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My Main Worry is Europe
My Main Worry is Europe
Can it get any better than this? That’s the question investors are asking themselves after an exceptional year. Despite a slowdown in the global economy and increasing trade tensions, almost every asset class is up for the past twelve months.
Mohamed El-Erian
Mohamed El-Erian is convinced that the world is nearing a tipping point. According to the internationally renowned economist who coined the term «New Normal», the faith of the global economy depends on a successful hand-off from monetary to fiscal policy and structural reforms. Otherwise, the world will sink into a mire of financial volatility and political collapse, he fears.
«As good as the ‹New Normal› was for the last ten years, I don’t think it will continue during the next ten years», says Mr. El-Erian in an extended interview with The Market.
In his view, Europe is getting much closer to a fateful junction. If the European economy hits stall speed, chances of a recession are increasing, Mr. El-Erian argues. Furthermore, he cautions that the U.S.-China deal will be a short-term truce since trade is no longer just about economics but also about national security.
Mr. El-Erian, investors are looking back at an amazing year with many turns and twists. What’s ahead for the financial markets in 2020?
There’s a tendency to what I call a «one issue market», meaning the market embraces a single issue and is influenced by that issue most of the time. For a long time, this issue used to be Central Banks, then it has evolved into trade. Trade will continue to be an important issue, even with the recent short-term truce. We have pressed the pause button on globalization. Now, the big question is if we press the play button again and continue to globalize as the market is assuming or if we step towards pressing the rewind button on globalization and deglobalize. That uncertainty is not going to go away. It’s going to be with us for the whole of 2020 because trade is no longer just about economics. It’s also about national security.
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Which Nations Will Crumble and Which Few Will Prosper in the Next 25 Years?
Which Nations Will Crumble and Which Few Will Prosper in the Next 25 Years?
Adaptability and flexibility will be the core survival traits going forward.
What will separate the many nations that will crumble in the next 25 years and those few that will survive and even prosper while the status quo dissolves around them? As I explain in my recent book Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic, the factors that will matter are not necessarily cultural or financial; being hard-working and wealthy won’t be enough to save nations from coming apart at the seams.
Here are the factors that will matter in the next 25 years:
1. The ability to engage and survive non-linear change, which is rapid, unpredictable and systemic, as opposed to linear change which is gradual, predictable and limited in nature.
None of the current political systems are decentralized enough and adaptable enough to survive the non-linear era we’re entering. As I explained in What If Politics Can’t Fix What’s Broken?, the politics of centralized compromise and incremental, top-down adjustments are wholly inadequate to dealing with non-linear disruptions.
2. The nations that cannot jettison their parasitic elites will fall; the few that find the political will to jettison their parasitic elites will have the wherewithal to survive and possibly even prosper as the global status quo collapses around them.
The problem, as we all know, is the parasitic elites rule the centralized hierarchies of wealth and political power, and they will cling to power even as the nation they rule crumbles around them. The hubris, complacency and greed of the ruling parasitic elites is near-infinite; the idea that the political and financial structures that they dominate will not survive simply doesn’t exist in the parasitic elites, with the exception of a few outliers who are constructing remote bugout compounds with landing strips etc.
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US fall from virtuous republic to tragic-comic empire described perfectly by Roman historians
US fall from virtuous republic to tragic-comic empire described perfectly by Roman historians
The ancient Greek historian, Polybius, celebrated the Roman republic of ~ 150 BC under its constitution with balance of powers among the Senate, two elected consuls, and the general citizens:
“Such being the power that each part has of hampering the others or co-operating with them, their union is adequate to all emergencies, so that it is impossible to find a better political system than this.” – The Histories, Book VI, Section V: On the Roman Constitution at its Prime
Americans and people around the world were equally proud of the United States Constitution as “impossible to find a better political system than this.”
About 100 years after Polybius’ account, Rome’s republic had descended into oligarchic competition for power. Contemporary to Julius Caesar, the Roman historian and government insider Sallust blasted the decline of virtue in government:
“To those who had easily endured toils, dangers, and doubtful and difficult circumstances, ease and wealth, the objects of desire to others, became a burden and a trouble. At first the love of money, and then that of power, began to prevail, and these became, as it were, the sources of every evil. For avarice subverted honesty, integrity, and other honorable principles, and, in their stead, inculcated pride, inhumanity, contempt of religion, and general venality. Ambition prompted many to become deceitful; to keep one thing concealed in the breast, and another ready on the tongue; to estimate friendships and enmities, not by their worth, but according to interest; and to carry rather a specious countenance than an honest heart. These vices at first advanced but slowly, and were sometimes restrained by correction; but afterwards, when their infection had spread like a pestilence, the state was entirely changed, and the government, from being the most equitable and praiseworthy, became rapacious and insupportable.” – Conspiracy of Catiline, The Argument
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