June 2021: ten predictions for the coming decade

1.     Italy, the euro, and the US dollar

On November 24, 2010, I published (in Global Politician and elsewhere) an article titled “Italy will Kill the Euro”. Six months later, credit rating agencies have downgraded Italy’s outlook from “stable” to “negative”. Italy is in worse shape than most members of the European Union (EU): at 6% of GDP, it has an ostensibly sustainable budget deficit, but its external debt (now close to 120% of GDP) is higher than that of the most egregious wastrels in the bloc, Greece and Ireland included. Italy's banking sector is over-exposed to borrowers in Central and Eastern Europe, a region habitually pendulating between recovery and economic calamity. If Italy goes Greece's and Ireland's way, the EU and the International Monetary Fund (IMF) - already over-extended by serial bailouts - will be unable to stem the red tide. Italy may actually effectively default and, in the process, ruin the euro and restore the US dollar to its erstwhile glory.

2.     Korean Unification

By late 2010, a succession war was simmering in North Korea. His panoply of suddenly-bestowed senior political and military posts notwithstanding, the generals and military establishment are less than happy and impressed with Kim Jong-un, the younger son of the Dear Leader, Kim Jong-il. Each side flexes muscles in an attempt to burnish their nationalist and martial credentials. The outcomes of this internecine conflict are ominous: a series of ever-escalating military skirmishes with South Korea and the ramping up of North Korea’s already burgeoning nuclear weapons program.

North Korea’s leaders are likely to try to reform their country’s economy and introduce capitalism, but this will fail. The regime in North Korea is all but dead on its feet. These are its last days. China is facing the terrifying spectacle of a crony failed state with tens of millions of starved and destitute potential refugees swarming across its porous and indefensible borders. There is only one solution to all the problems of the Korean Peninsula: unification. The parties came close to discussing it in secret talks in 2002 and then again in 2009.

3.     China’s Economy and the Second Great Depression

As I predicted in an article published on February 22, 2009 and titled “The Next 18 Months: Recession, False Recovery, Depression”, the years 2010-2011 saw a false recovery from the Great Recession of 2008-2009. Mounting sovereign debts crises in Europe and an anemic rebound in America’s economy were more than outweighed by the emergence of Asia as a global powerhouse. Yet, the warning signs were there: China’s economic “miracle” was based on unsustainable dollops of government largesse and monetary quantitative easing. This led to the formation of asset bubbles (mainly in real-estate) and to pernicious inflation. The Chinese authorities’ attempts to clamp down on rampant speculation and price gouging are too little, too late. The economy will slow down considerably and the Chinese house of cards will collapse ominously and swiftly. This will bring the entire global economic edifice into disarray with mounting imbalances and increased risk-aversion among investors. The second phase of the global crisis will resemble closely the Great Depression with massive write-offs in the values of equities and mounting, two-digit, unemployment rates everywhere.

4.     Israeli-Arab War