THE ENTERPRISE--WHAT THE FUTURE HOLDS? A SLOW, JOBLESS RECOVERY
At the end of this edition, is a brief future forecast from Stratfor .http://www.stratfor.com . More of its forecasts will follow as they come out.
The excerpted piece from John Mauldin is long, and takes some concentration, but his points are solid, scary and well documented. I wouldn't include something this long if I didn't think it was important reading. First some "quick hits."
CONCERNING TIDBITS AND THE "LIKELY LOSERS"
THAT IS MY SEGUE TO THE PROBLEM WITH THIS "RECOVERY"--JOBS (OR RATHER THE LACK THEREOF)
I usually think John Mauldin is brilliant, but also is too "bearish" about the future. Right now, I still think he is brilliant, but I am leaning toward the fact that we may be seeing the start of a "new normal." That would be scary, but possible.
I will post a heavily excerpted part of John's recent newSletter to show why the "recovery" we are all wondering about is not so near, and not so exciting either. Why? Joblessness. The areas in bold are my "emphasis added" so they will stand out. (You can subscribe to this one yourself--it's free: [email protected])
I keep hoping that John is too pessimistic, but I can't find the flaw in his premises or his data. Can you?
If not, my suggestion is that you hunker down for one of the least enjoyable recoveries in modern history.
Conditions have (mostly) stopped getting worse, although over a quarter million people lost their jobs this past month--and I bet they'd say things are not improving. Retail is still in the dumper and projections (backed by credible surveys by firms like BIGresearch http://www.bigresearch.com) predict that consumers will spend less, bargain hunt more and generally keep their spending low during the coming 4Q--which includes Halloween, Thanksgiving and Christmas.
==================
Thoughts from the Frontline Weekly Newsletter
Welcome to the New Normal
by John Mauldin
September 25, 2009
©John Mauldin
In this issue:
What We See
And What We Don't See
The Statistical Recovery
A Double-Dip Recession?
Welcome to the New Normal
Unemployment is high and rising. But if the recession is over, won't employment start to rise? The quick answer is no. We look deeper into the Statistical Recovery and find yet more reasons to be concerned about near-term deflation. This week we consider all things unemployment and ponder the need to create at least 15 million jobs in the next five years to return to a full-employment economy - and the implications for both the US and world economies if we don't.
What We See
First, the unemployment rate is now officially at 9.7%. [Ed. note: it just hit 9.8%] We are approaching the official high we last saw at the end of the double-dip1982 recession. In the chart below, notice that unemployment rose throughout 1980 and then began to decline, before rising rapidly as the economy entered the second recession within two years. Also notice the rapid drop in unemployment following that recession, as opposed to the recessions of 1991-92 and 2001-02, which have been characterized as jobless recoveries. Unemployment was as low as 3.8% in 2000 and saw a cycle low of 4.4% in early 2007.
(For the record, all this data is available on the Bureau of Labor Statistics website. There is a treasure trove of data. They are quite open about what they do and how they do it. When I call to ask a question, they are quite helpful. How people interpret the data is not their fault.)
Right now, about one-third of marginally attached workers actively want jobs but have not bothered to look because they believe there are no jobs in their area, at least not for them. If you add that extra 758,000 to the unemployment data, you get what is called U-4 unemployment, which today is 10.2%. If you count all marginally attached workers the unemployment number is 11% (U-5 unemployment).
And if you add those who are employed part-time for economic reasons (i.e., they can't get full-time jobs) the unemployment number rises to 16.8%. (That is called U-6 unemployment.)
Now, stay with me for the next two tables taken directly from the BLS website. The first is the total number of people in the US civilian work force. Notice how each year the number of potential workers rises. In fact, the number of workers has risen by about 15 million over the last ten years. This is from population growth and from immigration. Also notice that the normal rise did not happen last year. That is because the number of discouraged workers has risen rapidly and, as noted above, they are not counted. We will revisit this point later. But for now, there are 154,577,000 people in the available work force.
Next we look at the tables for the actual level of employment. Here we note that we are down almost 8 million jobs sincd the onset of this recession, and that there are almost 15 million people unemployed.
