11 January 2016

So what is some good news for 2016?

Well, that last posts of mine did seem a little grim, and I've been asked if there is any good news for 2016. Well, there is. It just won't sound like good news when you read this, but do dig in, and provide your thoughts on 2016.
For example, health sciences continue to progress at a rapid pace, with improvements across the board. Major advances in the diagnosis and treatment of Alzheimer’s for example, and remarkable treatments for cancer. It is well worth noting the comment by Louise Perkins, chief science officer for the Melanoma Research Alliance: "The options were far fewer even a year ago". "My most recent MRI brain scan did not reveal any signs of the original cancer spots nor any new ones," Mr Carter said in a statement.

In the civil war in Syria, and terrorism and the Islamic civil war (ISIS vs the Shi’a world), the entry of Russia to the fray gives real hope. After 4 years of civil war in Syria, backed by the bloodied hands of the West and Saudi Arabia, real progress is now being made. No longer are the waves of fuel trucks streaming from the oil fields of Iraq and Syria to the refineries and tankers of Turkey. This year we will see then end of the civil war in Syria, and not a moment too soon.

Of course, strangely, if the Saudis and the Iranian start throwing exploding things at each other, or a cyber-attack on Aramco is successful this time, then we could see a dramatic reduction in oil production, spiking oil prices, and counter-intuitively, greater economic growth in the West, and a resurgence of the Russian economy. It might even be enough of a bounce to counter the China slowdown. Who said wars are all bad? 

Hopefully while the Saudis and Iranian are throwing exploding things at each other, they will avoid throwing things that go "boom" at US ships in the Gulf. Recently Iran demonstrated that it certainly can, and that it can get close enough to US ships to possibly, if they really mean it, do some damage to those ships. That would not be a good thing to happen this year.

But back to how does that happen to oil, etc? Oil at $35/barrel results in uneconomic wells in North America and Russia (the ‘other’ largest producers) resulting in lost jobs, failing companies, and local economies in trouble throughout their economic supply and support chains. Boost the price of oil, and we will see more ‘domestically’ produced oil and with it booming communities.

We would also see a Saudi Arabia that will desperately need to focus on their own people and economy, instead of exporting terror through individuals supporting, financially, the likes of ISIS and various alternative Sunni terror groups. Saudi Arabia need an oil price of over $100 per barrel to break even. Can they really outlast the West? Even if they try, they will consume their financial reserves in the process, leaving behind a bankrupt desert country with no effective economy, and thousands of princes expecting their monthly subsidy. Things do not look good for Saudi Arabia.

2016 is also the year that Europe will start to fall apart. This won’t be a permanent falling about, but we will see Schengen put on hold. Only yesterday former French President Sarkozy said “Schengen is dead”. No more free flow of people without identification between countries in Europe, allowing for local security and reduction in terrorism. Radical Islam will be on the retreat in Europe, but expect to see a spasm of increased attacks earlier in the year. By the 3rd or 4th quarter, I fully expect Europe to be quieter. Migrants will not find open doors, and those that did get in will be forced, on threat of summary expulsion (forget going to Strasbourg for a legal pass) for almost any offense.

Further good news in Europe will be the Grexit, in which Greece finally adopts the New Drachma and exists the Eurozone. Good news? Absolutely. The only hope that Greece has of recovery is through debt forgiveness or restructuring into a new currency. Otherwise the Germans, the ECB and the IMF will continue to crush the Greek people, in no small part to prove to all others that they must comply, or else.

This will also be wonderful news for Democracy in Europe, a land that has forgotten that people can vote out those that have cheated them and on them, and they can repudiate the bribes accepted on their behalf. Yes, Greece needs to pay back its loans. Absolutely. But when there is no ‘moral hazard’ then there are not incentives for lenders to act prudently. Greece is guilty, but equally guilty are those that provided loans knowing that they wold never be repaid, and that the Greek people would be skinned of everything they have.

I think my summary would be that there is very good news also, but some of it will not look very good as it happens…

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