Let’s say you had to choose between “decency” versus the “obnoxious arsehole” as your tribal leader? Most of us would choose the decency candidate every time over the arsehole.
But how about a “decent but weak” candidate versus the “strong but an arsehole” leader?
Well, that’s a bit more complicated. Strong is good. We want a strong leader, ruthless when required, to defend us in a tough and scary world. We can live with then being an arsehole if they protect us and our families.
A decent but weak leader might be the nicer one, maybe the one you would rather have a drink with, but are they going to be able to defend your tribe? If they are weak, probably not. And that is important in a tough world filled with dangerous competitors.
And finally, how about the strong versus weak candidate? Well, that’s a no-brainer, you will always go for the strong leader.
Within the context of the US elections, the Democratic Party and their allies in the corporate media are promoting the first narrative. Trump is the obnoxious arsehole and Biden is the nice, decent candidate who can restore honour to the United States.
The Republicans are promoting the “strong versus weak” narrative, with Biden the weak, liberal leader who isn’t up to the job of being Commander in Chief.
My sense is that the voters, by the end of these round of debates, in particular the undecided voters, will see the middle narrative; a weak but decent Biden versus a strong President Trump who is also an obnoxious arsehole.
The question then becomes who will the American electorate vote for on election day and which factor wins, decency over strength in the privacy of the ballot box.
I agree with the verdict of two contrarian voices, Scott Adams and Tom Luongo, that Trump’s performance was very poor.
Indeed, Tom wrote that Trump couldn’t have performed worse last night and Scott Adams has withdrawn his support (temporarily at least) for Trump as a consequence of that debate.
Having said that, both also agree that Biden probably performed the best he can, given his clear cognitive decline over the last year.
Assuming that the two further debates happen, the likely trajectory is that, with expectations reshuffled, Trump will perform better, or be seen to have been versus the 1st debate and Biden will perform worse. That’s not a certainty but it is certainly likely.
After all, historians note that incumbent presidents normally screw-up their first debate. Obama famously performed badly against Mitt Romney in 2012 but went on to win that election comfortably. A poor 1st debate is not necessarily the end of the world for a sitting president. It’s true that Trump is behind in the polls and needed a better performance last night, which is why I call it a narrow Biden win.
In 2016, I remember when the “grab them by a pussy” video came out shortly before the election (and just before the 2nd debate). It caused an uproar. Trump polling dived, the media overwhelmingly concluded his campaign was finished and most political experts agreed. Only a few of us oddballs still thought he could win, myself on this blog, John Greer and Scott Adams among others.
The lesson from that is be careful to write-off the Donald. He might be down but it is foolhardy to assume he is also out.
*Note that the majority of polls suggest that Biden was seen by the electorate as the winner of the debate in case you assume, I am saying that Trump won that debate among undecided voters. My point being that the Democratic/media narrative isn’t necessarily what undecided voters are seeing.
“For many, the epitome of incompetence would be the president of the United States. The US has experienced exceptional death rates in relation to population. But its economy has got off relatively lightly: the US is expected to outperform Germany in minimising the damage with an expected fall of around 5 per cent in GDP, very painful but hardly in the territory of the Great Depression when GDP fell 30 per cent from peak to trough. The United States has benefited from the enormous monetary stimulus provided by the Federal Reserve as well as the big, bipartisan, fiscal stimulus from Congress (at least until the impasse of the last few weeks). But we also have to ask: did Trump help or hinder?Continue reading “Herd immunity and the politics of recovery”→
“The Democratic party seems to have miscalculated fatally in encouraging the riots — it’s been a truism of American politics for many decades that when voters are frightened for their physical safety, they back conservative candidates.”
Future historians may judge the past week as the key point when the Democrats lost the 2020 presidential election.
The failure of the former-Vice-President Joe Biden at the Democratic Party Convention to condemn the riots, looting and unrest spawned by the Black Lives Matter (BLM) movement contrasted strongly with the powerful law-and-order message promoted by the Republicans.
The scenes from Kenosha, Wisconsin (a key battlefield state), appalled most Americans and proved a powerful backdrop to the GOP Convention last week. As John Greer wrote on his blog recently, voters tend to go for conservative candidates when they feel insecure and frightened.
In particular, the Republican attempt to soften Trump’s image worked well with independent voters, along with GOP messaging on the economy and crime. I expect the Republicans to continue to hammer the Democrats on the perception that they are weak on law and order, lack patriotism and are a risk to a post-Covid recovery in the economy.
Long-time readers of this blog know that I remain skeptical of some of the polls out there showing huge leads for Biden in battlefield states. If the overall Biden lead is 2.7%, my instinct would be to suggest that the election in these key states is now virtually a tie.
My opinion is that it does exist, it is real, although I cannot say with any confidence whether there are less or more shy voters this year compared to 2016. My American readers would be in a better position to judge on this than me.
