The New World Order has more ‘new’ and ‘world’ about it than ‘order’. The historical economic cycles of a great many sectors have been blown to smithereens, and almost nothing follows the cyclical pattern to which we have become accustomed over many decades. The timing of bubbles, crashes and cycles no longer follows the accelerated patterns seen in previous periods, as has been the case in recent years. The rules of the game in the global economic landscape have changed radically. It seems as though there aren’t even any rules, but they probably do exist, even if we are not yet able to identify them amidst the apparent chaos.
Oil is no longer cyclical; Fernan2, the ‘master of crude’, has already warned of this in various articles which it has been publishing over the last few months. Currency markets are also in turmoil due to the emergence of a second major reserve currency (the euro) to underpin the flagship currency ($). The globalisation of the carry trade and the stability of the Chinese yuan – a country that is exporting and growing at rates never before imagined – does the rest. The US, operating in a veritable war economy, is extracting oil from Iraq by military means and manipulating the euro exchange rate in its favour, whilst having no alternative but to subsidise defaulters and loan sharks who are destabilising the credit system through their abuses. Precious metals are rising without any clear indication of how far or why, whilst banks’ share prices are falling and they mistrust one another. There is no clear strategy for safeguarding money in the face of more than considerable inflation, particularly for Spaniards, for whom the property market is crumbling through their fingers and the Euribor, in the form of exploitative mortgages, is also tightening the noose around their necks, just as it is for many Hispanic Americans. Is this chaos, or a new world order that we are not yet able to conceive of or define in order to devise the most appropriate and sensible strategies? Time will tell – in fact, it is telling us day after day.
A momentous change took place (as many of us sensed at the time) following 11 September 2001, although it has taken the massive global economic ship a few years to show the first signs of this shift in course and the changing global landscape. But let’s not panic: historically, humanity’s ability to rebalance and stabilise the global economy has always prevailed. Admittedly, it has wiped out many enormous fortunes along the way – such as those of the unfortunate souls who leapt from Manhattan’s skyscrapers in late 1929. But although I personally consider the current situation to be potentially more far-reaching than a mere stock market crash, I am nonetheless convinced of the global capacity for rebalancing. In other words, globalisation has a multiplier effect on spread, for example, the subprime crisis but it also proportionally increases the global economy’s ability to rebalance itself in a concerted manner. Another matter altogether is the geopolitical rebalancing that the world’s leaders may be able to achieve; but, with all due respect to the religions, I have always believed wholeheartedly in human capacity in times of difficulty. In fact, economic rebalancing will go a long way towards facilitating geopolitical rebalancing.
In short, globalisation – which has led us to the current situation, which is not yet a turning point (at least not a positive one), due to our own poor judgement – must serve as a lesson to us
also to help us stabilise the economy of the First World, which forms the foundation of our system. Some of you may say that it might be better not to seek that stabilisation and instead to begin laying the foundations for a new, fairer system with fewer imbalances between the First, Second and Third Worlds. I’m not saying that wouldn’t be fairer, but, selfishly, I must confess that I prefer the rebalancing of the capitalist system as we have known it in these parts until now.
In my view, globalisation is the key factor that has meant that cycles and scenarios which were historically at least somewhat predictable can no longer be repeated in the form we have known and studied them. We are establishing a new practice which will be the subject of theoretical analysis in the future, but not today. The waters will find their course once more, but along different, as yet unknown channels – channels that are no less stable or productive than those we knew before 9/11, and which we are now beginning to realise have been left behind for good.
The black swans They start out grey, and we must learn to appreciate them in all their splendour and rarity. If every crisis is an opportunity, then we are facing the mother of all opportunities. Let’s keep our eyes wide open and may God grant us good fortune.
Merry Christmas and prosperous New Chaos 2008.