Year in Review: 2008

Again, a very happy and successful New Year to Sublime Oblivion readers. It has certainly been a successful year for this blog, founded as Da Russophile on Jan 9th 2008. The original site at blogger has nearly 16,000 visitors, while Sublime Oblivion has been graced by nearly 2000 from the date of its inception on Nov 24th 2008. Readers and commentators, in other words you, have contributed to this every bit as much as the author.

The world itself was a rather more turbulent and mixed story in 2008. The cardinal event is probably the credit crisis and unfolding economic crisis, the magnitude of which is becoming increasingly clear since September. In its sheer depth and breadth, I suspect it reflects something deeper than the periodical housing bubbles and basketcase-country currency crises of history, or even the pricking of the maniacal optimism that saw such a destructive proliferation of the ‘financial weapons of mass destruction’ that are CDO’s and other exotic, unstable financial constructs .

The immediate portent is the probable peaking of world oil extraction in 2008 – there might be another, even higher peak, in a few years, but not by much or for long. Since the prevailing growth-based model of development as it stands relies on cheap, high-density energy inputs to maintain itself, the post-peak oil historian may come to view 2008 as the year when industrial civilization experienced a fundamental discontinuity.

(Perhaps I’m being a bit premature, though. The bigger turning point may come when, in a few years, government-forced economic recoveries will collide with falling oil supplies due to secular geological trends and the price collapse of this year. On a poetic and  mystical whim, let’s set that year to be 2012).

A major tenet of this blog, that overall things are improving and will likely continue improving in Russia. Birth rates rose and overall population decline fell to the tiny level of -1.0/1000 a year. Prior to the global economic crisis, which hardly anyone could claim to have foreseen, Russia’s automobile production increased by 40%, GDP grew at a rate of 8% and the grain harvest finally recovered and exceeded typical Soviet levels. More attention was paid to the hi-tech sector, with the expansion of ambitious long-term programs in nanotechnology, big increases in academic salaries and better funding and equipping of research, as reflected in the regional supercomputer statistics.

Although the economic crisis is an unwelcome interruption of the country’s comprehensive program of industrial and technological development, it is very unlikely to result in catastrophe, as I thoroughly explained in the (admittedly awkwardly-titled) Importance of Self-Sufficiency in Liquids. Claims that the crisis may precipitate the political downfall of the ‘Putin regime’ is nonsensical Kremlinology (the latter two words are a tautology). Their latest attempt at shoring up their ‘arguments’ were the protests over rising import tariffs on cars in Vladivostok and their ‘brutal suppression’ by units called in from other far-flung regions of the evil empire. In reality, as usual, the protestors there failed to get permission to forcefully close down the city’s thoroughfares – those that did, like the citizens of Moscow and St.-Petersburg, were not disturbed; neither were even those who didn’t get permission, but at least had the courtesy to demonstrate civilly. Furthermore, as outlined in an article by Ivan Yartsev, the protesters in Vladivostok a) numbered in the hundreds, not the thousands, and arrests were in the dozens, not the hundreds, b) the alleged brutality of the arrests was not confirmed by the available videotapes and c) most incriminatingly, there is evidence to connect the protest organizers with the mafia, since importing cars is big business and greater state regulation over them could decrease criminal profits. In the bigger picture, as of December only 21% of Russians are ready to take part in mass protests personally while 66% would be against (furthermore, the most favorable figures are found in Moscow and the big cities). Thus those hoping for regime change in Russia, as usual, are left clutching at dirty straws.

I extensively covered Georgia’s criminal invasion of South Ossetia and Russia’s success at restoring peace in the face of Georgian tactical surprise, disregard for the laws of war and hypocritical Western ‘moral’ condemnation of the victim (Russia, and above all South Ossetian civilians). It probably (hopefully) marked the high tide of neocon hypocrisy, deception and criminality, and possibly of the American Empire as argued in a cynical, but nonetheless incisive, article by Mark Ames. For it’s own and the world’s good, it is hoped that Obama – whose victory I predicted –  will reinforce already latent tendencies in Washington’s foreign policy elite and take a more intelligent, conciliatory and multilateral approach.

