Last year Henry and Bert made some unlikely but possible predictions for 2009 - the only sensible way to peer into the future. Here is the link, and readers will see that the first four of these less than obvious predictions were largely achieved, as is often the case.
(They were breaking of Australia's drought, oil back at $100 per barrel; Aussie dollar at $US0.90 and US economy begins recovery.)
We continue this tradition with new predictions for the upcoming year. First we note that pollster Roy Morgan reports that sixty-six per cent of Australians (up 17% in 12 months) believe 2010 will be a better year than 2009, while 18% (up 1%) think it will be the same or don’t know and only 16% (down 18%) think it will be worse.
First, here are the generally expected highlights of 2010.
1. Tepid economic recovery in the United States and European Union compared to ongoing boom in China, India and East Asia. With minor improvements in America and the Chinese Communist Party aiming for 10% economic growth, this seems highly probable.
2. Kevin Rudd wins a second term for Labor in Australia, but with a reduced majority. Although Tony Abbott has done much to re-energize the Liberal Party base, Kevin Rudd and Labor should still win the 2010 federal election. 'It's the economy, folks'.
3. Barack Obama regains some popularity as President, but the Republicans regain some seats in Congress and end the Democrats supermajority. However, populist anger at Congress is rising and the Republicans should win back some seats in the House of Representatives and Senate.
4. The Tories defeat Labour in the UK elections. The Labour Party’s popularity has steadily fallen since Tony Blair retired, and the Conservatives are now favoured to retake office after several terms in opposition.
5. There is another failed conference that attempts to reach an agreed position to stem greenhouse gas emissions.
Now our unlikely but possible scenarios.
1. Inflation and high interest rates grip the world economy. Government bailouts, stimulus packages and low interest rates destroy fiat currencies and plunge the world into a second Great Depression. (We may be a year or two early with this prediction, but it is one to watch for as the 20teens unfold.)
2. Al Qaeda suicide bombers attack a prominant Chinese target. The Islamic terrorists have so far attacked the developed, nominally Christian nations, but may try to spread their particular brand of anarchy more evenly.
3. Barnaby Joyce replaces Tony Abbott as Coalition leader after election defeat to Labor. If not Barnaby, will 2010 see the return of Malcolm, the resurgance of Joe or the promotion of Julie? And does anyone but hard-core Liberals care, that is the real question, Virginia.
4. Peaceful revolution in Iran overthrows the fundamentalist government and establishes a new democracy in the Middle East. Current unrest reminds some analysts of the preliminary stages of the overthrow of the last Shah. Obama's attempts at rapprochment, and the regime's scornful response, have encouraged dissent.
5. Carlton defeats Brisbane by five points to win the AFL Grand Final, with Fevola held to one goal five points and Jonathan Brown carried off after a clash with Eddie Betts in the first quarter. Do we hear the sound of flying pigs, gentle readers.
The Wall Street Journal says 'Turbulance Marks global Outlook for 2010'
Ambrose Evans-Pritchard of the London Telegraph, says '2010: The Yen will outdo the Yuan in a race to the bottom'.
'Milton Keynes will be vindicated. Lord Keynes will lose some of his new-found gloss. The Krugman doctrine that we should all spend our way back to health by pushing deficits to the brink of a debt spiral – or beyond the brink – will be seen as dangerous'.
However, 'By mid to late 2010, we will have lanced the biggest boils of the global system. Only then, amid fear and investor revulsion, will we touch bottom. That will be the buying opportunity of our lives'.
The challenges before us.
'The major western nations have substantial economic policy challenges even if there are no new adverse shocks. Asia is gathering speed to a point where goods and services inflation will quickly emerge. Imbalances will bedevil discourse, both the traditional variety plus intractable differences about how to handle the transition to a low carbon economy that virtually every government says is vital.
'Commodity inflation suits Australia, at least superficially. But there is a major caveat. No major resource boom anywhere been managed without an eventual bust. (Readers who doubt this should consult Charles Kindelberger’s Mania’s, Panics, and Crashes’).
'If the China boom persists, as now seems likely, the challenge for Australia is to avoid boom and bust. Bold tax reform, to encourage saving, wise investing (including in high tech new age industrial production) and entrepreneurial flair is surely part of the answer. Maintaining our world leading performances in agriculture, mining, medical science and treatment, many sports and some aspects of education is another big part of the answer.
'A proper understanding of the challenges before us is a necessary start'.
We welcome further suggestions and comment - contact Henry here.