Guest post by Brad Cabana. Original article can be found at Rock Solid Politics:
Stratfor, a US “geo-strategic ” global intelligence company, recently published its “Decade Forecast:2015-2025” here . The essential nuts and bolts premise of this forecast is the US will remain the unchallenged global super power, while Russia, China etc fragment under social chaos and democratic forces. It even predicts Poland will become the dominant player in Europe… I kid you not. Stratfor, in all its conclusions couldn’t be more wrong.
First, and probably most important, Stratfor’s conclusions are based on the current system of world commerce and consumption. It brags that the US still produces 22% of the world’s economic activity. That may be true, but it misses the key point – all that is about to change. Brazil, Russia, India, China (BRIC countires) are establishing a singular trading bloc among themselves. Importantly, the bloc’s transactions are to conducted in respective national currencies – not pegged to the US dollar or even using the US dollar. In effect, they are recreating the world economy to the exclusion of the US and major European powers.
The practical effect of this monumental shift can be seen already today. In the last three months BRIC has announced a new world bank that will challenge the world bank (that operates in US dollars) for global supremacy in sovereign lending to countries in need, or between themselves for major projects. One such project is the new canal to be built in Nicaragua, financed by China, and guaranteed military protection by Russia. Again, neutralizing the US controlled Panama canal. Then, last week, the BRIC countries announced they would be creating a supra-national parliament that in essence would mimic the European Parliament. Also, in the last while, countries like Egypt, Greece, Argentina, Venezuela, Turkey, etc have been gravitating to the new BRIC economic bloc – not wanting to be left out in the cold.
But what does the new bloc have that will unseat US dominance? One word: markets. With the creation of the new bloc, the US and Europe will lose significant markets for their businesses. The loss of those markets cannot be replaced. The US and Europe will be faced with massive deflation in their economies as a result, large scale recession if not depression, and the very social unrest Stratfor predicts for China and Russia will instead be taking place in the US and Europe.
Here are some real numbers that tell the tale. By 2025 the populations (markets) of the new bloc will be approximately 3.1 billion. By contrast, the North American/European bloc will have a population of 1.1 billion. That is if the current western trade partnerships remain intact in the face of closed markets in the new bloc. Consider, for example, Australia, which does massive trade with China. Australia will be forced to decide whether its political/military alliance to the West outweighs its economic survival. Other countries, particularly in Europe, face the same tough choices. By way of example, France has lost a few defence contracts lately with India – Russia being the benefactor.
Here are some even more staggering numbers. In a word: debt. The ability to borrow to consume. The necessary requirement to grow and drive any economy. You can check the current numbers of all countries here . There are two sets of shocking numbers – gross government debt as a percentage of GDP (Gross Domestic Product – annual) and debt per person. The three main countries power the new bloc shake out this way:
China – 20.9% (debt vs GDP) $1,489.00 (per person)
Russia – 14.6% $2,297.00
India – 68.1% $ 946.00
The main powers in the Western block look like this:
US – 107% $58,604.00
Japan – 242 % $99,725.00
Germany – 78% $35,881.00
UK – 95% $38,938.00
The lesson here is two fold. Firstly, the debt per person and overall gross sovereign debt of the powering nations behind the new bloc are minuscule, and they are ripe for growth. Secondly, in the case of India, its large gross debt as a percentage of GDP, yet minute personal debt, means once it economy is properly stimulated its Debt vs GDP ratio will fall drastically. None of these things can be said for the Western bloc. In a phrase: the West is maxed out. It has nowhere to grow, and certainly no ability to dominate the new bloc politically, militarily, or economically. Stratfor is just plain wrong. Very wrong. Surprisingly wrong. Money and markets do not have a soul. It has no national agenda or pride. It only exists on numbers. Those numbers heavily weigh to the favour of the new BRIC alliance. Just as assuredly, they condemn the West to a time of severe and fast decline.