My predictions for 2018

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“…the accelerating decline and impending fall of America’s global empire is the single most important fact of contemporary world politics.”

John Michael Greer – “A dangerous year”

 

It doesn’t seem that long ago that I started this blog, with predictions that shocked my early readership; of a world shaken by Brexit and the victory of Donald J Trump in the November presidential elections.

Now, that time of the year has arrived when I will be attempting to divine the future, again, using history as a guide. History rhythms and the election of Donald Trump, a populist demagogue, is a clear sign that the foundations of the American superpower is rotting badly.

John Greer, in his review of 2018, notes that the accelerating decline of American global power will lead to further instability as our liberal international order continues to disintegrate. This could lead to flash points in troubled parts of the world, including North Korea, the Middle East and North Africa, where radical and extremist groups or governments sense opportunities as an over-extended America cuts back financial and military aid to traditional allies.

The decline of the tottering American imperial giant is, as Greer states, the single most important fact in geopolitics, but it is within the broader context of what I refer to as the limits to growth mega-trend. Our industrial civilisation is facing hard limits to economic growth as it bumps upon the physical reality of resource depletion, worsening climatic change and growing water and food scarcity across the world. Already, the South African city Cape Town is on the brink of running out of water.

So, it is within these broader parameters that I will proceed, as in previous years, to outline a number of probabilistic forecasts for the year ahead.

  • A major volcanic eruption will happen (50% probabilistic chance)

Volcanic researchers and scientists have been noting an increase in seismic activity from known volcanoes around the world in recent years. My wild card prediction is that at some point this year a major volcanic eruption will lead to significant economic and societal disruption, including cancellation of flights, the enforced moving of populations and damage to homes and businesses.

Whilst I am not a climate scientist, I do wonder if the changing climate is contributing to the increased instability, particularly within the “Ring of Fire” in the Pacific, and whether Gaia is preparing to strike back against the human species causing so much disruption on Earth.

  • Italy will elect a centre-right coalition government (60% probabilistic chance)

The Italians are returning to the polls in 4 March and whilst the opinion polls currently suggest a hung parliament, the centre-right parties of Berlusconi’s Go Italy, the anti-immigrant Northern League and smaller right-wing Brothers of Italy are rising in the polls.

My forecast is that the centre-right parties will likely reach the 40% mark and be able to for the next government after March 2018 with Berlusconi as the kingmaker. The Italian electorate are increasingly frustrated with the waves of refugees flowing from northern Africa and perceive the current centre-left government as a soft touch on this issue.

Despite a modest economic recovery, youth unemployment is still shockingly high, particularly in the south, and frustration with the euro and the EU is also growing among many ordinary Italians.

Although opinion polls show that a slim majority of Italians wish to keep the euro, the new government will likely be Eurosceptic and hostile to French led efforts to further integrate the eurozone.

  • Bitcoin will end the year higher then it started – $13.400 (65% probabilistic chance)

The crypto-currency Bitcoin has had a rollercoaster ride, soaring to nearly $20,000 in December 2017 and making early investors fortunes in the process. Bitcoin has serious flaws, including high transaction fees and scalability issues, but it is a first mover and a crypto “gateway drug” to the alt-coins like Ripple, Dash, NEO and the hundreds of other little known cryptos in the sector.

Exchanges, where you can buy and sell cryptos, continue to see hundreds of thousands of new users joining every month. Dedicated crypto-currency hedge funds are raising billions from the superrich keen to get exposure to this volatile and exciting sector. This suggests that we are still in the early to middle stages of this asset boom, despite the speculative froth clearly manifest in parts of the market.

A “game-changing” moment will be if and when the US regulators approve a listed American bitcoin exchange traded fund (“etf”), which is likely to lead to an explosion in the bitcoin price, potentially up to $100,000 or beyond.

  • The Republicans will maintain control of the House of Representatives in the November Midterm elections (60% probabilistic chance)

I have been torn on this one for a while now. Until the transformational tax cuts were signed by President Trump I was reasonably convinced that a surge of liberal, anti-Trump voters in the mid-term elections would end the Republican Party’s control over the House of Representatives.

The Trump tax cuts have been widely misunderstood by the media and political elites (the “Pundocracy”). Whilst elements of the bill are giveaways to the corporation and the very rich, (e.g. cuts to the corporation tax for example),  the driving impact of the bill will be to redistribute capital and jobs to the “red states” from the high tax bi-coastal “blue states” who overwhelmingly voted for Hilary Clinton. As Tom Luongo notes on his blog, “All of that capital returning from overseas to invest in infrastructure and production won’t go to the big ‘Blue Wall’ states like New Jersey but to the new production belt in places like Chattanooga.” Trump’s electoral base will see the material benefits in 2018 and will likely turn out in force in the mid-terms to keep the Republicans in power.

Of course, there is a reasonable chance that a strong surge in turnout from the anti-Trump coalition of the upper-middle classes, the young and minorities will overwhelm Trump’s base and lead to a Democratic victory. My hunch though, is that the old Clintonian dictum, “the economy, stupid” will win out and Trump will trump, again.

  • The commodity super cycle returns (75% probabilistic chance)

Commodities have enjoyed a roaring trade since December 2017, with copper, oil and other key industrial commodities soaring in global bourses. My thesis is that a the global economy, swimming in trillions of central bank manufactured liquidity, is enjoying a late recovery which is starting to trickle down to the middle to lower stratums of the population.

My specific prediction is that Brent oil will hit $80 this year, on the back of growing global demand, on-going OPEC production cuts and a potential peaking of production by American shale oil producers as noted in this Bloomberg article.

