The EU and US Are Headed Towards Collapse. And China, Russia?
We have already discussed, in two recent blogs, the demise of the Euro - forecasted for the second half of 2013 - and the collapse of the USA - anticipated around 2017-2018. Let us recall both situations, in which annual data from the World Bank have been used spanning periods from 1970 to 2010. The variables which are taken into account in the analysis of the various countries and regions are listed at the end of the blog (the list shown is that of the USA but the same variables are taken into account for each country).
As discussed in the mentioned blogs, a shrinking, (or even dying) system is characterized by the fact that both its complexity and critical complexity are diminishing. Problem number two is if the two values get close to each other. The system in question becomes critically complex and chaos-driven - basically uncontrollable and running on autopilot (proving there is one). Let's see the case of the EU first (in all graphs, one tick corresponds to one year).
The crisis is reflected in loss of complexity (potential, functionality) after the peak in 2008 which is continuing to fall at alarming rates. But what is worse is that crticical complexity is falling at higher rates - see the two red arrows - which indicates convergence providing of course that no extreme events will change the system's current dynamics (refer to the mentioned blogs for more details). When complexity approaches critical complexity (imagine your cholesterol reaching the maximum value suggested by your doctor) the length of the red vertical segment approaches 0. What this means is that the country's governability index - defined as the ratio of the length of the red segment to that of the black one - approaces 0. The country, as a system, becomes no longer controllable. Many of its parts may still function but the system as such ceases to behave as one, and is just an ensemble of chaotically linked sub-systems.
The situation of the US is similar.
Complexity and critical complexity will, if the current trend continues, cross around 2017-2018. At that time the USA will be in a state of paralysis. What appears to be common to the EU and the USA is that both systems have reached peak complexity (development, growth) at the same time (2008) although the values are quite different.
But what about other important countries and regions of the World, such as China, Russia and the Arab countries? Let's take a look at China first. The situation is totally different.
We can observe that the evolution of complexity doesn't at all resemble that of the Western World. This is not surprising. While we don't intend to provide an exhaustive analysis of the possible reasons, certainly culture, government and lifestyles come to mind first. The important thing is that there is no clear and visible indication of a tendency for complexity to drop. China, as a system (we're not looking at just the economy - the analysis is holistic and embraces all facets of a society) appears to be much more solid (controlled and controllable) than the Western countries. There is no collapse in sight.
Something totally differentl may be said of Russia.
Russia has been enjoying a period of sustained almost constant complexity increase over the past two decades which has plateaued only recently, around 2009-2010. Again, it is not the scope of this blog to analyze the reasons of this behavior. What is clear, nevertheless, is that unlike the Western world, Russia does not seem to be heading towards paralysis. At least not as of today.
Finally, a glimpse of the Arab countries.
The Arab countries seem to be following the Western world to a certain degree, although their evolution in terms of complexity seems to be more "traumatic" and rugged (let us not forget that the Arab world has been/is torn by unrest and conflict). However, they too, as a system, are heading towards a state of paralysis, disgregation and, potentially, collapse.
More soon.
Below is the complete list of variables used in the analyses.
Agricultural machinery, tractors
Fertilizer consumption (% of fertilizer production)
Fertilizer consumption (kilograms per hectare of arable land)
Agricultural land (sq. km)
Agricultural land (% of land area)
Arable land (hectares)
Arable land (hectares per person)
Arable land (% of land area)
Land under cereal production (hectares)
Permanent cropland (% of land area)
Forest area (sq. km)
Forest area (% of land area)
Average precipitation in depth (mm per year)
Land area (sq. km)
Agricultural machinery, tractors per 100 sq. km of arable land
Cereal production (metric tons)
Crop production index (1999-2001 = 100)
Food production index (1999-2001 = 100)
Livestock production index (1999-2001 = 100)
Surface area (sq. km)
Cereal yield (kg per hectare)
Trade in services (% of GDP)
Communications, computer, etc. (% of service imports, BoP)
Income payments (BoP, current US$)
Imports of goods and services (BoP, current US$)
Insurance and financial services (% of service imports, BoP)
Goods imports (BoP, current US$)
Service imports (BoP, current US$)
Royalty and license fees, payments (BoP, current US$)
Imports of goods, services and income (BoP, current US$)
