Geopolitics and the global economy

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Tiny Toy
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Geopolitics and the global economy

Post by Tiny Toy »

There is a great interview here with Pippa Malmgren talking about the global economy and its effect on future threats, including the nuclearisation of Russia and the Middle East.

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ArmChairCivvy
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Re: Geopolitics and the global economy

Post by ArmChairCivvy »

Thanks for starting a broader view thread (assessment of where things are headed, and if the capabilities the kit we are discussing adds up to will be any good in such XYZ scenario).
- I must confess that I thought Pippa Malmgren was the outspoken Swedish Foreign Secretary... before I opened the link
Ever-lasting truths: Multi-year budgets/ planning by necessity have to address the painful questions; more often than not the Either-Or prevails over Both-And.
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Re: Geopolitics and the global economy

Post by ArmChairCivvy »

Today's Torygraph (biz p.1) lists Morgan Stanley, Merrill Lynch, Goldman Sachs and our very own RBS amongst those who say oil could go to $20
- that's the Russian coffers empty in the summer then
- or another 50% devaluation, making the population (not quite) as much poorer (again)

Some have had enough as dozens of smaller towns have lost their (central) heating systems in the cold spell:
"On the eve of New Year pensioner burnt administration Dudinka, which could not solve its housing problem. Retired poured in the lobby brought with gasoline and set fire to the building. As a result of the incident three people were killed and eight injured, 50 were evacuated from the building."
- sorry about the ggogle-translate
Ever-lasting truths: Multi-year budgets/ planning by necessity have to address the painful questions; more often than not the Either-Or prevails over Both-And.
If everyone is thinking the same, then someone is not thinking (attributed to Patton)

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Re: Geopolitics and the global economy

Post by Pseudo »

The lifting of sanctions on Iran certainly won't do anything to help the oil prices recover, particularly given the renewed hostility between itself and Saudi Arabia. That said, falling oil prices seem like they might be the least of anyone's economic problems this year.

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Re: Geopolitics and the global economy

Post by ArmChairCivvy »

All too true. Focussing on Russia (I don't think any of the major actors within M East are going to be swayed in their foreign policies by the pressure from oil prices ):
- the external balance is holding; a decline in imports (down 40% in dollar terms in 2Q15 y/y) outpacing a drop in exports (down just under 30% y/y)... so all the niceties of life now gone, for most of the population
- the internal budget balance was achievable with oil at $80-85
-when oil went down, devaluation by 50% halved that (it is all in roubles)
- now, if oil is going to around $20, all the bets are off (for what is going to happen next)
Ever-lasting truths: Multi-year budgets/ planning by necessity have to address the painful questions; more often than not the Either-Or prevails over Both-And.
If everyone is thinking the same, then someone is not thinking (attributed to Patton)

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Pseudo
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Re: Geopolitics and the global economy

Post by Pseudo »

That's a good point about the devaluation. A lot of big Russian companies such as Gazprom have an awful lot of debt that's mostly denominated in dollars. Though Russia is far from the only country with that problem.

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Re: Geopolitics and the global economy

Post by ArmChairCivvy »

It has been claimed that Germany is engaging Russia in the two further gas pipe lines on the bottom of the Baltic, so that all those bn's that Russia will have to commit are away from their rearmament prgrm
- if the debt markets are not open, those bns will have to come from reserves or from energy exports (so it is a zero sum game, within a given total, as inducing more export volume has been done to the max already)

The first pipeline, already built, provides enough gas for 38 mln households; how many households does Germany have? No where near 100 mln
Ever-lasting truths: Multi-year budgets/ planning by necessity have to address the painful questions; more often than not the Either-Or prevails over Both-And.
If everyone is thinking the same, then someone is not thinking (attributed to Patton)

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Re: Geopolitics and the global economy

Post by ArmChairCivvy »

6 factories are reportedly being disassembled in DonBas for transportation into Russia (proper).

