2002- THE PREDICTIONS
'Next year will be a war year as well..' President GW Bush
course predicting the President will nearly choke to death on a pretzel
is more difficult
The Prince of Peace
has spoken, 2002 will be one of relentless military expansionism. The
'War against terror' will go on... 'we are going to continue to hunt down
these al -Qaeda people in this particular theatre, as well as other places.'
100 days of bombing and the B-52s pound Afghanistan. When will it stop?
It's the other places
that sounds worrying. Just where will the war go? When will the USA
face up to the fact that most of the terror is actually coming out of
Brixton Mosque and other choice places in the UK? Can we expect B52s
over London and Birmingham in the near future? When will Mr. Blunkett
and Blair face up to the fact that extremism is harboured and nutured
in their England. Are they reading the hate emails?
It is worth recalling
that England nurtured and harboured Karl Marx in its bosom. You cannot
escape the fact that his ideas, so adopted in the Soviet and Union and
China, resulted in the greatest human catastrophes of the 20th century.
This is not to say that Marx was responsible, simply that he lit the
fuse that would eventually become the crushing death masks of Stalinism
and Maoism. Marx was calling for social justice for the working man,
perhaps unaware that his words and ideas could be interpreted to oppress
and defile the working man. Not so those who now preach hatred and extreme
jihad against the west, in particular the USA and England, converting
the vulnerable, the needy and ex-cons to their cause, selling glory
and martyrdom in exchange. These extremists know full well what they
are doing, they know how many could die. Like Russians spies in the
20th century, their recruits lay sleeping until called to action. They
are our neighbours in places like Finsbury, Lambeth, Camden, Brixton
and many nothern UK cities. The shoe bomber Richard Reid is a prime
example. An ex-con and convert to Islam, he was a worshiper at the Brixton
Mosque where Zacaria Moussaoui (the suspected 20th hijacker on 11.11.01)
worshipped. They are on a holy mission to destroy the western way of
life and one or twenty such people armed with only small amounts of
explosives or even a knife and fork can cause the deaths of thousands.
They can and have thrown thousands out of work in the airline and tourism
Ironically, the tragic events of 2001 and the war in Afghanistan have
had quite the opposite effect to what they may have intended. Bin laden
may have hoped to extinguish hope and faith in capitalism, instead he
has shaken the engine of capitalism out of its torpor and through effective,
decisive action, the west has found resolve and intellectual arguments
for the renewal and maintenance of our way of life. The Wall street
and Pentagon deaths may have been terrible, but they have awakened us
to the dangers within and without. They have not produced despair in
the young, but given them a shock. Conscious consumption is all very
welll, but there is more to see and understand in this world than the
local Mall. May the young realise that there are others out there belonging
to a different tribe with different ideas and aspirations, quite alien
to their own. An awareness of world geography would be no bad thing
So 2002 - will
it be a year in which President Bush conducts his war of revenge against
'terror' or will it be a year of unintended results? What kind of year
will it be?
The Developing Scenario:
I: INDIA v PAKISTAN:
Is nuclear war possible between these two belligerents?
At the moment there is great tension following the attack on the India
parliament by 'alleged' Pakistani extremists. (14 people were shot dead)
Pakistan for it's part is hoping for a reward from the USA for its pliant
part in the Afghanistan war. Nevertheless, as evidence now shows, the
Taliban could not have survived without Pakistani help these past years
and if it is discovered Osama Bin Laden is hiding there, do not expect
much sympathy for that country. A war is extremely possible between
India and Pakistan, but the nuclear option seems too extreme at this
time. Indeed Pakistan has 'ruled it out' which means that they were
at least thinking about it.
Since the December 27th Bin Laden broadcast on TV it is more likely
that Bin Laden is hiding in Pakistan. Expect this to be increasingly
dominant in the news for early 2002. (For background reading as to the
outcome of this proposed war read the novel LAST
JET ENGINE LAUGH by RUCHIR JOSHE which looks at Pakistan in
a post-war situation).
*As of Jan 15th there is still much posturing but at least the Premier
and the General have shaken hands. In the end India and Pakistan must
ask themselves what will they gain and what could they lose from war
and from here it looks as though both could lose a great deal. Glory
is a messy ugly thing and very overrated. Ask the Afghan Taliban.
Will the default by Argentina matter? $155 Billion dollars is lot of
money not to be able to repay. As of Jan 15th with the Peso now floating
fleely and downwards the peso has already devalued by 50 percent and
could fall further.
Right now the fifth President (Eduardo Duhalde) in two weeks is enacting
a rash of emergency measures to help them get through this period of
uncertainties. There is daily rioting and one suspects it will all get
very ugly. The election in March 2002 may go his way, but expect Argentina
to default anyway and another change of government by the summer, with
more rioting and a much worse situation. As of January 2002 Pesos was
no longer swopped for US Dollars. The continued impoverishment of the
poor and the destruction of the middle-classes will follow and with
it, the ability to restore and rebuild thier economy. Argentina is a
one-way bet in 2002. Right now factories and farming are at a virtual
standstill, The factories contain old machinery, exports are at a minimum
and the more they delay devaluation, the bigger the pain later. Only
slowly will we find out many banks in Europe and America are affected
and by how much. This story will run all year and could spill over into
our economies in the west.