My expectation is that the Covid pandemic will continue to abate, as more parts of America hit de facto herd immunity – when roughly 15 to 20% of the population have been infected – and the issue will fade as a public concern going into November.
The polling will likely, for a while at least, show a sustained Biden advantage but in the battlefield states, the race will become more competitive as swing voters focus on the economy and law and order issues which will politically benefit President Trump.
Many undecided/swing voters will tune into the debates to make their final mind up on who to vote for. Who performs best during these upcoming debates will have the momentum going into the final weeks of the presidential election.
I would be interested in what my readers think about who is likely to win the election and why. Please feel free to add your comments at the bottom of this blog.
The two conventions, and the positive response of those independent voters who watched the GOP convention, reinforces my view that President Trump remains the most likely to win this election.
“Enrique argues that, contrary to the current headlines, we’re in the 7th or 8th inning of defeating the coronavirus. He expects cases, hospitalizations, and deaths in the U.S. to plunge in the next six weeks, which, when combined with unprecedented fiscal and monetary stimulus, could lead to a 1999-style “melt up” in the markets going into the end of the year.”
Whitney Tilson, “We’re pitied & mocked; We may be through the worst of it”, daily newsletter
My approach when it comes to writing my monthly posts is to wait for that creative spark, after which a wall of words pours out. This month that process has been disrupted and instead of a single overarching narrative I have a jumble of thoughts bumbling around in my mind.
So, given that I will be away on holiday for the next two weeks, I thought I will give you a concise summary of my thinking on a range of subjects that I have covered before on my blog.
Let’s start with the big macro picture. I strongly recommend that you read the latest blog post by John Greer called “The Arc of Our Future” which explains why we are tracking the Limits to Growth BAU model and what is likely to occur in the coming decades. The short version is that the world is now facing a protracted and long-term economic and population contraction and the Covid pandemic appears to have been the trigger for that lurch down what Greer calls the Long Descent.
I have covered this extensively on the blog, see here, here and here, and don’t have a huge amount to add to the issue for now. The key will be whether the economic data over the next few years continues to track the peak and early decline as predicted in the LTG BAU computer model.
In regard to Covid there is much discussion about a looming Second Wave of infections. My earlier prediction, based on Farr’s Law, was overly optimistic, even if actual death rates from Covid has broadly reflected the curve of the Law (particularly if you factor in the possibility of hidden deaths from Covid prior to February/March which was not picked up by the official data).
Either way, folks are still picking up the virus and that is shown by the active cases being reported around the world. Having read extensively on the subject I am reasonably certain that effective herd immunity kicks in when approximately 20% of the population has been infected by the virus. The massive surge of cases we have recently seen in the United States hasn’t been in New York region but in the South and West of the country which was comparatively unaffected by Covid earlier in the year.
If, and it is a big if, this assessment is correct it will be a clear positive for President Trump’s re-election prospects.
Some readers have reacted with understandable skepticism to my last post where I outlined why I still thought Trump was more likely than not to win the election. Whilst I do think there is a logical pathway to a Biden win; a grim Covid and economic picture going into the Autumn, continued dysfunctional comments and tweets from the president and a gaffe-free performance by Joe Biden, I don’t think that’s the end of the story.
The Tories were seen to have a relatively good economic Covid crisis even if they badly mishandled the public health side of Covid. I think something similar will happen in the United States should the virus abate over the next 6 weeks and the jobs situation start to recover into the Fall.
Joe Biden has lurched significantly to the Left, something that has barely been discussed so far, and his tax and spend policies are going to attract more attention once the election battle truly commences. Trump may be down but I still think he is not out.
And yes, for those who are interested, I have placed my own real money betting on such an outcome. Given the recent odds, even a relatively small deposit will yield a nice profit should I prove right and Trump does get re-elected. Odds on Trump getting re-elected have gone as low as 3 to 1 on betfair exchange. Still, I’m not betting the house on it given I still think there is a 40% chance that Biden will win.
As for the polling, one of the most accurate battlefield state pollsters in 2016, Trafalgar Group (TG), who factor in the possibility of “shy Trump voters” in their methodology, have released a very interesting set of polling recently showing that Trump is still competitive in battlefield states. What is most interesting about their polling is that they were virtually the only pollsters who accurately forecast Trump’s shock victory in Michigan (see below and note that excluding TG pushed Clinton’s average lead to around 5%).
Also note that “Cahaly’s polls in 2016 also showed Donald Trump winning Pennsylvania – again, he was nearly alone in projecting Trump’s narrow victory there – and thus taking the White House.”
Virtually all the other polling data was forecasting a comfortable Clinton victory in both states, many with Hilary 5% ahead of Trump. Mr Cahaly, who runs the TG, was one of the few pollsters who came close to the actual result on the night.
