Get ready for another rough ride

The growing confrontation between Israel, backed by the US and Nato, and Iran is the source of greatest concern. This could spill over into a major war in a region already ravaged by conflict and instability. If war does take place against Iran, it would automatically involve Russia and China. Oil prices could spike to US$200 per barrel in a crisis scenario.

The US is building up military capability in the Asia-Pacific region. President Obama has also signalled to China that the US will be a force to reckon with in the South China Sea. The US is calling for its Asian allies to contain China. The Chinese are warming up their defences in response to the US’s direct challenge in Asia. This has complicated the security arrangements in Southeast Asia, including Thailand.

The euro, which celebrated its 10th anniversary on January 1, is wobbling. Countries such as Greece or Italy might be forced to leave the euro zone and go back to their traditional currencies. Sovereign debt in the euro zone is not sustainable. The crisis will deepen this year. As Robert Prince of Bridgewater, the world’s largest hedge fund, put it: “You’ve got insolvent banks supporting insolvent sovereign funds, and insolvent sovereigns supporting insolvent banks.” 

There is no future for the global economy because bad debt in the financial system is too high at $21 trillion. The world’s gross domestic product is over $50 trillion. Most of the bad debt is swept under the carpet of the banks and sovereigns of the developed nations. The leading economies will see their debt of $7.6 trillion maturing this year, meaning they will have to issue more bonds to refinance old debts. Japan leads the pack with $3 trillion, followed by the US’s $2.8 trillion, Italy’s $428 billion, France’s $367 billion, Germany’s $285 billion, Canada’s $221 billion, Brazil’s $169 billion, the UK’s $165 billion, China’s $121 billion, India’s $57 billion, and Russia’s $13 billion. Some are calling this a “ponzi scheme” because some of these countries are issuing new debt to pay for old debt they could never pay off in the first place.

China, India and the other BRICS countries are experiencing economic slowdown. This means any hope of the developing nations pulling the global economy out of its sluggishness is going to be wishful thinking. Thailand’s gross domestic product hardly grew at all last year due to the worst flooding in 50 years. It might recover this year, but would be limited given the bearish global environment.

China, in spite of its domestic problems, will exert itself as a global leader by promoting the yuan as another global currency. The yuan’s rise will come at the expense of the dollar and other major currencies. The yuan could go through a big-bang launch. This is the underlying friction between the US and China, for any challenge to the dollar as the dominant global currency would undercut America’s ability to expand the empire and its military overreach.

Watch out for Ron Paul, a presidential candidate for the Republican Party. Paul, backed by Occupy Wall Street and moderate Americans, is the true voice of change and back to basics. If the US economy gets worse, the message of Paul against the US establishment will get across louder and clearer. Obama clearly represents the interests of Wall Street rather than the common folk he promised to help during the presidential campaign four years ago. At the same time, the US Federal Reserve, which has already bailed out European banks, might need to unleash Quantitative Easing 3 to prop up the banking system. Unemployment will continue to be high. Middle-class income will also continue to plummet. The American economy is not going anywhere.

The gold price is not likely to trade below $1,500 an ounce. As confidence in the fiat currency system wanes further, gold will shine brighter. Gold, which peaked at the $1,800-plus level last year, will strike back. The global elites are now shifting the global monetary system to adopt the Special Drawing Rights (SDR) of the International Monetary Fund as the global currency in the event of a euro and dollar crash. The IMF would serve as the global central bank. If this scheme were to fail, we might see a return to a monetary system based on gold.

Natural disasters and epidemics will continue to wreck havoc on countries and economies. Thailand’s floods last year caused damage to the tune of Bt1.4 trillion alone. Now storms and floods are hitting Southern of Thailand. Food will become scarce. Inflation will follow. Bird flu is coming back to haunt us. China, Hong Kong, Vietnam, Bangladesh and Malaysia are on high alert.

Thai politics is heading for another round of confrontation. The highlight is the government’s attempt to stage a constitutional coup. Ex-prime minister Thaksin Shinawatra may be flying back to Bangkok in grand style. Public demonstrations will ensue. This will provoke the dormant military from their sleep. 

  That’s my brief view for 2012. I wish my readers all the best and a Happy New Year.