At least one of the companies is 79% Russian owned, so no Big Deal, but
- somebody believes that the border will soon be in its old place again
- with mutual trade embargos (that could change!) the flow of inputs and manufactures out and into Russia would be disrupted

Just makes the rebuilding task ever more formidable
Ever-lasting truths: Multi-year budgets/ planning by necessity have to address the painful questions; more often than not the Either-Or prevails over Both-And.
If everyone is thinking the same, then someone is not thinking (attributed to Patton)

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Re: Geopolitics and the global economy

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Re: Geopolitics and the global economy

Post by ArmChairCivvy »

It was one of the bigger surprises for Hitler that once his tanks reached DonBas, the machinery for all those heavy industries had actually been shipped out, to much further East
... this time no surprises, but still a repeat, in a way
Ever-lasting truths: Multi-year budgets/ planning by necessity have to address the painful questions; more often than not the Either-Or prevails over Both-And.
If everyone is thinking the same, then someone is not thinking (attributed to Patton)

IrishT
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Re: Geopolitics and the global economy

Post by IrishT »

Pseudo wrote:The lifting of sanctions on Iran certainly won't do anything to help the oil prices recover, particularly given the renewed hostility between itself and Saudi Arabia. That said, falling oil prices seem like they might be the least of anyone's economic problems this year.
If people seriously thought there was a likelihood of conflict between them, speculative demand would go up. I don't think very many policy makers truly expect the Saudis and Iranians to get in a straight up brawl. Instead, they'll likely ramp up support for their proxies (Iran gaining access to frozen assets, and even if oil is very low, it is still a huge boost to them to be able to gain an income that was previously out-of-bounds for them).

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Re: Geopolitics and the global economy

Post by marktigger »

things are looking interesting with the Chinese slow down and the Oil Price drop.

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Re: Geopolitics and the global economy

Post by ArmChairCivvy »

I quite agree with the assessment the US Army Chief of Staff gave yesterday:

"China’s strategic patience and self-confidence contrasts with the Russians, whom Milley noted are bitter and anxious over the loss of the Soviet empire, the expansion of NATO, and the demographic disaster of an ever-shrinking ethnic Russian population.

While Chinese intentions are less aggressive than the Russians’, their long-term capabilities are greater. With the rise of China and the Asia-Pacific generally, Milley said, “we are living through…one of the largest shifts in global power in world history,” comparable to the fall of the Roman Empire or the rise of the current Atlantic-centric global economy after 1492. “History is not necessarily optimistic” about such shifts: In Harvard case studies of 18 rising powers, he said, 15 ended up at war with the incumbent major power."

I've stated myself often that the biggest insurance against WW3 is the one-child policy that China has had in place for long. Looking at this
http://esa.un.org/unpd/wpp/Graphs/Proba ... POP/20-64/
you can understand why they have reversed it; the working age population is at its peak right now. However, these are generational changes, so... Peace for our time! (the famous last words)
Ever-lasting truths: Multi-year budgets/ planning by necessity have to address the painful questions; more often than not the Either-Or prevails over Both-And.
If everyone is thinking the same, then someone is not thinking (attributed to Patton)

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ArmChairCivvy
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Re: Geopolitics and the global economy

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Relating to the above, but taking a shorter term view, the triangle drama between USA, Russia and KSA is as much technology driven as was the collapse of the USSR, them being left behind by an ever increasing distance in the productivity stakes (thank you, mighty microchip!).

When you think about the lower oil price, you may want to ask first how much of an economy depends on it:
- KSA 100%, Russia 50 and USA 10?

However KSA has about as low production costs as you can get with the old (conventional) technology. The fact that for shale production technology costs are higher is not the decisive characteristic. Production is inherently more adjustable as the sources run dry in one spot quickly anyway, and the starting up in the next is quick. To bring conventional wells into production have comparatively huge start-up costs, so you don't shut them down even when prices dive.

Now we come to balanced economies and resources to rescue/ regenerate industries. Compared to saving their Financial Services letting half of the US shale companies to go to the wall would be nothing as technology will not evaporate into the thin air and know-how (people) can be redeployed within years (not decades, by which time each and every person would be engaged in some other type of gainful activity). So a flexible restart when the price goes up again (slap on some tax breaks, just to be on the safe side of it actually happening) and in the meantime technology advances just lower the break-in.
- the hundreds of bn's pumped into Financial Services firms under the TARP scheme have mainly been paid back already
- the cost of the shale industry rescues would probably be closer to what was done with the motor industry, just more unnoticeable (as delaying tax revenues don't meet the eye as readily as pumping in cash upfront)
Ever-lasting truths: Multi-year budgets/ planning by necessity have to address the painful questions; more often than not the Either-Or prevails over Both-And.
If everyone is thinking the same, then someone is not thinking (attributed to Patton)

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ArmChairCivvy
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Re: Geopolitics and the global economy

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ArmChairCivvy wrote:When you think about the lower oil price, you may want to ask first how much of an economy depends on it:
- KSA 100%, Russia 50 and USA 10?
In theory the recent creeping up of the oil price should bring the Russian economy out of the "negative growth danger zone" which is estimated to arise whenever oil price remains under $41 for a prolonged period.

