Events to look out for in March 2011: Black Swans

I had originally called this section “Economic Developments”, but in truth, it seemed too restricted an approach. In this section I like to consider that which we all fail to see because we are too immersed in our little lives and short term concerns. I’m not gonna ramble on about the really unlikely, such as developments in cold fusion, holographic technology or quantum computing completely changing our lives. Sadly, nor will the upcoming new version of the iPad. My focus is on the negative, unfortunately; not because I mean to exploit my humble insights into prospect theory to increase my readership, but because things are actually bad, and short of anything like the above happening, it won’t get better. So although things are bad, we can still get further in it and therefore I’d like to bring up those things I find to be more annoying itches.

I’ll be short. I continue to worry about China. It continues to grow explosively and is due for a bust of any number of bubbles (real estate and I would suggest banking. Hopefully not food). The central bank has been trying its best to keep inflation down without bursting however many bubbles populate its economy. Moreover, they’re probably in the process of transiting from a (financially) closed economy with a fixed exchange rate and a dependent monetary policy, to a more open arrangement, while still keeping exchage rates pegged, as a result of QE2 in the USA. Finally the little known fact is that there are several grievances among the Chinese population such as corruption, pollution, welfare and yes, human rights violations and a total absence of democracy, which are voiced. Could China follow Lybia? It is extremely unlikely, but that is the topic of this subheading…

The recent turmoil in Tunisia, Egypt and Lybia as well as in Yemen, Bahrain have led commodity prices to explode, which in turn make everything else more expensive and scarce. Directly or indirectly, it’s inevitably going to sting… And we don’t yet know what the aftermath of this beautiful revolutionary mess will look like or, for that sake, if it’ll end with Lybia. We are supporting the winners, but no one really knows how the internal struggle for power will be institutionalised and how that’ll affect the world and Europe in particular.

Then, there are the natural catastrophes. Portugal and Turkey are due for an Earthquake as are all these other places (this really is a black swan. I mean for some places the odds are ridiculously small)… A vulcano could blow up somewhere, one of France’s nuclear reactors could blow up, or less unlikely, one of Russia’s, Ukraine’s or any other former Soviet Republic. But I am getting lost. “Certainly” nothing like that will happen…

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