I'm going to stick my neck out and make some predictions for the coming year.
-- Kenneth Deffeyes of Princeton has already stuck his neck out and called 2005 the year of the global oil production peak. We'll go neck-and-neck with him. (Colin Campbell and others are holding out for 2007.) We'll only truly know in the rearview mirror, but we are apt to see a lot of turbulence in the oil markets as they apprehend the approaching peak. It is extremely significant, for instance, that Venezuela's Hugo Chavez has decided to give favored customer status to China. Chavez would like nothing better than to turn the screws on the United States. Under the China deal, there will be a lot less imported oil for the US. This alone guarantees substantial price increases for Americans this year. We'll know this year whether the Saudis have truly lost their ability to boost production and act as the world's swing producer; their super-giant Ghawar oil field is pumping half-seawater these days. 2005 could also be the year that west Africa becomes so politically chaotic that oil production and export suffers dramatically. US natural gas storage is high now, but production continues to decline. If the winter weather turns harshly cold, we'll have problems. The past two summers in the northeast have been supernaturally cool, with barely two consecutive days over ninety degrees. If we have even a normal cooling season, it may also be one of electrical blackouts. 2005 will be the year that the public gets panicky about the global energy predicament.
-- The Iraq elections will be a fiasco. Few Iraqis will venture to go to the polls, which become wholesale targets for rocket, mortar, and suicide attacks. Interim President Iyad Allawi is declared the winner by default, since there is no other alternative. American policy will be to take the path of least resistance and let Allawi rule -- assuming he isn't assassinated -- and make it his responsibility both to organize another election and to impose basic civil security, which may be utterly beyond his government's abilities. US forces will withdraw from the Iraqi cities (and peacekeeping duties) to bases out in the desert where they will revert to the primary strategic mission (perhaps futile) of attempting to exert a modifying influence over Iran and Saudi Arabia. Meanwhile. Iraqi Shi'ites (Allawi) and the Sunnis (including old Baathists) will have a civil war. God knows what will happen to Iraq's oil infrastructure. US forces can't guard it all.
-- In 2005, China continues its policy of securing natural resource contracts (oil and metals) around the world. Several friction points may develop between China and the US. A slacking off in "consumer" spending in the US as Americans choke on credit payments will prompt China to search desperately for a group of new customers for manufactured goods. China will find some in Brazil but few elsewhere and ultimately won't be able to replace its shredding US customer base. China will orchestrate a movement among adjacent former Soviet republics to terminate American military base leases there. If China is pissed off enough, it will turn the heat up on Taiwan, forcing the US to pretend that we would intervene on behalf of Taiwan -- a pretense the whole world would see through, and which would be a major sign of America's waning ability to project power around the world. Eventually, trouble in the US economy may lead to political turmoil in China as factory workers are laid off in enormous numbers and begin to make trouble in the streets.
-- Speaking of the US economy (aka, the dual WalMart / Housing bubble), here's what I see: the fantastic apparatus of mortgage-and-credit creation wobbles as misfeasance in Fannie Mae combines with a falling dollar and loss of overseas customers for US debt to cause interest rates to rise substantially. Rising interest rates crush large numbers of homeowners holding absurd mortgages on over-priced houses that never should have been granted in the first place (and only were because lending standards turned to shit over the past decade.) Also clobbered are "consumers" over-extended on credit card debt (who are actually the same people as the ruined homeowners). A knockout punch comes in the form of up-ratcheting oil-and-gas prices, which thunder through the economy as price inflation. The housing bubble pops like a zeppelin and a giant sale of distressed properties begins, with house prices plummeting. (Prices on other things, especially food, shoot up.) Yesterday, the New York Times ran a typically clueless business section story on an expected bull market in corporate mergers. This was pawned off as a sign of economic vitality; I see it as an obvious sign of weakness. Virtually all mergers will result in substantial layoffs of workers, as merged companies seek first to eliminate payroll redundancy. Many mergers will represent the desperate marriage of losers, for instance Sears and K-Mart, two giant chain retailers who had lost out to WalMart and Target for a huge-but-limited customer base, and were headed down the drain. Now Sears and K-Mart will head down the drain together as that customer base becomes even more limited by the credit default orgy of 2005.
-- After a long cycle of dominance the Republicans begin to pay a price for their stupidity and greed. An economically hard-pressed public will become inflamed over White House efforts to go easy on illegal immigration. Bush and Co. will be blamed for all the economic travails cited above. Meanwhile, the Democrats, led by the wraith-like Harry Reid (Nevada), will stand idly by without a single idea in their collective heads. In a better world, this would lead to the formation of a new-and-improved progressive opposition. But in this imperfect world, what we are apt to see instead is the formation of several big movements on the lunatic fringe: hardcore isolationists, anti-immigrationists, and biggest of all, a tsunami of the formerly middle-class -- all those ruined home owners and credit card bankrupts who will demand political action to bring back their lost 'entitlements.' These are the people who could lead the United States into a kind of corn-pone Naziism.
-- Finally, there is a whole category of events that we have to classify as "the uncallables." An islamist maniac could bring down the al Saud dynasty with one well-placed bomb. Of course there could be some kind of major terrorist strike in the US or Europe. It's impossible to predict events like last year's multiple hurricane assault on Florida, or the tidal waves that killed multiple thousands in the Indian Ocean last month. There hasn't been an attempt on a US president's life in twenty years and there will be no shortage of homegrown ticked-off crazies here. Who knows what's going on inside Iran (perhaps not even the CIA). The Boston Red Sox might even win a consecutive world series. Considering what we face, that wouldn't be so strange. In the immortal words of Bette Davis's character in All about Eve, "Fasten your seat belts, everybody. It's going to be a bumpy ride."
Oh yes, in May 2005 the Atlantic Monthly Press will publish The Long Emergency by the overworked editor of Clusterfuck Nation, Jim Kunstler.