However, the effective defence spend (incl. exceptional items, like "international relationships" - read "Syria intervention") is estimated at 20% of the GDP and by gulping up the resources that might (otherwise) help to diversify the economy from the frozen Soviet-era structures is stymieing it and building up a tinder box in the provinces. The going off of any such may happen in an unexpected way and would require major media operations "to black out" from the view of the general population.

In Russia there are 300 towns depending on one sole factory and these towns have a total population of 15 million, ie. 10% of the overall number within the Russian federation. The demand situation has been lagging for a good while by now and the liquidity of enterprises is starting to hit the payment of salaries (the purchasing power of which is plummeting anyway).
- right now only one per cent of the workforce (and their dependants) are being hit, but this is on the increase and the concentration by area is high
Ever-lasting truths: Multi-year budgets/ planning by necessity have to address the painful questions; more often than not the Either-Or prevails over Both-And.
If everyone is thinking the same, then someone is not thinking (attributed to Patton)

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Re: Geopolitics and the global economy

Post by ArmChairCivvy »

I wonder who financed the spectacular growth of China's defence spending, as in

with America's defense budget shrinking of late, and China's continuing to expand, that gap is closing. China's defense budget for 2015 was twice and a half the size of a decade earlier; at $214.7 billion, it is now 12.37% of the global total, and more than a third of the American defense budget.
- no one can make the purchase parity adjustment, but up the third, say, to a half?
- China's defense budget last year does the same trick as America's: it is as big as several of the next ones put together – in 2015: Russia, Saudi Arabia and France. We only just evaded being one of those three included - because the comparative sum has to tally!

http://howmuch.net/articles/this-gif-sh ... s-on-trade

And no wonder China is doing its utmost to end the greenback's status as a reserve currency (without much success, so far)... they could then choose where to send their money, a quicker thing to do than America weaning off cheap manufactured imports (from China).
- instead of MAD, we now live in the era of mutual assured financial/ economic destruction. An argument that does not apply with Russia (hence they keep reminding everyone that they've still got their nukes!).

China's inexorable rise and its military muscle-flexing, especially in the South China Sea, is making some of its neighbors nervous
... and Obama's rephrasing of the US nukes policy, in the dying days of his Administration, will probably usher Korea and Japan (probably in that order) into the nuclear club rather sooner than later.
Ever-lasting truths: Multi-year budgets/ planning by necessity have to address the painful questions; more often than not the Either-Or prevails over Both-And.
If everyone is thinking the same, then someone is not thinking (attributed to Patton)

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ArmChairCivvy
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Re: Geopolitics and the global economy

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ArmChairCivvy wrote:Obama's rephrasing of the US nukes policy, in the dying days of his Administration, will probably usher Korea and Japan (probably in that order) into the nuclear club rather sooner than later
Something is going to happen on that front.

But also the "Mission in Columbia" fiction soon could turn to true stories (not necessarily in Columbia) "south of the border", judging by todays breakingdefence story:
" last year, Kelly made headlines by calling the confluence of terrorism, violent drug cartels, collapsing societies and out-of-control migration an “existential” threat to the United States. As Trump’s choice to lead the Department of Homeland Security, he can be expected to take seriously the task of securing the southern US border and increasing the intelligence and law enforcement resources devoted to countering the narcoterrorism threat."
- USCG will get busy, but on land... that will be JSOC?
Ever-lasting truths: Multi-year budgets/ planning by necessity have to address the painful questions; more often than not the Either-Or prevails over Both-And.
If everyone is thinking the same, then someone is not thinking (attributed to Patton)

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Re: Geopolitics and the global economy

Post by marktigger »

Russian Economics could become a huge factor especially if Trump increases defence spending. And the Russians end up in another Afghanistan in Syria.

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Re: Geopolitics and the global economy

Post by ArmChairCivvy »

marktigger wrote:Russian Economics could become a huge factor especially if Trump increases defence spending

Yep, Reagan said "step on the gas, boys" and the tank was empty on the opposing side


. And the Russians end up in another Afghanistan in Syria.
- this latter parallel is not accurate; but let them bleed themselves white (while we are not getting involved directly, ie. beyond the border of Iraq involved) is a good starting point. While, for once, the Iraqis could do the job for themselves (... instead of the elite sitting in the cafes of European capitals, waiting out for the outcome).
Ever-lasting truths: Multi-year budgets/ planning by necessity have to address the painful questions; more often than not the Either-Or prevails over Both-And.
If everyone is thinking the same, then someone is not thinking (attributed to Patton)

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Re: Geopolitics and the global economy

Post by ArmChairCivvy »

