and future related virus pandemics will further instill these systems rather than have them dissipated.
We entered 2020 with 81% of the assembly and 64% of the components in the Technology sector worldwide made in China. Europe and the United States will shortly thereafter start to transfer some manufacturing to their regions. China will react by strengthening its advantages of artificial intelligence in sectors such as health, purchasing, transport, payments and focus more heavily on its domestic economy and spreading its influence on its bordering markets. It will be key for China to increase private consumption and services in its GDP, with higher local production of consumer goods that will compete in quality with Europeans and Americans and align a better quality of life for its citizens. China will need to completely change its mindset on how it views it people and realize their innate value to the country in order to maintain its strength. The gap between the United States and China will widen. There will be a decoupling in the supply chains that will end the Chinese economic miracle, and their growth will stabilize around 3.5% of GDP as they move to re-engineer their new reality into being. This could be a saving grace for its people and land as they could take it to fix decades of pollution and destruction of its environment in exchange for its accumulation of dollars and the ability for it to participate in the world economy. China could now use where it is in its level of technical knowledge to move forward toward an individual path of growth for itself without trade with the US. The technology transfer it has gained will allow it to succeed on that path.
Oil Wars and Dying Sheiks
OPEC and developing countries will be the big losers, because of the fall in the price of raw materials and the flight of capital to developed countries as Funds look for security in assets in so-called safe havens. This will lead to overvalued stock markets and real estate in Western countries from 2021–2025. By the end of the decade, as reality sets in that the economies of these markets are no longer driven by internal growth, the markets will fall dramatically. The fall in GDP of countries linked to raw materials will be brutal. The war for market share between Saudi Arabia and Russia will cause irreparable damage to the shale gas business in the United States which itself will go into bankruptcy dangers due to over supply. That will result in the Saudis turning to supply China and India. India-China, as countries who do not want to run large deficits, will race to leap frog oil to renewables as a way to fuel their economies. Any upside in oil will be from 2022 to 2030, after that it will be a total collapse. Integral to the international collaboration between countries without the reliance on the “Oil Sheiks” will emerge in the face of the failure of global coordination that we have witnessed and to react to future crises. The Arab oil producers will lose their world leadership in resources, their oil backed global empire and thus dominance of the dollar which backs the oil trade will be finished. This will then allow those 5 large blocks to start their own internal alliances and preference of currency most linked to their internal economic value to allow deflationary economies to be built. With the ability to finance their own regions, investments in public goods and services will grow. In the short term the gap between rich and poor will widen further, fueling populism. Less-educated workers will be disadvantaged in the new wave of digitalization and teleworking.
Global Culturism And Reputationalism
2020 as it progresses, will be one where ethnocentric views increase in the world in the short term. People have seen their tremendous fragility and most will be looking for immediate survival of their “tribe”. Many will come down from their deification and understand that they are only temporary creatures and so are all other humans. This will then lead to a global understanding that we are united in spirit and not in economy. It will lead to a massive cultural shift of what is valuable in reality between humans — their experience of one another. The need for more authentic experiences will require less of we thought was important. Less office space will be rented, and the price of rent will go down. Professionals that have become accustomed to communication via Zoom conferencing, and remote work with flexible schedules will now find it difficult to go back to a system they now consider unnecessary. People will have learned to consume less. Online shopping will become natural in a new, much more digital society. The losers will be the chain stores, and shopping centers will become leisure platforms. Online university education programs will grow in popularity, boosted by augmented reality and 5G. Education will reconfigure towards skills.
Companies will hire fewer employees and outsource more freelancers. The number of freelancers will grow because professionals will be wary of job security and will have discovered the value of flexibility. Freelancers will create a personal sovereign currency based out of a new concept called “Reputationlism” where, based on their experience, they will trade time for assets with one another thereby increasing efficiency and wealth on a peer to peer level.
Private Equity will redirect its investment from consumerism and “Silly Con Valley” pump and dump tactics towards health, food, and technology-related companies. The shared economy will lose strength. Companies will sell foreign subsidiaries and non-strategic holdings to capture liquidity. Proximity suppliers will be sought, and just-in-time supply models will be renounced. Companies with strong balance sheets and multi-channel distribution capacity will take advantage of the distress of competitors to drive intense business concentration and become regional champions. Investors will invest in these companies boosting their market capitalization.
Following the bubble of IPOs of loss-making companies at ludicrous prices, investors will bet on companies that generate profits. Many of the unicorns will deflate and go bankrupt. 77% of the companies that went public in 2019 were losing money and will be killed off as experiments in foolishness of the old economy.
Politics and the Weavers of Rubbish
Political leaders have used the pandemic to increase their power and their base. At the same time, they have exposed what ridiculous morons they are and how inept guardians they are of our welfare. Politicians will lose face, and experts will gain importance. Citizens will be frustrated by the inability and demagoguery of their leaders and will demand more expertise from governments. A democratization through technology will be called for, to be run by a consortium of private parties that form a PPP with Governments to transparently help manage and keep our officials honest. Almost all current leaders will lose the next election. Politics will polarize towards the extremes until this new system of the people is put into place. The world will become more socialist. There will be a reversal of capitalism and individualism that have dominated our society in recent decades. Governments will take a more significant role in the economy, increasing regulation and intervention. The limitation of freedoms will increase. Although these limitations will need to come to a balance by ensuring individual freedoms and privacy are kept. Governments will be expected to provide security and stability and its leaders accountable to the people.
These are some of the thoughts I have had going into this new reality we have all been thrown into. I’m grateful for the time you have spent to read through this. Let’s meet again in 2030 to see how close I was.
Shahal Khan, Washington D.C.