Some may say I’m cherry picking polls and maybe so, but his record is good in 2016 so I will take the TG polling seriously. They are currently showing that Trump is tied in Florida, behind Biden in Pennsylvania, Minnesota and Michigan but ahead in Georgia and Wisconsin. That sounds fairly reasonable to me at this stage of the race (e.g. Biden would narrowly win if the election was held now).
Those who are interested in reading more should follow Mr Cahaly at his twitter feed here.
In regard to the markets, I’m expecting a healthy correction soon in the stock markets as the perfect V shaped recovery priced in doesn’t match with economic reality. However, a surge in equity markets later on this year, assuming the Covid outbreak fades in the United States, the economy continues recovering and continued money printing looks likely.
Crypto markets also look bullish, with bitcoin breaking out of a key resistance level at $10.5k along with other quality altcoins being adopted in the real world.
“Trump hasn’t yet begun his reelection campaign in earnest; he has an absurdly large campaign fund, an organization that’s already trained upwards of a million grassroots organizers, and a whipsmart online presence. (The Trump campaign had t-shirts saying #YouAin’tBlack for sale within a couple of hours of Biden’s latest gaffe, for example.) I expect him to steamroller Biden.”
I would like to add that this FI blog tries, as far as humanly possible, to avoid taking party political sides. From a forecasting perspective, avoiding bias, remaining calm, objective and data-driven are key attributes to successfully forecasting future events.
A risk for me, having successfully forecasted Trump’s victory in 2016, is that I subconsciously double down again on the same bet when the political facts have changed. With that in mind, let’s review the data.
So, what does the polling data say? Well, currently Biden is clearly out-polling Trump in the majority of polls being conducted.
It is probably not surprising that Trump has taken a hit in the polling. The Covid-19 pandemic has killed over a 100,000 Americans, unemployment has soared and the economy is only just starting to recover since the lockdown measures were imposed.
Compared to other countries, the Trump Administration has performed poorly in the Covid-19 benchmark stakes. Germany, New Zealand, Taiwan, South Korea, Japan and Singapore have been far more successful in avoiding the casualties and economic damage seen in the United States. Of course, other countries have also handled it badly, but that does not change the facts that America has had a poor pandemic crisis.
Swing voters and independents are frustrated and are currently telling pollsters they plan to vote for Joe Biden in November. Nevertheless, what do voters actually think of Joe Biden?
At the top of this post are the findings from a recent American focus group exercise, conducted by Lord Ashcroft, into what voters thought on the two leaders. Words associated with Biden were overwhelmingly “elderly”, followed by “likeable”. The clear risk is that voters may like Uncle Joe but may not trust him to being Commander-In-Chief if they think he is too old for the job.
For President Trump, arrogant, dangerous, fake and racist were the top names coming up, with ruthless and smug following close behind. Voters consider Trump a strong leader but also deeply divisive and unlikeable.
It is probably fair to say that neither candidates inspire those voters in the broad middle of the US political spectrum.
John Greer, who successfully forecast Trump’s apparently unlikely bid for power in 2016, recently wrote that he expected Trump to defeat Biden once the election campaign is in full swing.
Polls suggest that a slim margin of voters think Trump is a better choice than Biden is to get the economy back and this is likely to be a major issue on the campaign trail. Moreover, the recent protests and, at times, violent unrest across America is also likely to play to Trump’s hand given his hard-line law and order message.
“Trump’s tough, politically incorrect “law and order” stance on the riots, vilified by the mainstream media, is actually playing rather well with ordinary Americans. The overwhelming majority were sickened by the tragic death of George Floyd in Minneapolis. They respect the right to peaceful protest.
But, as protest begat rioting, looting, and the loss of life, Trump sensed the rapidly shifting public mood and called out big city mayors and governors for failing to protect their citizens. Most Americans agree, including a good many Democrats. We find Black men, a cornerstone of the Democratic coalition, taking a serious look at Trump’s candidacy. Should one-in-five vote for Trump, his reelection is guaranteed.”
The specific poll suggests that one in four Black voters plan to vote for President Trump.
That is just one poll. It is also true that other polling indicates that far more Black voters plan to stick with the Democrats.
The key fact is worth repeating: should Trump get a fifth of the African-American vote, his re-election will be guaranteed.
Interestingly, I have not seen any mainstream media coverage of these interesting polling findings on the rising Black support for President Trump since the 2016 election. It is probably because the media, overwhelmingly anti-Trump, cannot get their collective heads around why any minority voter would support a president widely considered a racist.
On specific policy issues, the average African American (and indeed Latino) is far more conservative than many commentators assume.
A recent poll showed that overall, 58% of voters supported Trump’s call for the military to help police control protests. Ah, some of you might say, that would be overwhelmingly white voters. True, but not the full picture.