Not long ago we saw the unholy pact of both the Saudis and Russia saying they will cut production, to support the price of oil
- if we go back to the start of the troubles in Ukraine (they were meant to be short lived, I presume) external calculations pointed to the Russian economy being able to balance at $80 a barrel
- now it is looking like under 50 for a lo-ong way ahead

Why is that? The Saudi oil minister has just said that they are tired of subsidising free-spending high-cost producers (ie. they want more oil revenue for themselves), and here is an analysis by an economics professor from Texas (where the conference takes place):

"the realization that the energy market has reconstituted itself, with the U.S. as the swing producer. U.S. breakeven costs on unconventional oil will henceforth determine the long-run price of crude. [If the Saudis still pretend things to be otherwise, they will just hurt themselves, and thereby the future stability of the Kingdom; my addition] Over the next decade, there will be fluctuations in crude prices as world demand fluctuates and political disruptions interrupt supplies, but the price should tend towards the equilibrium set by marginal costs in the U.S.

Two further factors could push the price even lower. The United States has elected a pro-energy president, who will lessen environmental and other regulations on energy production. These steps will drive break even cost even lower. If Europe and other countries follow the United States’ political changes, restrictions on unconventional oil would begin to disappear worldwide. If so, the world economy can look forward to cheap energy for decades to come.

In the meantime, Russia’s Putin will be on the outside looking in. The Russian economy and state have survived two plus years by tapping foreign reserves and depressing living standards. It is unclear how it could survive decades of energy prices below what Russia needs to stabilize its economy and provide the government with the funds it needs to maintain political harmony while fighting its hybrid wars abroad." Funnily, at a closer look both Russia and Saudi Arabia are facing the same problem, how to balance that. But it is difficult as they are on the opposite sides. And then some countries have a political tradition of looking at international relations as a Zero Sum Game...

QUOTED PART BY: Paul Gregory (in Forbes), who is a professor of economics at the University of Houston. He currently teaches a course on comparative economic systems.
Ever-lasting truths: Multi-year budgets/ planning by necessity have to address the painful questions; more often than not the Either-Or prevails over Both-And.
If everyone is thinking the same, then someone is not thinking (attributed to Patton)

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Re: Geopolitics and the global economy

Post by ArmChairCivvy »

Oil glut is already with us https://gallery.mailchimp.com/ed58b19f2 ... 01b059.gif
and the renewal of the OPEC production restraint deal is highly unlikely.
Ever-lasting truths: Multi-year budgets/ planning by necessity have to address the painful questions; more often than not the Either-Or prevails over Both-And.
If everyone is thinking the same, then someone is not thinking (attributed to Patton)

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Re: Geopolitics and the global economy

Post by ArmChairCivvy »

Oil price plunges and theinternal repression machine steps into a higher gear (this TV channel has already been taken off the air, but the past stays on utube):

Everyone filmed from the helicopter hovering overhead. And the guy holding a placard with an opinion of the current leader had already packed his rucksack - as he knew that Siberia would be waiting ahead.

The other strand seems to be emerging on the international front: the INF treaty transgressions are no longer swept under the carpet, but will soon have a spot light shining on them.

A lot will happen before the NATO meeting of 25 May will be taking stock... and perhaps even making some decisions.
Ever-lasting truths: Multi-year budgets/ planning by necessity have to address the painful questions; more often than not the Either-Or prevails over Both-And.
If everyone is thinking the same, then someone is not thinking (attributed to Patton)

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Re: Geopolitics and the global economy

Post by Zero Gravitas »

Insightful thread.

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Re: Geopolitics and the global economy

Post by Frenchie »

http://www.defensenews.com/articles/fre ... ks-with-us

Yesterday, Emmanuel Macron has won the presidential election with 66.1% of the vote.
From a military point of view, the budget out of pensions and OPEX is currently of 32 billion euros, Macron has promised a budget of 42 billion euros in 2022 and of 50 billion euros in 2025.
He promises a new White Paper on defense which will be delivered by december 2017 at the latest, and a new military programming law 2019-2025 will be voted in early 2018.
He defends the renewal of the two components of deterrence, submarine and airborne.
Macron assures us to consider the question of a second aircraft carrier.
The Scorpion program, launched by Jean-Yves Le Drian, will be accelerated, as will the Joint Light Helicopter (HIL) and Supply Aircraft.
He also considers necessary a higher number of transport aircraft and naval vessels.
We'll see.

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Re: Geopolitics and the global economy

Post by 2HeadsBetter »

"Macron assures us to consider the question of a second aircraft carrier." - As well as or instead of C de G?

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