CHRISTMAS WEEKLY COMMENT 20-12-2014
By Barry Edwards
Recollections of 2014
As we approach the winter solstice, the shortest day if the year Christmas is upon us and the New Year beckons. The theme of this final comment for 2014 is to summarise some of the main events that have occurred during the year and discuss their implications.
Internationally there have been some dramatic unexpected events; the main surprise was the sudden annexation of Crimea by Russia which caught everyone off guard leading to the further fighting in Eastern Ukraine which has still to be resolved satisfactorily. As a result of that action the sanctions imposed on Russia and their import restrictions are having a serious economic effect on the country which is not likely to lead to a resolution soon unless Putin starts to remove his troops from Eastern Ukraine. The fall in the oil price is the main problem forcing his hand but it is not easy to predict how he will react.
The Middle East has seen the rise of Isis which is demonstrating the major differences between the Shia and Sunni branches within the Muslim world swamping the supposed reason for trouble in the region, the Israeli and Palestinian conflict. There are many factions within the Muslim people meaning that nobody is sure how this fighting could be resolved. The breakdown of the governments and the actual borders of the countries are adding further confusion to seeking a lasting solution. In my view, all this leads back to the end of the Ottoman Empire and the Sykes-Peko agreement just after the First World War creating the borders in the Middle East around physical geography and not ethnic groupings.
The amazing thing is that in the past when you have this much fighting throughout the Middle East and North Africa the oil price used to rise substantially. Instead we have seen a 40% fall this year and it may well fall further.
The EU is surrounded by countries that are restricted from trading, at war or have shrinking buying power from the fall in the price of oil further challenging the potential for growth. With the indecision about increasing inflation and demand there is good reason why the EU is struggling. This lack of growth is the main concern in the UK since the EU is the main trading area for the export of products and services.
China is also experiencing slower growth which is reducing imports from around the world affecting many countries that have become used to their enormous demand for raw materials. Economists are not convinced about the official GDP growth statistics that are released and suspect that the actual figures are much lower based on the energy consumption that is reported. Borrowing in China is around 250% of GDP creating the possibility of massive loan losses as property prices fall; so far the authorities have avoided the potential collapse of the banks but no one is quite sure how this will play out. Most commentators believe that the financial system is controllable since there is little foreign exchange risk and the reserves are large enough.
Developing countries are also experiencing little growth as commodity values have been declining throughout most of the year causing their currencies to fall against the dollar which is the currency of most commodities. Investors are withdrawing from most emerging markets and reinvesting in their home markets. Japan is going through a vast quantitative easing programme to generate growth which is only slowly beginning to have some effect. The only really positive economic news is from the USA and the UK but both starting to suffer from the lack of growth around the world.
Therefore, as we go into the New Year there is not much positive news to forecast that 2015 will be a great year. The opinion expressed by the public in the many opinion polls conducted is that they have little faith in their leaders and politicians generally, creating an environment which makes it difficult for anything proposed to be taken seriously. You only have to watch television programmes where open discussion is conducted and you can see the genuine resentment by the audience of the people responsible for making the decisions that affect us all to realise that this is the case.
There is the potential for politicians to change the expectations of the electorate providing they can put forward the real policies to make that real difference. Most of the problems described above are certainly solvable and the solutions could be implemented quickly within the bounds of the framework of government procedure. We have discussed many possibilities in previous comments and many others have suggestions and proposals that could achieve the same purpose.
However, it is the Middle East that is the epicentre of what will happen over the next decade and ultimately will determine how we all live our lives. It is not the disruption and conflict that is the centre of concern, it is the will of the people in the area to want to change and start to want to believe in the message that is in the religious teaching. This is where we start to wish that those causing the problems can begin to see the failure of their actions and think about the wishes of the families they are continually destroying. It is the time of year to think about how we can change that process with the goodwill of Christmas.
Merry Christmas to everyone and a Happy New Year, the weekly comment will return in January unless there is vital news that needs comment during the festive season.