The same poll also shows that 37% of African-Americans supported the policy. A similar to number, interestingly, to those polls suggesting that around 40% of African-Americans approve or may even consider voting for Trump in November. Coincidence or an underlying electoral pattern? I let you decide.
Whilst Joe Biden has come out against defunding the police, he risks being tarnished by association if he does not take a stronger line on what many voters would consider crazy ideas from the radical Left of American politics.
Therefore, to summarise, my forecast is that once the virus (slowly) burns out and recovering the economy takes centre stage in the presidential campaign, President Trump will rediscover his mojo once politics moves to the issues of jobs and law and order.
Voters will take a closer look at Joe Biden and the more they see him in their living rooms the less they will like him. Gaffe prone, mumbling and at times apparently senile, enough independent and swing voters will decide, reluctantly for some, that it will have to be the Donald again.
It is possible that Trump may even win the popular vote, crazy as that idea might sound right now. It is certainly something that John Greer thinks is a very plausible outcome.
Should the GOP surprise on the upside with the African-American vote and claw back the white elderly voters that deserted him during the Covid-19 pandemic, a landslide victory could be the outcome.
Of course, there remains a scenario in which Joe Biden avoids any disastrous gaffes and takes advantage of the poor economy and Covid-19 handling to defeat President Trump in November. It is not impossible but, in my opinion, despite what the current polls are suggesting, it is the less likely outcome of this election.
Whether or not Trump narrowly wins in the Electoral College or pulls of a bigger win in the popular vote, I continue to stick with my forecast that the most likely outcome of the 2020 presidential election will be the re-election of President Donald Trump.
“…Where this could all lead is almost too grim to contemplate: debt defaults, soaring unemployment, mass impoverishment, famines and “existential” (as Ethiopian Prime Minister Abiy Ahmed has put it) damage to economies. Divides between the Global South and North, and indeed within individual societies in the Global South, could worsen as those who can afford to pay their way out of lockdowns – with testing, contract tracing, bio-surveillance and so on – pull ahead of those still deeply affected by the virus and its economic fallout.”
“We have been modelling both COVID-19 deaths and cases according to Farr’s Law ever since and the results have been fascinating. Thus far, both COVID-19 new confirmed cases and deaths have followed Farr’s Law curve perfectly, each with an R2 of 0.995.”
In my last post I warned of the risk of social unrest as a social and economic consequence of the lockdown measures imposed by governments around the world.
The violent clashes with police in France’s suburbs and the less reported but widespread social unrest across the developing world during the month of April reflects the perilous economic state that many were plunged into by the lockdown.
For this post, I wish to discuss my thoughts on the likely endgame of this virus. My forecast, and it may surprise some of you, is that this virus has already peaked in the majority of countries and is now fading away.
Indeed, my specific forecast is that by June this year there will be very few confirmed new cases in the majority of the world. The pandemic will disappear as fast as it appeared on our planet.
The virus, so far at least, is tracking the models originally developed by Dr William Farr. G&R, an investment research firm, have been tracking the Covid-19 cases on Farr’s Law curve and have found that so far it fits perfectly (see above quote).
Goehring & Rozencwaig
As you can see from the above graphs, it is looks likely that by the end of May the virus should have largely disappeared from the world.
A big question remains whether a second wave or secondary peak will come later on this year. The example widely credited is the Spanish Flu outbreak, where a far nastier second wave occurred later on which killed many more than the first wave. We have also seen second waves during the global flu pandemics during the 20th century.
It is important to note that many epidemics follow the bell-shaped curve of Farr’s Law with no second wave arriving later on. Certainly G&R, in their commentary, are sceptical of the notion that a terrifying second wave is inevitable in relation to our current pandemic. What I am reasonably confident in saying is if, and it remains an if, a second wave occurs later on this year, our governments and public health systems will be in a far stronger position to test, isolate and contain any renewed local outbreaks of Covid-19. Apps will be installed, armies of human trackers will be trained and the world, in general, should be much closer to the successful South Korean model of “test and isolate”.
A second wave of the virus, should it actually happen, will be most likely milder and far more successfully contained in comparison to the 1st wave. Indeed, I suspect the global response, when we wait in trepidation in Autumn for the dreaded second wave of cases to appear, will be a global “is that it?”.
If the above is true, and we can speculate as much as we can on why this has occurred, it indicates a much stronger economic recovery in the second half of 2020 than some are forecasting. I anticipate that social distancing rules, maintained in some form of another for the majority of countries during the summer, will be progressively lifted during Q3/Q4 2020. Risk assets, including stock markets, will see an end of year rally driven by investor euphoria over the return to our post-Covid normal.
There will be economic aftershocks, severe in some countries and economic sectors, particularly in the developing world, global tourism and hospitality industries. The Global South will be badly hit by the economic hit and lockdown measures imposed and we will likely see further political and social turmoil in the months to come as hundreds of millions face severe food insecurity and shortages.
