The coming global social crisis

Today Reuters reported Iceland’s population is demonstrating for a change in government. This is the beginning of a global unrest which will unseat various governments around the world, spurred by the financial crisis. WW1 began seven years after the financial crisis of 1907. WW2 began seven years after the financial crash of 1929. We have been watching this crisis like watching a slow motion car crash from the comfort of our living rooms, but as the crash proceeds unimpeded through the window and wall and into our homes we will rise in indignation. How dare this affect our lives, break our legs and puncture our hearts! Expect the news of numbers to be replaced by the news of civil strife in 2009. First USA and Europe, then second world and finally third world countries.

What about China and India? While the rest of the world shakes in its boots, the biggest news out of China and India in the last month is that BOTH countries have launched their space missions… First, a few weeks ago China slingshot their first astronaut past the statosphere and this week India catapulted their first rocket towards the moon. If you have spent any time in either ‘country’ (both far larger in population than the entire collection of countries that make up Europe or the Americas) you will know the world’s economic turmoil hardly feature on their radar. Neither country have announced any radical currency or liquidity measures to boost their economies. So sell dollars. Buy reminbi. Buy rupees.

Not convinced? US Dollars will depreciate by 20%+ in the next 12 months against the yuan despite its current strength (brought on by funds deleveraging) . A new global body will be created out of necessity in the next year, as the crisis within the real economy becomes real. By the current action of many Governments (which amount to little better than a department store extending credit to their most greedy, over-extended platinum store card holders. When that fails, they buy a stake in their house and promise it’s OK to come back and shop again). As John Maynard Keynes – the creator of the Bretton Woods Agreement that was dismantled in 1971 by Nixon and has led to the monetary policies that have led us into this government concocted mess – says, “The day is not far off when the economic problem will take the back seat where it belongs, and the arena of the heart and the head will be occupied or reoccupied, by our real problems – the problems of life and of human relations”.