Yet towering over the ultimately petty affairs of Men is Gaia, the system of the world’s biological, geological and climatic systems, and it is in slow-motion meltdown – quite literally, as the Siberian permafrost and Arctic Sea gas hydrates are starting to dissipate and release huge quantities of methane gas. This is a greenhouse gas that is twenty times more potent than CO2 and could potentially unleash runaway global warming and a mass extinction like the Permian-Triassic 250mn years ago, the most severe such event in Earth history. Ultimately, this news story from around August 2008 could turn out to be far more singularly important in the long run than petty things like new political leaders or wars or even peak oil; so important, that perhaps the only possible road to salvation left to us is Green Communism.

2009 Predictions

1. The US economy goes into freefall (around 5-10% annualized decline) in the first two quarters, but will bottom out and perhaps recover slightly in the second half as public spending stimuli kick in. Overall GDP loss of around 5% in 2009. The Dow Jones does not rise above 9000. Afghanistan continues simmering but on one of the few positives, Iraq remains stable

2. Global deleveraging is largely accomplished by mid-2009, and credit markets start working again. Deflation will cease around this time and concern about inflation mounts as commodities rebound and the results of the Fed’s recent monetary splurge work their way into the system. The inflation rate will start rising at a worrying pace, and may exceed 10% by year-end.

3. Commodities remain low in the first half of the year. However, an incipient global recovery in the second half will result in a rebound in oil prices from around 40-50$ per barrel in the first half, to 60-80$ in the second. The record 2008 harvest will be followed by a pitiful 2009 harvest, because of the twin shocks of a) the cyclical price collapse due to overproduction in summer 2008 and b) farmers having difficulties obtaining credit in many countries. Expect renewed global food riots.

4. Exporting countries contract at a fast rate as demand for their goods abroad plummets. Germany and Japan decline at -5%, and China sees only anemic growth of 2%. This is accentuated by increased protectionist sentiment around the world as countries raise barriers in order to get bigger multipliers for their fiscal stimuli, while doing everything they can to encourage exports. Among Iceland, Latvia, Ukraine, Georgia and Argentina, some may see GDP declines of more than 10% and government collapse. Venezuela’s GDP will decline but there will be no economic collapse and Chavez will remain in power.

5. The US dollar and yen weaken relative to the Euro. The US budget deficit will be somewhere in the range of 8-13% of GDP due to the reduced tax base and massive fiscal loosening. In a pessimistic scenario, investors start shunning T-Bills and capital inflows in the US reverse, precipitating a debt-and-currency crisis.

6. Russia will grow by 1% in 2009 – Q1 will see a very sharp downturn of -5% or more, but will abate in Q2 and will see a recovery in the second half as economic stimuli kick in, commodity prices start rising again and most importantly as affordable credit channels are finally unblocked. In particular manufacturing will receive a great boost due to the weakening ruble. Although there will be a small budget deficit of perhaps 1-2%, the trade balance will just about remain in the black for the year. The RTS will exceed 1000 by year-end as investors realize how extraordinarily cheap everything is. There are no major political protests, Medvedev remains President and Russian-American, and more generally Russian-West, relations improve.

7. Neither Saakashvili nor Yushscenko will survive 2009 as political leaders. The disillusioned people of Ukraine take to the streets and oust the bickering and incompetent Orange regime, replacing it with a more economically rational and Russia-friendly one. Saakashvili is either forced to resign or is removed in a coup under the twin weight of his disastrous war and collapsing economy. The profile of as yet obscure organizations like Eurasec, CSTO and GECF will increase (look them up in Wikipedia!).

8.In Russia, the birth rate will be between 11.5 and 12.5 / 1000, the death rate at 14.5 and 15.5 / 1000 and net migration will fall substantially to 0.5 / 1000. For comparison, the figures for the first ten months of 2008 were 12.1, 14.8 and 1.7 respectively.

9. There will be another major war in some region of the world (not counting the current struggle between Hamas and Israel). Probably the most likely is a pre-emptive Israeli pre-emptive air strike against Iranian nuclear facilities, before the Islamic state’s air defences become too strong with the addition of Russian S-300’s. Military confrontations in the former Soviet Union are now unlikely. It is possible that there will be a major terrorist attack against US assets or the global oil infrastructure.

10. By year-end the performance of the world’s top supercomputer will exceed 3 petaflops. Oil production in 2009 will be substantially lower than in the year before.There will be a major global-warming related event, e.g. a new European heatwave, an extreme hurricane or breakup of a major ice shelf.