Even in the developed world, the pandemic has acted as an accelerator to existing trends already in the making. The movement to cloud based computing, collapse of well-known retail names, the neo Cold War between a rising China and declining America, rise oF online learning, working and shopping and the rejection of hyper-globalisation.
Longer term, I think historians and economists will treat the 2020 Great Lockdown as the trigger point for the longer-term reversal of decades of economic growth as forecast in the 1972 Limits to Growth business-as-usual modelling.
As I explained, rather prophetically at the beginning of the year in my blog post here, the beginning of 2020 was the peak of industrial civilisation and we have now embarked on the Long Descent, for better or for worse.
The social unrest in the rougher parts of Paris, London and Berlin would be nothing compared to the spectre of starvation which is now the reality for millions of impoverished Africans and Indians.
Social unrest as a consequence of the lockdown measures imposed by governments across the world to prevent the spread of covid-19 is the likely next step in this grim saga. This will likely be a major trigger for a further massive fall in stock markets, along with Depression era economic data coming through on jobless figures and economic activity in the month of April.
The day after I posted that on the blog, I jetted off to Asia for a three-week holiday, just as the coronavirus was starting to spread beyond China. It was a great trip travelling across south-east Asia and at some point, I will write a post on it.
However, there is only thing to write about today and that is the developing global crisis of the coronavirus pandemic outbreak. Apologies for the delay in writing a post, it’s been hectic since I came back from holiday and to a certain extent, I’ve, like millions of others, has been trying to get my head around this developing situation.
The coronavirus marks the end of the long era of growth and the new era of deglobalisation, supply disruption, international balkanisation and state interventionism. We are now entering that era.
Last year, in my post “How to prepare for a dying future”, I wrote that “at some point, major pandemics will become inevitable, leading to huge disruption of global and regional supply chains, international tensions and the closure of borders to refugees.” I should have added everybody else as well!
The situation is developing fast, and as I write, the Financial Times is leading on the story that London will be shut down soon to prevent the spread of the virus. So, what do I see coming?
The confirmed (and unconfirmed) number of the infected will continue to exponentially rise throughout the developed world for the foreseeable future. The death rates will continue to soar, despite the shutdowns being imposed throughout most of the Continent.
Financial markets will continue to have a volatile journey with relief rallies being punctured by ever deepening slumps as the crisis worsens. My tentative forecast for the bottom in the markets is when the FTSE 100 hits the low 4000’s and the S&P 500 around 1750 which could happen within weeks.
Governments around the world are already stepping up monetary and fiscal measures to avoid a deflationary depression and a re-run of the 1930’s Great Depression. This will involve nationalising of essential bankrupt companies (airlines, railway companies etc), massive support to small-to-medium businesses via tax breaks, grants etc as well as helicopter money to citizens. All this will not be cheap. Government debts will soar and central banks will monetise on a scale never seen since the 2008/9 financial crash.
The medium-longer term consequences of a global bailout of the private sector negatively effected by the shutdown measures will be a permanent shift in power from the private to the state. The inflationary impact of People’s QE by the central banks will, in time, result in a wave of global inflation. I would recommend gold as a good hedge when this happens.
It is likely that the combination of stringent shutdown measures on a scale of China, the warmer weather from May onward and the fast-track work on reaching a vaccine will ensure that the worst of the pandemic crisis – at least for the cooler regions of the world, will be over by the beginning of June. I am also cautiously optimistic that a vaccine will be ready by the Autumn for mass production.
The economic impact, at least in the short term, will be severe and whilst there will be a recovery later on, it will be jagged one given the fact that millions of people will have lost their jobs and stared (or fallen into) the financial Abyss. After such an experience discretionary spending will remain weak and consumers will prioritise getting cash reserves and stable employment over spending on non-essential items.
The pandemic virus will trigger a wider reorganisation of life – a further shift to remote forms of working and a greater focus on reliance at a personal, family, corporate and national level. Governments around the world will prioritise the re-localisation of the production of goods: China and the south-east Asian region will be the main casualty of this trend.
The virus will have negative consequences for the European Union (EU) as it has acted as a brutal reminder that when the chips are down you are only rely on the nation-state to act in the interests of the people. The failure of the rest of the EU member-states to provide medical provisions to the Italians in their darkest hour (China intervened) will not be forgotten by Rome for a long time.
Civil disorder is likely to occur in our major cities. Criminal gangs will exploit the partial withdrawal of the police to target the wealthy, food supply chains will be severely stretched given the increased demand for food and this, in itself, could trigger violent clashes in our major urban centres. Declarations of martial law, army on the streets, rationing, curfews and in the worst-case scenario, shoot-to-kill orders could occur.
