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Second of three parts
AS I explained at the beginning of this list on Thursday, these are presented in the order I think is most to least likely to happen. To save time and space (because a three-installment column is awkwardly long enough), let's jump right into it:
4. A Black Swan: The metaphor has been around since the time of the Roman Empire, but "Black Swan Theory," as we understand it in the modern world, comes to us from the work of statistician and historian Nicholas Nassim Taleb in his seminal 2007 book, "The Black Swan." A Black Swan (capitalized) as defined by Taleb is a surprise event that could not have been predicted, has a major effect and is, usually, inappropriately rationalized by hindsight.
Some examples provided by Taleb include the outbreak of World War 1, the dissolution of the Soviet Union, the rise of the internet and the September 11 terrorist attacks on the US. An event like the Covid-19 pandemic, though it was unexpected, would not qualify as a Black Swan; there was sufficient historical and other pieces of evidence prior to its occurrence that it (or at least a pandemic of some kind) could have been predicted, and in fact, such predictions have been made.
Surprises happen all the time, but the world has not seen a true Black Swan — other than the literal birds, which are native to Australia — in about 20 years, but it will in 2022. Humanity has created too much tension in too many systems — in the planet's environment, in political relationships, in the global economic framework, and even in systems of basic human communications and social interactions — for something not to break.
If I knew what it was, then it wouldn't be a Black Swan. Just stay on your toes, and keep your eyes and ears open.
5. Crypto crash: I will admit that with this prediction, I am intentionally and quite cheerfully trolling the advocates of magic electric fairy tokens, the blockchain and all things related to it because they deserve to be gigged for their greed and enthusiastic lack of foresight.
The development and subsequent ridiculously explosive rise of so-called non-fungible tokens or NFTs in 2021 will prove to be the proverbial straw that broke the camel's back.
Cryptocurrency trading and "mining" activities had already faced a growing backlash in the past couple of years from governments who have grown weary of the blockchain's being a vast petri dish for financial crimes and a huge waste of energy. The appearance of NFTs will finally be the step too far because the entire concept is literally a Ponzi scheme, an "investment" that requires a constant supply of new money to sustain itself. Throw in rampant intellectual property abuse for good measure, and most countries that still tolerate the "crypto ecosystem" are going to decide that they've had quite enough of this nonsense.
I think it is probably too optimistic to hope that crypto will disappear entirely — it's like herpes for the global economy — but a wave of new restrictions and bans on cryptocurrency activities this year will cause the huge bubble of its "value" to collapse. The world will be better off in the long run, but unfortunately, a lot of otherwise blameless people, who were lured by the promise of huge profits while not having to do any actual work or create anything, are going to lose a lot of real money.
6. A significant economic slowdown, perhaps even a recession, in China: It will not be as spectacular or destructive a downturn as some analysts hope it will be, but China's fast-moving economy will slow down this year and could possibly even dip into a recession for a couple of quarters. This obviously has some disturbing implications for the heavily China-dependent Philippine economy. So, local policymakers should be planning for ways to compensate for it.
The big problem in China is debt. The poor financial condition of Evergrande, the country's largest property developer, is well known, but that is just one of hundreds, perhaps thousands, of firms that are for all intents and purposes under water. China and Chinese companies fueled the years-long rapid expansion of the economy with debt, but a combination of the pandemic, supply chain and labor constraints, and increasing political pressure exerted through economic means by its two biggest markets, Europe and the US, are forcing a lot of those markers to be called in.
In order to prevent a sudden, destructive shock such as the total collapse of Evergrande or another major business, the Chinese government will have to apply the brakes on the economy to unwind the debt bubble in a controlled way. It is probably up to the task; other predictions of the Chinese economy's demise in years past have, so far, all been proven wrong. It, however, is going to come at some cost to its growth rate and as a consequence, to its soft power influence.
The good news is it will likely also ease some of the geopolitical tensions China has gotten itself embroiled in such as over Taiwan, in the South China Sea and with India. Any serious escalation, particularly involving Taiwan, will be viewed as too costly; at least, until China gets its financial house in order. The rest of the world should use the time wisely.