Going back to the part-time workers, there are roughly 9 million people who are working part-time because of business conditions, or those are the only jobs they could find. The average work week is at an all-time low of 33 hours. The chart below is from my friend David Rosenberg.
David wrote in a special report today:
"What does all this mean? It means that when the economy does begin to recover, when we finally get to the other side of the mountain, companies are going to raise their labour input first by lifting the workweek from its record low. Just to get back to the pre-recession level of 33.8 hours would be equivalent to hiring three million workers. And, the record number of people working part-time against their will are going to be pushed back into full-time, which will be great news for them, but not so great news for the 125,000 - 150,000 new entrants into the labour market every month. They won't have it so easy because employers are going to tap their existing under-utilized resources first since that is common sense. Also keep in mind that there are at least four million jobs in retail, financial, construction and manufacturing jobs lost this cycle that are likely not coming back. In fact, the number of unemployed who were let go for permanent reasons as opposed to temporary layoff rose by more than five million this cycle. This compares to the 1.2 million increase in the 2001 tech-led recession and in the 1990-91 housing-led recession (when Ross Perot talked about the sucking sound of jobs into Mexico)."
And What We Don't See
Those are the facts. Now it's time to look at what we don't see, and what you don't read or hear from the mainstream media.
...We are adding about 1.5 million workers to the workplace every year. That means over the next five years we are going to need 7.5 million jobs just to maintain that growth, or about 125,000 a month. That is on the low side of what economists normally estimate, which is around 150,000 per month. If we used the 150,000 estimate, it would mean we need 9 million jobs.
There are at least 1 million (and probably more like 2 million) discouraged workers who would take jobs if the economy got better. You can derive that number by going back to early 2007 and seeing the level of discouraged workers. That means, by the end of 2014 we are going to have 163 million people in the work force (see table above).
Today we have 139.6 million jobs, and that number is likely to slip at least another half million (last month the economy lost 216,000 jobs, with a very suspicious birth-death ratio accounting for a lot of job creation). So let's call it 139 million current jobs.
Let's assume that we would like to get back to a 5% unemployment rate. That would not be stellar, but it would certainly be better than where we are today. Five percent unemployment in late 2014 will mean 8.1 million unemployed. To get to 5% unemployment we will have to create 14 million jobs in the five years from 2010-2014. (163 million in labor pool minus 8 million unemployed is 155 million jobs. We now have 139 million jobs, so the difference is roughly 15 million.) Plus the equivalent of 3 million jobs that Rosenberg estimates, just to get back to an average work week. And maybe the extra 1.5 million a year I mentioned above.
But let's ignore those latter jobs and round it off to 15 million. Let's hope that by the beginning of next year we stop losing jobs. That means that to get back to 5% unemployment within five years we need to see, on average, the creation of 250,000 jobs per month. As an AVERAGE!!!!!
Look at the table below. It is the number of jobs added or lost for the last ten years. Do you see a year that averaged 250,000? No.
If you take the best year, which was 2006, you get an average monthly growth of 232,000. If you average the ten years from 1999, you get average monthly job growth of 50,000. If you take the average job growth from 1989 until now, you get an average of 91,000 a month. If you take the best ten years I could find, which would be 1991-2000, the average is still only 150,000. That is a long way from 250,000.
Even with robust growth of 200,000 jobs a month thereafter for the next two years, unemployment will still be close to or over 9%. That would only be an additional 1.8 million jobs (making the most optimistic assumptions) over the new jobs needed for population growth.
A Double-Dip Recession?
And that is before this administration makes the economically suicidal move to raise the top tax rate by 10%. The popular image is that those who pay the highest tax rate are Wall Street execs, bankers, and corporate moguls. The reality is that 75% of them are small business owners, and they are responsible for the large majority of new jobs that are going to be needed, not to mention a large part of consumer spending. If you tax them more you are going to get fewer jobs (as they will have less to invest) and less consumer spending.
A tax increase of the size being contemplated, with unemployment at today's level, will guarantee a double-dip recession, which of course means that unemployment will rise, not fall.