Insurge Intelligence recently posted a good article on the potential ramifications of the outbreak. They argued that “the prospect of business closures due to the outbreak could perhaps be the biggest wildcard, leading to unpredictable societal disruptions in public services— food supply chains might become strained if companies are forced to close on a large scale, or operate on reduced staffing, for a prolonged period due to the virus becoming endemic.
However, much of the real risk here comes not from supply chains, but the self-fulfilling prophecy of panic-buying, leading to empty-shelves and disruptions in availability of key food items. At worst, managing that sort of disruption could see national security agencies step in to maintain public order and keep the show on the road until things settle down.”
So, to summarise, we are entering uncharted territory but this isn’t the end of the world but rather the end of an old world.
The globalisation dream has ended. Even if, as I’m sure we will, partially bring back the tourist industry, global travel in the years to come and relax border controls, it won’t be on the scale before.
The emergency measures being introduced, massive state interventionism, rationing of goods, border controls, nationalisation of industries and the suspension of the free market itself (mortgage relief, landlords banned from removing tenants etc) are a hallmark on what is coming longer term. The end of the money economy.
As I explored in an earlier FI post here, what will eventually happen in the decades to come is the partial or complete collapse of market based economic arrangements around the world.
Big picture, the macro trends, whether on escalating climate change disruption, resource scarcity, the shrinking of working-age workers in the developed world from 2020 onwards are here to stay and will accelerate.
“The fact that conventional non-OPEC oil production has rolled over is a huge problem that has received little attention by oil analysts. To put this in perspective, conventional non-OPEC oil production still represents 45% of global oil production and now appears to be in sustained decline.
Furthermore, if you include other sources of non-OPEC production, such as Canadian Oil Sands (which is not considered “conventional”), biofuels, refinery gains, and OPEC NGLs (which are not part of the OPEC quota systems), the US shales still represent an enormous 75% of the total non-OPEC liquids growth over the last decade. Now that the Bakken and Eagle Ford are facing exhaustion issues that are readily becoming apparent, nearly all of non-OPEC’s production growth will have to come from just one play in West Texas–the Permian.
Never before has the global oil industry been so dependent on one field in such a concentrated geographic area for all of its future growth.”
“A spate of new scientific research released through 2019 has thrown light on nearer-term risks of a global food crisis in coming decades, such as a multi-breadbasket failure — due not just to climate change, but a combination of factors including population growth, industrial soil degradation, rising energy costs, groundwater depletion, among other trends.
Taken in context with a number of climate change models produced over the last decade, the heightened risk of droughts in the 2020s means that a global food crisis could be imminent.”
If our global industrial civilisation was a mountain, we are likely to be at or very close to the peak.
If this is correct, our collective future will be a story of the decline and eventual collapse of our industrial civilisation.
A core purpose of this blog is to circulate to a wider audience my view that the limits to Growth business-as-usual (BAU) modelling is the most likely future fate of our industrial civilisation. And that modelling, which has proved broadly accurate over the past 40 years, suggests that we are hitting global per capita peaks in food and services as at now.
As you can see from the above chart, the 2020’s are, if the modelling continues to prove broadly accurate, a tipping point when industrial production slumps, global population peaks and death rates start to soar.
The idea that, as we enter the 2020’s, global key metrics are peaking and will rollover may still be a shocking idea for many. We are likely to have to get used to this new paradigm soon. At the top I included a quote from the Insurge Intelligence website which is one of the few online sources that takes resource scarcity seriously. They argue, based on the latest scientific evidence, that various factors, which I have previously referred to as the Limits to Growth mega-trend, are colliding to make a global food crisis a rising probability in the coming years.
I’m not convinced that a global food crisis is imminent – far too much food is wasted across the developed world – however the prospects of future shortages, price hikes and climate triggered droughts is likely in the coming decades.
Peak oil concerns have faded since the surge in US shale production over the last decade. A recent report by Goehring & Rozencwajg suggests that the bulk of non-OPEC production growth this decade will come from “…one just play in West Texas- the Permian”.
Given that conventional oil fields are declining on an annual basis, global oil demand is still rising (for now) and the US shale miracle is slowing, the prospects of another oil supply shock this decade are high. That will likely prove to have major repercussions on a global economy still recovering from the 2008/2009 financial crisis.
So that’s the big picture on where we are and where we are heading as we enter this potentially momentous decade. Now it is time to review how my predictions for the year 2019 fared.
I predicted that Britain would leave the EU in 2019 and that there would be an 11th hour amendment to May’s deal, possibly relating to concessions on the Irish backstop. In fact, Britain is not leaving the EU until 31st January 2020 but Boris Johnson did manage to secure changes to the Irish backstop which enabled a revised deal to be agreed between the UK Government and the EU in October 2019. It wasn’t in the direction of a softer Brexit either as I thought at the beginning of last year.