Previous articles on Argentina here. Argentina
the Beautiful, Argentina
1st 2002. Good-bye to the Franc, the Mark, the Escudo, the Peseta
and many others.
This is something of a grand return to the greater Europe of Pax
Romana, where Caesar's coin could be spent in any part of the Empire
and in theory it is a 'good thing'. Right now the UK and Denmark
are set against it, but for how long? Finland has embraced it and
Norway has not. The Euro has a flaw, the common interest rate that
will not suit each country all the time and there are suspicions
that the rate will be set to suit Germany most of all, but the Euro
is a logical and binding step in the European Community and will
be a success, eventually.
There can be few
people who do not know that most of Europe is changing to the Euro currency
on January 1st 2002. Good-bye to the Franc, the Mark, the Escudo, the
Peso and many others.
This is something of a grand return to the greater Europe of Pax Romana,
where Caesar's coin could be spent in any part of the Empire and in
theory it is a 'good thing'. Right now the UK and Denmark are set against
it, but for how long? Finland has embraced it and Norway has not. The
Euro has a flaw, the common interest rate that will not suit each country
all the time and there are suspicions that the rate will be set to suit
Germany most of all, but the Euro is a logical and binding step in the
European Community and will be a success, eventually. Although the currency
is rising as I write this, I expect some shock will cause it to fall
in the Spring (especially as there are elections in German, France,
Holland and Ireland this year) and many reforms will be put on hold
including the enlargement process currently held back by Ireland. My
recommendation is to buy into each fall and by the early summer the
inevitable swing back in value will catch many off guard. The UK may
well be smug in the winter months as fraud and chaos take place, but
when the Euro strengthens and the pound begins to creak as the world
wakes up to the fact of of our decimated manufacturing industry and
faltering banking, media and property empires, the race to get into
the Euro will begin in the Autumn of 2002. Right now the Government
is encouraging retail operators to take the Euro at all outlets (but
providing none of the financial or legal backing to enable smaller retailers
to compete). Thus the back door is open. Prediciton? The result of the
referendum, anti-euro newspaper Barons nothwithstanding, will be a yes.
We have no other choice.
For reactions to the first week of the Euro read GoodbyePeseta
, Euroadventure and
The Third Week
4: PROPERTY (UK)
Sometimes you just have to admit that you are wrong. Well I have miscalled
the homeowning market for so long, I figure that this year I will finally
be right. London is the key. Not only has 'expensive' property stopped
rising (the lack of Christmas bonuses a key here) but those who took
out mortgages at five times their income or more, are having to sell
now and what has become as a trickle, will be a rout in March/ April.
Just as the provinces have taken years to catch up with the London effect
and are still rising in many areas, the London squeeze of property will
ripple out over the year and gather pace as unemployment rises. Many
people have made the fatal mistake of increasing their mortgages - cashing
in on the rising value of their homes. They have spent this money of
holidays, new cars, face lifts, or in a few cases improving their homes.
But as jobs become more scare and prices falter, at some point the banks
and mortgage lenders will grow nervous. It will take another year because
mortgage loans are cheap at the present, but in the end market forces
will apply. What goes up will go down and in particular many speculative
buys in dodgy areas will reveal to be hard to shift.
I am not saying that houses will go back to 1997 prices or anything
like, but the froth will disappear and as more people have to sell,
the marginal houses and cramped studio apartments will suffer most.
Value for money will come back in to vogue.
1986 friends of mine bought a run down house in Mottingham, a London
suburb for £65,000 . Today it is valued at £660,000. The
temptation form many ordinary London housholders is to cut and run.
Take the profit, buy the little place in the sun and bank the rest.
The snag? Interest rates. Buy for £150,000, invest the rest at
a real return of around 3 percent or less, after tax it produces around
£13,500 per annum. Not much for a life in the sun. Now have the
same thing happen in Toyko and invest at zero interest rate.
How hard is it to survive in Japan with no income from savings. Especially
if you don't have a job and house prices are falling along with everything
else as they are in a deflationary spiral. High property prices are
no guarantee of a good life. You have to stay in the game. Taking a
profit means you are out of the game forever. Many people percieve themselves
as rich because of the value of their home. In the UK investment in
industry has been diverted to home buying. It crashed about our ears
in 1988, why wouldn't it do so again?
* Right now on Jan 7th car sales in the UK have reached record highs
(though sadly not of British made Rover's) all this is fuelled by credit
and the signals coming out of the Bank of England are interest rates
are going to have to rise. This is turn will raise Sterling and further
damage our manufacturing in the UK. Of course if we were in the Euro
we could arbitarily raise our interest rates. Is it the right thing
to do? Will it choke of consumer demand? I am predicting a shock for
the consumer and interest rates of 6 percent by the autumn, we shall
see. A slow burn.