Part 3 on Tuesday
ben.kritz@manilatimes.net
Twitter: @benkritz
FROM: MANILATIMES.NET
AS I explained at the beginning of this list on Thursday, these are presented in the order I think is most to least likely to happen. To save time and space (because a three-installment column is awkwardly long enough), let's jump right into it:
4. A Black Swan: The metaphor has been around since the time of the Roman Empire, but "Black Swan Theory," as we understand it in the modern world, comes to us from the work of statistician and historian Nicholas Nassim Taleb in his seminal 2007 book, "The Black Swan." A Black Swan (capitalized) as defined by Taleb is a surprise event that could not have been predicted, has a major effect and is, usually, inappropriately rationalized by hindsight.
Some examples provided by Taleb include the outbreak of World War 1, the dissolution of the Soviet Union, the rise of the internet and the September 11 terrorist attacks on the US. An event like the Covid-19 pandemic, though it was unexpected, would not qualify as a Black Swan; there was sufficient historical and other pieces of evidence prior to its occurrence that it (or at least a pandemic of some kind) could have been predicted, and in fact, such predictions have been made.
Surprises happen all the time, but the world has not seen a true Black Swan — other than the literal birds, which are native to Australia — in about 20 years, but it will in 2022. Humanity has created too much tension in too many systems — in the planet's environment, in political relationships, in the global economic framework, and even in systems of basic human communications and social interactions — for something not to break.
If I knew what it was, then it wouldn't be a Black Swan. Just stay on your toes, and keep your eyes and ears open.
5. Crypto crash: I will admit that with this prediction, I am intentionally and quite cheerfully trolling the advocates of magic electric fairy tokens, the blockchain and all things related to it because they deserve to be gigged for their greed and enthusiastic lack of foresight.
The development and subsequent ridiculously explosive rise of so-called non-fungible tokens or NFTs in 2021 will prove to be the proverbial straw that broke the camel's back.
Cryptocurrency trading and "mining" activities had already faced a growing backlash in the past couple of years from governments who have grown weary of the blockchain's being a vast petri dish for financial crimes and a huge waste of energy. The appearance of NFTs will finally be the step too far because the entire concept is literally a Ponzi scheme, an "investment" that requires a constant supply of new money to sustain itself. Throw in rampant intellectual property abuse for good measure, and most countries that still tolerate the "crypto ecosystem" are going to decide that they've had quite enough of this nonsense.
I think it is probably too optimistic to hope that crypto will disappear entirely — it's like herpes for the global economy — but a wave of new restrictions and bans on cryptocurrency activities this year will cause the huge bubble of its "value" to collapse. The world will be better off in the long run, but unfortunately, a lot of otherwise blameless people, who were lured by the promise of huge profits while not having to do any actual work or create anything, are going to lose a lot of real money.
6. A significant economic slowdown, perhaps even a recession, in China: It will not be as spectacular or destructive a downturn as some analysts hope it will be, but China's fast-moving economy will slow down this year and could possibly even dip into a recession for a couple of quarters. This obviously has some disturbing implications for the heavily China-dependent Philippine economy. So, local policymakers should be planning for ways to compensate for it.
The big problem in China is debt. The poor financial condition of Evergrande, the country's largest property developer, is well known, but that is just one of hundreds, perhaps thousands, of firms that are for all intents and purposes under water. China and Chinese companies fueled the years-long rapid expansion of the economy with debt, but a combination of the pandemic, supply chain and labor constraints, and increasing political pressure exerted through economic means by its two biggest markets, Europe and the US, are forcing a lot of those markers to be called in.
In order to prevent a sudden, destructive shock such as the total collapse of Evergrande or another major business, the Chinese government will have to apply the brakes on the economy to unwind the debt bubble in a controlled way. It is probably up to the task; other predictions of the Chinese economy's demise in years past have, so far, all been proven wrong. It, however, is going to come at some cost to its growth rate and as a consequence, to its soft power influence.
The good news is it will likely also ease some of the geopolitical tensions China has gotten itself embroiled in such as over Taiwan, in the South China Sea and with India. Any serious escalation, particularly involving Taiwan, will be viewed as too costly; at least, until China gets its financial house in order. The rest of the world should use the time wisely.
Part 3 on Tuesday
ben.kritz@manilatimes.net
Twitter: @benkritz
FROM: MANILATIMES.NET