Overall, I will probably give myself more of a fail than a pass on that prediction but I was not wholly wrong. The timing of our leaving the EU was technically wrong but de facto correct in the sense that the Tories victory in the December general election insured Brexit was happening as a political fact prior to the New Year. Similarly, the key to unlocking a revised Brexit deal was eventually done by concessions on both sides on the issue of the Irish border.
My second forecast, which I only placed a 30% probabilistic chance of happening, was an Arab style insurrection in France. This didn’t happen in the end and was my wildcard scenario for the year.
In terms of my predictions for 2020, here is what expect is likely to happen, with a probabilistic rating attached.
UK will agree to a shallow goods-based trade deal by 31st December 2020 (70% probability)
Britain, led by Prime Minister Boris Johnson, will achieve a shallow trade deal with the EU facilitating the free flow of goods by the end of 2020. Other areas will be concluded in 2021 and 2022 but the overall thrust of the final settlement with the EU will be a hard Brexit e.g. low alignment with EU standards which allows the UK to diverge on regulation and laws.
Despite much commentary in the European media I don’t think there will be an extension to the trade talks although it is possible that a very short-term technical extension to approve the new deal might occur in January or February 2021.
Sir Keir Starmer will win the Labour leadership contest (75% probability)
The crushing defeat of Jeremy Corbyn’s Labour party in the 13th December British general election triggered a new leadership race. There are currently 5 candidates still in the running although that is likely to be reduced given the need for trade union endorsements. The three candidates who are most likely to go to the wider membership are Sir Keir Starmer, Rebecca Long Bailey (RLB) and Lisa Nandy.
The Yougov polling of Labour members and the political betting markets suggest that Sir Keir Starmer is the overwhelming favourite to win the race. RLB is the preferred candidate of Corbyn’s circle but has lacked any spark so far. Anecdotally the membership, still shaken by the defeat, seem to be prioritising Starmer who is seen as the most prime ministerial of all the candidates.
Whilst I have placed a small wager on Lisa Nandy, who has impressed me so far and could surge now that the hustings have started (allowing me to exit with a profit), my forecast is that Sir Keir Starmer is the most likely candidate to win the Labour leadership contest.
The result will be announced on 4th April 2020.
Donald Trump will win the US presidential election (60% probability)
This has proved a difficult one to call. Whilst Trump’s rating vs v vs Joe Biden, who remains the most likely Democratic candidate to win the primaries, remains poor, he has significantly narrowed a once big lead.
Compared to Elizabeth Warren and Bernie Sanders, who are on the left of the Democratic spectrum, Trump is leading in key battlefield states. Should either Warren or Sanders win the Democratic primaries Trump is likely to win the US presidential election, possibly by a landslide.
Joe Biden, who appeals to soft Republicans and conservative Democrats worried about the tax-and-spend socialism of Sanders and Warrens, has a better chance of defeating Trump.
One figure to watch for is Mayor Pete Buttigieg, who would be my wildcard candidate to win the Democratic primaries. Conservative, ex-military veteran and homosexual; he reminds me of the relatively unknown Emmanuel Macron who ended up winning the French presidential elections in 2017. Buttigieg has horrendous ratings among the key African-American demographic who form Biden’s Southern firewall and therefore has a difficult, if not impossible, path to victory.
Should Biden become the Democratic Party candidate the prospects of a Democratic victory in November increases (at least compared to his rivals), however, on the balance of probabilities I would predict that President Trump is more likely than not to get re-elected for a second term in office.
The reason for my call is that Trump has managed to erase much of the once mighty Biden lead in battlefield states and we are still in the early days of this presidential campaign. The booming economy in the “flyover states” and the wider cultural weaknesses of the Democratic Party suggest that enough voters will hold their noses and vote for the Donald again.
Please note that prediction is predicated on the assumption that President Trump is not impeached in the Senate.
Well, that’s it for my set of forecasts for 2020. We will see how I perform at the beginning of 2021!
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“Like Trump, Johnson realized that his nation’s leftward party had abandoned its working-class voters in order to pander to the comfortable classes. He went to the working class voters Labour had abandoned and spoke to them about the issues that concerned them—above all, an end to the open borders and free trade agreements that drove down working class wages in order to boost middle class salaries and investment class profits—and found them more than willing to listen.”
The last Labour Prime Minister, Gordon Brown, was reported to have warned during the dying days of Labour government that if they let the Tories into power the Labour party would never get back in. Disappointed Labour supporters might feel that this prophecy is coming true after another shattering defeat on 13th December 2019.
The Tories made sweeping gains across the Red Wall, the old Labour Leave voting strongholds across Wales, Midlands and the North. The eventual vote tally surpassed my baseline prediction of a comfortable Tory majority and pushed it closer to a 1987 scenario which I warned could happen in my last post.