Looking ahead, it is likely that commodities could spike in 2019 in the face of deepening depletion dynamics, leading to a re-run of the nightmarish 2008/09 economic crisis.

Lets not forget that the reason why sub-prime mortgage holders couldn’t afford their home repayments was because a spike in oil prices. This meant that ordinary American workers couldn’t afford their petrol, electricity, food and mortgage repayments and once they stopped paying their mortgages, the consequences led to the implosion of the banking giant Lehman Brothers and the near ending of the global financial system.

Could something similar happen again to the global economy, which is far more indebted, then a decade ago? I wouldn’t bet again it.

  • The Ethereum crypto will hit $2,000 (70% probabilistic chance)

The crypto Ethereum, also known as Ether, has enjoyed a soaring rise in 2017 and I think it is likely to see a further rise in 2018. Unlike the majority of the cryptos, it is a crypto with real world uses and could have a massive transformational impact in the future.

Ethereum is an indirect way of investing into the underlying blockchain technology and it is for this reason I am confident that the crypto Ethereum, the virtual fuel of the decentralised computing platform, will see a further rise in price in 2018.

I will be continuing my series on the impact of technology, which will include a review of John Michael Greer latest book, The Retro Future: Looking to the Past to Reinvent the Future soon.

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My predictions for 2018

Review of 2017

2017-Predictions

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At the beginning of the year, I half jokingly considered including in my 2017 forecasts the prediction of a British royal engagement. If I had, it would have been a rare success story in 2017!

Reviewing my forecasts for 2017 has been a sobering experience with every one failing to hit the spot. This does not include my special British general election forecast of an increased Conservative majority of which I have already autopsied in my post-election equivalent to eating humble pie.

So what went wrong? To summarise, I over-estimated the electoral appeal and political calibre of the radical, populist and anti-immigrant/euro politicians on the Continent and failed to anticipate the strong anti-Trump/Brexit backlash from the liberal wing of the electorates. However, in my defence, I do think I captured the broader dynamics going on, even if my specific predictions were a bit off-piste.

Marine Le Pen did succeed in getting into the second round of the French presidential elections, as predicted, and had she faced Francois Fillon (“Fillon”), the conservative arch-Thatcherite candidate, may have had a better chance in the final result. As it happened, when I wrote my forecasting post, Fillon was still ahead in the polls with Emmanuel Macron (“Macron”) only starting to emerge into the limelight.

I would also note in my defence that I twice forecast, once the 1st round was over, that Macron would win the French presidential elections, which you can read here and here. Overall, I consider the French elections, considering the volatility of the race, a reasonable success story for me.

The Dutch elections is a classic case of me going along with the frankly near-hysterical liberal response to the Trump victory rather then doing my own further research into the Dutch far-right firebrand Geert Wilders (“Wilders”). After all, Wilders campaigned on a platform of shutting down mosques and banning the Koran, positions which make President Trump an arugula eating liberal by comparison. In the end Wilders came second, not first as I forecast, and increased his overall share of the vote compared to the last election with 13% of the national vote.

A similar tale emerged during the German federal elections which humbled the German Chancellor Angela Merkel. The Alternative for Germany (“AfD”) party, which had collapsed in the polls earlier in the year, roared back to win 13% of the vote in a result that shook the German political establishment. My post “make Germany great again” explored the rise of the nationalist Right in a country which had been relatively immune to populist politics.

Whilst the AfD failed to hit my ambitious forecast of getting into second place, the strong performance by the nationalists in the federal elections validated my view that populist politics would transform German politics in 2017.

A Bloomberg article noted that contrary to the post-Macron consensus from the Pundocracy the forces of political populism continued to rise throughout 2017. The article notes “A Bloomberg analysis of decades of election results across 22 European countries reveals that support for populist radical-right parties is higher than it’s been at any time over the past 30 years.” So to conclude, whilst my specific forecasts were mainly wrong, I did successfully capture the broader dynamic of a continued wave of populist politics transforming European politics.

The Saudi princes being allegedly tortured in the five star Ritz-Carlton hotel in Riyadh might wish they had removed Crown Prince Mohammed bin Salman (“MBS”) when they had the chance. I did predict, with a 55% probabilistic chance, that MBS would be sidelined or removed but in the end, MBS moved first to seize power in the Kingdom. MBS is certainly a man to watch in the coming years and it is conceivable that the reforms unleashed under his Ceasaresque reign will eventually bring down the House of Saud.

My final forecast was that President Trump would partially or totally remove Russian sanctions. This turned out to be totally wrong, with the alleged collusion before the election between the Trump team and the Russian government, aka “Russiagate”, destroying any changes of an easing of the sanctions regime in 2017. Ironically, the rise of right-wing populist politicians to power across central and Eastern Europe, including the Austrian Freedom Party, increases the chances that this may happen in 2018 when EU sanctions on Russia come up for renewal.

My 2016 forecasts on a narrow victory of the Leave campaign and the rise of Donald Trump to the American presidency were spot on and it was probably unlikely that I could achieve a similar success rate for 2017.

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One of the ironies of 2017 is that whilst readers who had placed political bets on a Le Pen victory or an increased Conservative majority would have lost money, if they had brought the crypto Ripple, following my crypto-currency post on 1 December, they would have made over 1,000% return in the weeks that followed. The Ripple price soared from 24 cents to over 3 dollars from the beginning of December to after New Year.

Other cryptos whom I tipped, including Ethereum and Dash have seen big increases in value since the publication of my crypto post on FI, and I remain bullish that 2018 will be a strong year for the crypto-currency space.

I will soon be publishing my forecasts for 2018 and we will see if I have a better success rate this year then 2017.

Review of 2017