Without getting too political, think about elections in 2010 with unemployment levels still rising. And fast-forward to 2012, with deficits (optimistically) projected to be almost $1 trillion and rising. With a tax increase giving us another recession?
Today's Wall Street Journal tells us that 5 million people have been unemployed for over 6 months. And the longer you are unemployed, the harder it is to get a job. That means you have to settle for a job with less income than you had before. The only group to see a rise in employment? Those over the age of 55, as they have to take a job, any job, so they can save for retirement.
The Statistical Recovery
The economy is in the process of bottoming. The year-over-year comparisons are getting easier. We will find that new level of spending and economic activity and grow from there. But it is going to be awhile before we get back to full employment. While the numbers may say recovery, it is not going to feel like one.
We have enormous excess capacity - capacity utilization is about 68%. Banks are cutting back on their loans, and consumers and businesses are borrowing less. Housing is likely to be in a funk for at least two years. We are deleveraging, which is causing the velocity of money to slow.
All of this is very deflationary. Will the Fed print enough money to reflate the economy? You better hope so. Will we have to deal with it later? Of course. We have no good choices. We are in for a long five years, at the least. Yes, there will be opportunities, and new industries will be created. But it won't happen overnight.
Welcome to the New Normal.
==================
FOURTH QUARTER FORECAST: INTRODUCTION from Stratfor
Editor's Note: Our fourth-quarter forecast, a supplement to our annual and third-quarter forecasts, is broken into three parts: introduction, primary forecast and regional trends. In this piece, we outline what we expect to transpire over the next three months. Our primary forecast focusing on critical global trends publishes Monday, Oct. 5. Our forecast on regional trends publishes Tuesday, Oct. 6.
Setting the Stage
Events are taking the fourth quarter of 2009 into new territory. The rising confrontation with Iran has taken center stage as a conflict with global participants and global consequences. As the final quarter of the year dawns, representatives from the world's major countries are meeting in Geneva with their Iranian counterparts. The official goal is to see if sufficient international safeguards can be placed on the Iranian nuclear program. Failure could well lead first to sanctions against Iran, and should those fail, possibly a U.S.-Iranian military confrontation.
At its core, the brewing crisis is this: Israel is too small a territory to tolerate a nuclear-armed Iran, and too militarily weak to guarantee that it can deal with the problem on its own. However, an Israeli strike would certainly generate Iranian retaliation against shipping in the Persian Gulf, which in turn would force the United States to act against Iran directly. So the question in STRATFOR's collective mind is whether or not any concessions Iran grants on its nuclear programs will be sufficient to satisfy Israel's security concerns. The Obama administration is obviously a player, and the onus is on the Americans to act, but the decisions that truly matter will be made in Israel, not the United States.
As goes this crisis, so goes the world.
Russia is attempting to lock down the United States in the Middle East so that Moscow can extend and deepen its efforts to re-create its Soviet-era sphere of influence, particularly in the former Soviet Union. Thus Russia is funneling various forms of assistance, primarily technical cooperation on weapons, energy and nuclear industries, to Iran. It is also making apparent its intent to do an end run around any sanctions the West might impose on Iran. An Iran strong enough and independent enough to keep the United States preoccupied is just what Russia wants.
After the worst recession in a generation, the global economy is on the mend. The ending recession was primarily financial in nature, meaning that it evolved primarily into a crisis of confidence. Confidence requires time to rebuild, and as such the recovery is both shallow and extremely uneven, with some regions as likely to descend back into recession as return to real growth. It is a recovery very vulnerable to disruption. A military confrontation in the Persian Gulf would send shock waves through the system, at a minimum interrupting the flow of Iran's 2.4 million barrels of daily oil exports. That alone would be more than enough to break the recovery's back.
Copyright 2009 Stratfor.
John L. Mariotti, President & CEO, The Enterprise Group, Phone 614-840-0959 http://www.mariotti.net http://mariotti.blogs.com/my_weblog/
At the end of this edition, is a brief future forecast from Stratfor .http://www.stratfor.com . More of its forecasts will follow as they come out.
The excerpted piece from John Mauldin is long, and takes some concentration, but his points are solid, scary and well documented. I wouldn't include something this long if I didn't think it was important reading. First some "quick hits."
