Warning Global systemic crisis – First quarter 2011

breach of the critical threshold of global geopolitical dislocation

Published on Global Europe Anticipation Bulletin GEAB N°49, November 16, 2010.

… The crisis that we are experiencing is characterised by developments on a planetary scale, taking place at two levels that, while correlated, are different in nature. On the one hand, the crisis is symptomatic of the profound changes to our world’s economic, financial and geopolitical reality. It accelerates and amplifies the underlying trends that have been at work for several decades, trends that we have described regularly in the GEAB since its launch at the beginning of 2006. On the other hand it reflects the steadily increasing collective awareness of those changes. This growing awareness is in itself a phenomenon of collective psychology on a global level and it influences the way the crisis develops and triggers sharp bursts of speed in its evolution. Several times in recent years, we have anticipated “inflexion points” in the crisis, corresponding to “sudden leaps” in this collective awareness of the changes under way.

And we consider that all the pre-requisites for “rupture” crystallised around the G20 summit in Seoul, enabling a crucial advance in collective awareness of the global geopolitical dislocation. It is that phenomenon that led LEAP/E2020 to identify the breach of a critical threshold and to issue a warning about the consequences of that breach as from the first quarter of 2011.

Around the date of the G20 summit in Seoul, LEAP/E2020 identified a build-up of events likely to lead to “rupture”. Let us examine the main events concerned (2) and their chaotic consequences.

Concluding the quantitative easing: the Fed placed under “house arrest”

The Federal Reserve’s decision to launch “QE2” (by purchasing USD 600 billion of US Treasuries from now to 2011), triggered an outcry, for the first time since 1945, amongst almost all the other global powers: Japan, Brazil, China (3), India, Germany, the ASEAN countries (4), …(5) It is not the Fed’s decision that marks a rupture: it is the fact that for the first time, America’s central bank had its ears boxed by the rest of the world (6), and in a very public and determined manner (7). This is certainly not the cosy atmosphere of Jackson Hole and the central bankers’ meetings. It seems that Ben Bernanke’s threats to his colleagues, conveyed to our readers in GEAB No. 47, did not have the effect that the Fed’s chairman had hoped. The rest of the world made it clear in November 2010 that it had no intention of letting the US central bank continue printing US dollars at will in an attempt to solve America’s problems at the expense of every other country on the globe (8). The dollar is now getting back to being what every national currency is supposed to be: the currency and thus the problem of the country that prints it. In fact, in these last weeks of 2010, we have witnessed the end of an era where the dollar was the currency of the US and the problem of the rest of the world, as John Connally put it so neatly in 1971, when the US unilaterally terminated the convertibility of the dollar into gold. Why? Simply because from now on the Fed must take into account the opinion of the outside world (9). It is not yet under guardianship, but it is under “house arrest” (10). According to LEAP/E2020, we can already anticipate that there will be no QE3 (11) regardless of the US leaders’ opinions on the subject (12); or it will take place at the end of 2011 to the tune of major geopolitical conflict and the collapse of the US dollar (13) …  (full long text with charts).

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