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Some predictions for the rest of the decade  |  Michael Pettis  |  Credit Writedowns

My basic sense is that we are at the end of one of the six or so major globalization cycles that have occurred in the past two centuries. If I am right, this means that there still is a pretty significant set of major adjustments globally that have to take place before we will have reversed the most important of the many global debt and payments imbalances that have been created during the last two decades. These will be driven overall by a contraction in global liquidity, a sharply rising risk premium, substantial deleveraging, and a sharp contraction in international trade and capital imbalances.

To summarize, my predictions are:

....

  •  European politics will continue to deteriorate rapidly and the major political parties will either become increasingly radicalized or marginalized.

  •  Spain and several countries, perhaps even Italy (but probably not France) will be forced to leave the euro and restructure their debt with significant debt forgiveness.

  •  Germany will stubbornly (and foolishly) refuse to bear its share of the burden of the European adjustment, and the subsequent retaliation by the deficit countries will cause German growth to drop to zero or negative for many years.

IMO, this COULD be a good thing. Globalization has chiefly served to enable holders of large amounts of capital to confound any attempts at regulation by individual nations, whose average citizens have been regularly and repeatedly raped by the international corporations which are the vehicles for the large holders of capital.

The real basis for creation of capital is the power of the state to creatively reorder the society to suit the needs of the business enterprises within it. This has been done exclusively in the interests of those businesses and with disdainful disregard for the needs and interests of all but those with existing capital. The most recent phase of that process has, effectively, put to sleep the powers of the state to act in the interests of any but those with capital. This has been definitively accomplished by the almost total capture of the states.

Winding down globalization will not cure the problems that afflict our societies, but it does create the space for solutions to be implemented. In order for that space to be utilized large numbers of the electorate in individual countries have to realize the potential they have to shape their society and lives and must use that opportunity effectively. The alternatives are a collection of individual authoritarian states. An individual authoritarian state does not have to have a mad expansionist goal in order to make life miserable for the vast majority of its citizens.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Aug 29th, 2011 at 12:31:24 PM EST

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