America will probably be leading us out of recession in mid - 2002 but
Europe is lagging behind and all of 2002 will be coping with the effects
of the 2001 downturn. The combined effects of the turndown in civil
aircraft, jet engine orders, shipping, the EU fishing quotas, the EURO
confusion, will mean Europe has a mixed and sometimes difficult year.
Germany has 4 million unemployed and difficult elections to get through.
America has cut away the fat and is lean, hungry and with incredibly
low interest rates, ready to climb back out of the hole, led by the
*On the negative side. Ford, one of America's largest companies is having
major sales problems with its domestic vehicles. Sales of Jaguars and
Range Rovers are good but they will not sustain the company alone. The
key compenent manufacturer for LandRover has gone under, so expect production
to grind to a halt. *Since I wrote this on Jan Ist Ford have announced
35,000 jobs to go in the USA. (Jan 11th) Marconi in the UK are laying
off another 4000 people and selling off core assets to stay in business.
Some key 'old economy' companies are having problems and this may yet
drag down the overall optimism. Already Alan Greenspan in the US is
saying that he thinks the recovery will take a lot longer than oriiginally
thought. Walt Disney has yet to recover from the effects of 9/11. How
many other companies are also feeling the pain. Expect a rash of major
companies getting out a lot of bad news and write-downs this first quarter.
(especially dot-com investments).
The interesting element is almost zero inflation in the UK. (0.7% Jan
15th figures). Some may celebrate this but are we going the way of Japan?
Assets will start to fall in value year on year and deflation takes
hold? We have become so used to our homes and antiques going up by around
ten percent a year , how will we react if this goes into reverse?
But what of Japan and China?The key to Japan is to watch the first figures
on the Tokyo stock market after New Year's day. If it rises (the saying
goes) then the economy will revive. If not, then expect another year
of stagnation and pain. Japan is dealing with its banking credibility
problem and it is tempting to think that Japan is suffering, but the
reality is that it still exports a fantastic surplus every year and
it is still an incredibly rich country. This could be the year Japan
gets moving again. The Nikkei has risen every day since the first of
january and now stands at 10942. A long way off the heady 26,000 or
higher of years ago, but confidence building and an excellent sign.
We shall see if it continues and the saying is correct. As I ammend
this the stock markets worldwide are down. So is the Nikkei. So perhaps
it is a sign tha the old sayings no longer ring true. Expect this year
to turn 'tough'.
China is growing year after year, the low inflation scenario in the
world can only help. Now in the WTO, China is well placed to grow stronger
and richer this year. It may also raise its voice a little and annoy
America. Growth this year is running at around seven percent. Can this
continue without overheating the economy?
This is not likely. Expect Israel to continue to have major problems.
At any time it could spill over to other countries. Especially if Bush
goes after Saddam Hussein. Is there a chance for peace betweeen Palestine
and Israel? Probably not with Sharon in change of Israel. The suffering
Indonesia will continue to suffer too but it would be good to think
that this is the year that Burma returns to sanity and its rightful
elected ruler is allowed to take over from the oppressive Generals.
South Africa will
suffer greatly from the recent involuntarily devaluation of its currency
by 40 percent. Imported oil and machinery will raise inflation but fortunately
it can always increase the exports for BMWs and Volkswagens from the
East London and Wolfsburg factories in the Eastern Cape. South Africa's
greatest hope is an export surge and they do make and sell quality goods
and fruit. If they could also face up to the challenge of Aids (80 percent
of the forty million sufferers of this disease live and die in Africa
as a whole 4.8 million in SA alone)) and other mismanaged areas, such
as a failure to privatise state industries and telecoms. It could yet
'come right', but don't bet on it. The Zimbabwe effect is going to increase
and destabilise the region and South Africa is awfully loathe to condemn
Mugabe. The fear is by foreign investors is that its silence means that
it agrees with Mugabe and the land grabs and murders of South African
farmers will increase from the high number that has already occurred
Yes the weather will have unpredictable effects. Every two to ten years
the El Nino affect appears in the Pacific and alters rainfall, gulf
streams, and causes floods, quakes, typhoons. Already this january we
have seen El Nino activity increase by 15% in the southern hemisphere.
Expect this sotry to be big around September /October 2002.
Current price of Oil $21.07 (Brent Crude)
Curent price of Gold $277.75
Oil: $19.16 (Brent)
Nikkei : 10208
What price oil and
gold one year from now? If cheap oil is helping us recover will OPEC
with Russia's help choke off the recovery with high oil prices or will
a weak market keep the price low. Fortunes are won on lost on such decisions.
If you have read the above and have an opinion about inflation/deflation
and things to come. Send them to
Our first reaction to
Sam's predictions is from Lionel
Darmendrail in Bayonne, France
analysis at this point sounds (pro) American ...' Click here
and read on
© Sam North 2002
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