Transport services (% of service imports, BoP)
Travel services (% of service imports, BoP)
Foreign direct investment, net outflows (% of GDP)
Private current transfers, payments (BoP, current US$)
Workers' remittances and compensation of employees, paid (current US$)
Current account balance (BoP, current US$)
Current account balance (% of GDP)
Net income (BoP, current US$)
Net trade in goods and services (BoP, current US$)
Net trade in goods (BoP, current US$)
Net errors and omissions, adjusted (BoP, current US$)
Foreign direct investment, net (BoP, current US$)
Private capital flows, total (BoP, current US$)
Private capital flows, total (% of GDP)
Portfolio investment, excluding LCFAR (BoP, current US$)
Changes in net reserves (BoP, current US$)
Net current transfers (BoP, current US$)
Net capital account (BoP, current US$)
ICT service exports (BoP, current US$)
ICT service exports (% of service exports, BoP)
Communications, computer, etc. (% of service exports, BoP)
Income receipts (BoP, current US$)
Exports of goods and services (BoP, current US$)
Insurance and financial services (% of service exports, BoP)
Goods exports (BoP, current US$)
Service exports (BoP, current US$)
Royalty and license fees, receipts (BoP, current US$)
Exports of goods, services and income (BoP, current US$)
Transport services (% of service exports, BoP)
Travel services (% of service exports, BoP)
Foreign direct investment, net inflows (BoP, current US$)
Foreign direct investment, net inflows (% of GDP)
Portfolio equity, net inflows (BoP, current US$)
Current transfers, receipts (BoP, current US$)
Workers' remittances, receipts (BoP, current US$)
Workers' remittances and compensation of employees, received (current US$)
Workers' remittances and compensation of employees, received (% of GDP)
S&P Global Equity Indices (annual % change)
Market capitalization of listed companies (current US$)
Market capitalization of listed companies (% of GDP)
Listed domestic companies, total
Stocks traded, total value (current US$)
Stocks traded, total value (% of GDP)
Stocks traded, turnover ratio (%)
Agriculture value added per worker (constant 2000 US$)
Water pollution, clay and glass industry (% of total BOD emissions)
Water pollution, chemical industry (% of total BOD emissions)
Water pollution, food industry (% of total BOD emissions)
Water pollution, metal industry (% of total BOD emissions)
Water pollution, other industry (% of total BOD emissions)
Water pollution, paper and pulp industry (% of total BOD emissions)
Organic water pollutant (BOD) emissions (kg per day)
Water pollution, textile industry (% of total BOD emissions)
Water pollution, wood industry (% of total BOD emissions)
Organic water pollutant (BOD) emissions (kg per day per worker)
Energy production (kt of oil equivalent)
Electricity production from coal sources (kWh)
Electricity production from coal sources (% of total)
Electricity production from oil, gas and coal sources (% of total)
Electricity production from hydroelectric sources (kWh)
Electricity production from hydroelectric sources (% of total)
Electric power transmission and distribution losses (kWh)
Electric power transmission and distribution losses (% of output)
Electricity production from natural gas sources (kWh)
Electricity production from natural gas sources (% of total)
Electricity production from nuclear sources (kWh)
Electricity production from nuclear sources (% of total)
Electricity production from oil sources (kWh)
Electricity production from oil sources (% of total)
Electricity production (kWh)
GDP per unit of energy use (PPP $ per kg of oil equivalent)
GDP per unit of energy use (constant 2005 PPP $ per kg of oil equivalent)
Energy imports, net (% of energy use)
Alternative and nuclear energy (% of total energy use)
Fossil fuel energy consumption (% of total)
Energy use (kg of oil equivalent) per $1,000 GDP (constant 2005 PPP)
Energy use (kt of oil equivalent)
Combustible renewables and waste (metric tons of oil equivalent)
Combustible renewables and waste (% of total energy)
Electric power consumption (kWh)
Electric power consumption (kWh per capita)
Energy use (kg of oil equivalent per capita)
CO2 intensity (kg per kg of oil equivalent energy use)
CO2 emissions (kg per 2000 US$ of GDP)
CO2 emissions (kt)
CO2 emissions (metric tons per capita)
CO2 emissions (kg per PPP $ of GDP)
CO2 emissions (kg per 2005 PPP $ of GDP)
CO2 emissions from solid fuel consumption (% of total)
Other greenhouse gas emissions, HFC, PFC and SF6 (thousand metric tons of CO2 equivalent)
HFC gas emissions (thousand metric tons of CO2 equivalent)
Agricultural methane emissions (thousand metric tons of CO2 equivalent)
Agricultural methane emissions (% of total)
Methane emissions in energy sector (thousand metric tons of CO2 equivalent)
Energy related methane emissions (% of total)
Methane emissions (kt of CO2 equivalent)
Agricultural nitrous oxide emissions (thousand metric tons of CO2 equivalent)
Agricultural nitrous oxide emissions (% of total)
Nitrous oxide emissions in energy sector (thousand metric tons of CO2 equivalent)
Nitrous oxide emissions in industrial and energy processes (% of total nitrous oxide emissions)