Overall, despite the poor performance of the Scottish Conservatives, I am reasonably happy with my forecast. It captured, unlike some commentators, the sizable Tory majority and I never ruled out the possibility that the Tories could be heading towards a larger majority along the lines of Thatcher’s 1987 victory.
The Scottish Conservatives fiasco is an interesting one. Up to a week or so before the election, all the signs, including from within the SNP camp, was that the Scottish Conservatives were making inroads into keeping the bulk of their seats. The SNP strategy to focus on independence over Brexit was proving a mistake among Unionist voters.
What I didn’t fully realise was that Nicola Sturgeon decision to pivot from indyref2 to prioritising stopping Brexit in the last week of the campaign probably did enough to ensure that left-wing Unionist Labour voters would swing to the SNP over the Tories. The lesson from that is not to under-estimate the SNP leader Nicola Sturgeon!
So, what was the main lesson from this election? I would argue that it was the electoral revenge of the so-called gammon voters. The term gammon has become popularised by a rather toxic set of upper-middle class social justice warriors to describe working to lower-middle class white middle-aged men with slightly reddish complexion.
These voters tend not to have a university education, have worked in manual jobs or are self-employed and have socially conservative views. They historically have voted Labour but have been drifting away since the early 2000s to the Tories, UKIP/Brexit Party or not voting at all. This key voting demographic, who tend to live in the Red Wall, was referred to by a Tory think-tank as Workington Man and provided Boris with his stunning majority.
There has been a ferocious post-election debate within the Labour party on what was to blame for Labour’s defeat. Some have argued that neither Corbyn or his policies were at fault but rather Labour’s Brexit position.
As for Labour’s super-radical manifesto, the reaction in focus groups was dismissive laughter when Labour’s policies were read out. People simple didn’t take it seriously. Labour would have been far better keeping to a more centre-left (albeit still radical) 2017 policy manifesto with a few key pledges that sounded vaguely feasible should they get into office.
Labour’s defeat had its roots in the aftermath of that June 2017 campaign. Despite the fact that the Tories clung onto office, the Tories underwent the political equivalent of a near-death experience. The recriminations were brutal and a forensic process started in Tory HQ on what went wrong. Yet, it must be stressed that Theresa May managed, despite the abysmal campaign, to get over 40% of the vote and gain marginal seats like Mansfield.
Labour, on the other hand, had a very different reaction to another electoral defeat against the worst Tory leader in living memory. They went on a political equivalent of a 24 hour cultish party where Jeremy Corbyn became a secular Messiah to the chants of “Oh Jeremy Corbyn”. There were no tough questions on why Labour failed to get more votes and what they needed to do to give them a better chance of converting some of those Tory voters into Labour at the next general election.
In an alternative history, Corbyn might have moved to neutralise his historical “baggage” – e.g. the historic associations with IRA, Islamists and so on – through an apology or acknowledging that he had made mistakes in the past. Along with a tougher position on law-and order, national security and Brexit, that might have been enough to persuade some voters to give him a chance. It was those “gammon” voters who were most suspicious of Corbyn. The failure of Labour to deal with their weaknesses proved fatal in the winter of 2019.
There is no doubt that Labour’s flip-flopping over Brexit irritated both Remain and Leave Labour voters across the country. Still, I would argue that by shifting to an official second referendum position, Labour lost the support of Leave voters (those “gammon” voters) across their traditional heartlands which proved fatal in the December election. Brexit was only one, admittedly big issue, which encapsulated a deeper sense among Leave voters that Corbyn’s Labour party did not share their values, their patriotic love of the country or their economic interests.
This article brilliantly explains how the Tories have transformed their position and what a dire position Labour is now in. As the writer notes, “Brexit is a sign of the times, a glimpse of the future but the progressive mind can only see it as reactionary, nostalgic and backward looking. The decisive role of the working class in asserting national sovereignty through its democratic vote in order to renew the ancient institutions of Parliament and the common law is incomprehensible to the left.”
By embracing a hard Brexit, with the clear commitment to ending free movement, the Tories signalled to the working classes that they could be entrusted with their vote. As Greer notes, Brexit was driven by the bottom 80% of voters who had been economically hit by the impact of mass movement of EU workers into the UK which effectively capped their wages over the preceding 15 years. It’s not a coincidence that real wage growth for the working classes has only picked up since 2016 as the supply of foreign workers dropped after the referendum result.
I will be writing my 2020 forecasts soon but one thing is clear, the shock waves of Boris stunning political victory will have ramifications for America. Should the Democrats run on a left-wing “woke” policy platform they will struggle to win over Middle America in November 2020. However, much voters wince at President Trump’s tweets, his vulgar and at times unpresidential behaviour, they will be unlikely to turn over the White House to a far-left Democrat radical.