CONCERNING TIDBITS AND THE "LIKELY LOSERS"
- Japanese car makers Honda and Toyota are symptomatic of the currency problem with the Yen near 90 to the US dollar. Many Japanese manufacturers will suffer, and this is an exchange rate not likely to change for a long time. Other countries are suffering too, but Japan more than most at this time. Losers: American Consumers and Japanese manufacturers. (Remember a WEAK DOLLAR IS A HIDDEN TAX)
- Finally someone is "whistle-blowing" on the irresponsible "ratings agencies" (Moody's, S & P, et. al. who were the real culprits in helping cause the financial crisis. How they could have rated some of that garbage a AAA is beyond belief. Some of them should suffer, pay fines and go to jail. Losers: American investors and many global investors who trust these investment ratings.
- Roman Polanski--child molester/rapist and generally bad guy is being supported by a wide range of Hollywood celebrities. This is living proof of how the movie industry has legions of morally bankrupt people. Of course, the movies they are making show that too. Losers: Everyone who has morals and cares about the "entertainment" that is being created.
- And then there is Michael Moore, the fat fool of cinema with another of his propaganda films. It will be widely distributed and some of his fellow fools will give it great praise. These are the same people who gave Al Gore an Oscar. Consider the source--then dismiss them. Losers: Michael Moore and Al Gore. What goes around, comes around. Both will be exposed and the phonies, posers and propagandists they are--someday.
- A recent WSJ article entitled "Hate Calculus? Try Counting Cow Carbon," pointed out the foolishness of the recent move to "count the carbon impact" of everything. It is impossibly flawed, vague and arguably non-scientific. I don't care if Wal-Mart is for this; Wal-Mart is dead wrong. It is about to saddle suppliers with another huge project to make it look good and feel good in the media. Remember the big RFID project. Can anyone tell us the ROI on that one. Losers: Wal-Mart customers, and ultimately the American people if this lunacy becomes law--which Cap & Trade threatens to become.
- Panetta the "punching bag." Why doesn't he tell the Obama camp to either get out of his face, or find some flunky to put in charge of the CIA, So much damage was done under Clinton's regime, and now it continues. Pretty soon, the only reliable intelligence services will be the "private ones," where real (smart, determined) people dig into the areas and secrets. But then, who'd want another "Blackwater-type" scandal? Losers: Americans and future elected officials who will have lousy, politically correct intelligence--instead of the cold, hard facts they need for decisions.
- Why are Jews liberals? That is the title of a new book and several articles. It beats me. Maybe one of my Jewish friend and readers can tell me. Maybe it is their "persecution complex" manifesting itself--the Jews have certainly had their share of that. Or maybe it is because they are wealthier than most Americans (or so the belief goes). As it stands, Obama policy will leave Israel so far out on a limb they can drop a bomb on Iran from there. Talk about an appeaser President hoping someone else will do his "dirty work." Losers: Jewish-Americans, and the people of Israel.
- Doesn't anyone remember the array of Jimmy Carter's era of stupidity. Doesn't anyone in Washington understand how "protectionism" in global trade backfires? For that matter, is there anyone in a position of power in Washington who understands how business works, or has actually run a for profit business successfully and created real wealth? Or are they all just "redistributors?" Losers: All Americans, because as American businesses are damaged, jobs go away.
THAT IS MY SEGUE TO THE PROBLEM WITH THIS "RECOVERY"--JOBS (OR RATHER THE LACK THEREOF)
I usually think John Mauldin is brilliant, but also is too "bearish" about the future. Right now, I still think he is brilliant, but I am leaning toward the fact that we may be seeing the start of a "new normal." That would be scary, but possible.
I will post a heavily excerpted part of John's recent newSletter to show why the "recovery" we are all wondering about is not so near, and not so exciting either. Why? Joblessness. The areas in bold are my "emphasis added" so they will stand out. (You can subscribe to this one yourself--it's free: [email protected])
I keep hoping that John is too pessimistic, but I can't find the flaw in his premises or his data. Can you?
If not, my suggestion is that you hunker down for one of the least enjoyable recoveries in modern history.