Industrial nitrous oxide emissions (thousand metric tons of CO2 equivalent)
Nitrous oxide emissions (thousand metric tons of CO2 equivalent)
PFC gas emissions (thousand metric tons of CO2 equivalent)
PM10, country level (micrograms per cubic meter)
SF6 gas emissions (thousand metric tons of CO2 equivalent)
Population density (people per sq. km of land area)
Population in largest city
Population in the largest city (% of urban population)
Population in urban agglomerations of more than 1 million
Population in urban agglomerations of more than 1 million (% of total population)
Pump price for diesel fuel (US$ per liter)
Pump price for gasoline (US$ per liter)
GEF benefits index for biodiversity (0 = no biodiversity potential to 100 = maximum)
Water productivity, total (constant 2000 US$ GDP per cubic meter of total freshwater withdrawal)
Annual freshwater withdrawals, agriculture (% of total freshwater withdrawal)
Annual freshwater withdrawals, domestic (% of total freshwater withdrawal)
Annual freshwater withdrawals, industry (% of total freshwater withdrawal)
Annual freshwater withdrawals, total (billion cubic meters)
Annual freshwater withdrawals, total (% of internal resources)
Renewable internal freshwater resources, total (billion cubic meters)
Renewable internal freshwater resources per capita (cubic meters)
Terrestrial protected areas (% of total surface area)
@Jacek
Felicitaciones! Es una excelente análisis. No tengo mucho tiempo para intercambiar impresiones y nos sabes cuanto lo lamento!
Pedreo
14 February 2012 1:33 » Chris Jones of Star Legal & Corporate (Vietnam)
Thanks for this. As you say, 'complexity' indeed.
I predicted the first big signs of the collapse would come in 2012 (see youTube 'Global Economic Crisis 2012: Causes and Effects' by Zip Zagon my YouTube name). However, this is, or course an election year in the US, so the money ptinting will be running full tilt. There will be a big price to pay for this additional money printing a short time after the elections.
With the mony printing comes a false hope of recovery. It will prompt the lemmings to return to the equity market. Equity investment these days is mostly sheer speculation rather than about investment in sound companies for the long term. Investors will therefore temporarily abandon the USD bonds, thus removing the demand off the USD; this in turn will erode the value of the USD causing inflation. We can already see this see saw patern clearly emerging.
The effect of this big rise in inflation will scare the equity investors back into USD bonds, thus again pushing up the value of the USD and deflating the prices of commodities, including gold and oil that are priced in USD.
From there we will go into a deflationary spiral of falling demand and falling prices, which will be very hard to pull out of - a repeat of what happened in the Great Depression.
The Greek parialment may have just signed off on the austertiy bill, but those who think the Greek people have the stomach to see this belt tightening process through are dreaming. The belt tightening will all collpse in a heap, and the Euro Zone money would have been already lent - what a huge mess will ensue.
The Greeks would have been far better to have pulled out of the Union, wiped out their poor long suffering creditors, abandoned the Euro, deflated their own national currency, taken some short sharp pain and then recovered. This present way is merely prolonging the agony. How can austerity promote growth? And only growth (or war with the demand it stimulates) can pull the Greeks out of their present mess.
Severe economic difficulties are never present by themselves. They are always accompanied by political and social unrest, and so it will be again. Unfortunately, the only immediate solution I see is a war with Shiite Iraq undertaken by the Western allies and NATO and, importantly, funded by the Gulf Sunni States,m because the US public would not and could not fund yet another war in the Middle East.
There has to be a good reason to attack Iran, because there isn't one now. So look for someone (Mossad/ CIA?) fermenting trouble amoung the Shiite minority living in the very sensitiv area of the eastern side of Saudi Arabia, home of a large part of the world's oil supply. With the Sunni Gulf States funding this war, Israel would once again have to sit on the sidelines while others did its dirty work, a situation that couldn't please the Israelis more.
Yes, unfortunately war with Iran is the only short term answer for the West and for global economic recovery. As it stands, no matter what so-called remedial actions are taken, the aging populaton of 'Baby Boomers' now a big liability demanding pensions and medical care, instead of a tax-paying asset, and the increasing unemployment, will not definitely not provide the demand necessary for a recovery to occur.
But Russia and China are both allies of Iraq in some ways. What will they do? Just sit there while the US and its allies strike an ally on their borders? Hardly. CAJ.
08 February 2012 23:53 » RUEL C. DE VERA
Thanks Ladies and Gentlemen, exciting data inputs perfectly executed.
CONGRATULATIONS!!
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