Conditions have (mostly) stopped getting worse, although over a quarter million people lost their jobs this past month--and I bet they'd say things are not improving. Retail is still in the dumper and projections (backed by credible surveys by firms like BIGresearch http://www.bigresearch.com) predict that consumers will spend less, bargain hunt more and generally keep their spending low during the coming 4Q--which includes Halloween, Thanksgiving and Christmas.
==================
Thoughts from the Frontline Weekly Newsletter
Welcome to the New Normal
by John Mauldin
September 25, 2009
©John Mauldin
In this issue:
What We See
And What We Don't See
The Statistical Recovery
A Double-Dip Recession?
Welcome to the New Normal
Unemployment is high and rising. But if the recession is over, won't employment start to rise? The quick answer is no. We look deeper into the Statistical Recovery and find yet more reasons to be concerned about near-term deflation. This week we consider all things unemployment and ponder the need to create at least 15 million jobs in the next five years to return to a full-employment economy - and the implications for both the US and world economies if we don't.
What We See
First, the unemployment rate is now officially at 9.7%. [Ed. note: it just hit 9.8%] We are approaching the official high we last saw at the end of the double-dip1982 recession. In the chart below, notice that unemployment rose throughout 1980 and then began to decline, before rising rapidly as the economy entered the second recession within two years. Also notice the rapid drop in unemployment following that recession, as opposed to the recessions of 1991-92 and 2001-02, which have been characterized as jobless recoveries. Unemployment was as low as 3.8% in 2000 and saw a cycle low of 4.4% in early 2007.
(For the record, all this data is available on the Bureau of Labor Statistics website. There is a treasure trove of data. They are quite open about what they do and how they do it. When I call to ask a question, they are quite helpful. How people interpret the data is not their fault.)
Right now, about one-third of marginally attached workers actively want jobs but have not bothered to look because they believe there are no jobs in their area, at least not for them. If you add that extra 758,000 to the unemployment data, you get what is called U-4 unemployment, which today is 10.2%. If you count all marginally attached workers the unemployment number is 11% (U-5 unemployment).
And if you add those who are employed part-time for economic reasons (i.e., they can't get full-time jobs) the unemployment number rises to 16.8%. (That is called U-6 unemployment.)
Now, stay with me for the next two tables taken directly from the BLS website. The first is the total number of people in the US civilian work force. Notice how each year the number of potential workers rises. In fact, the number of workers has risen by about 15 million over the last ten years. This is from population growth and from immigration. Also notice that the normal rise did not happen last year. That is because the number of discouraged workers has risen rapidly and, as noted above, they are not counted. We will revisit this point later. But for now, there are 154,577,000 people in the available work force.
Next we look at the tables for the actual level of employment. Here we note that we are down almost 8 million jobs sincd the onset of this recession, and that there are almost 15 million people unemployed.
Going back to the part-time workers, there are roughly 9 million people who are working part-time because of business conditions, or those are the only jobs they could find. The average work week is at an all-time low of 33 hours. The chart below is from my friend David Rosenberg.
David wrote in a special report today:
"What does all this mean? It means that when the economy does begin to recover, when we finally get to the other side of the mountain, companies are going to raise their labour input first by lifting the workweek from its record low. Just to get back to the pre-recession level of 33.8 hours would be equivalent to hiring three million workers. And, the record number of people working part-time against their will are going to be pushed back into full-time, which will be great news for them, but not so great news for the 125,000 - 150,000 new entrants into the labour market every month. They won't have it so easy because employers are going to tap their existing under-utilized resources first since that is common sense. Also keep in mind that there are at least four million jobs in retail, financial, construction and manufacturing jobs lost this cycle that are likely not coming back. In fact, the number of unemployed who were let go for permanent reasons as opposed to temporary layoff rose by more than five million this cycle. This compares to the 1.2 million increase in the 2001 tech-led recession and in the 1990-91 housing-led recession (when Ross Perot talked about the sucking sound of jobs into Mexico)."
And What We Don't See
Those are the facts. Now it's time to look at what we don't see, and what you don't read or hear from the mainstream media.
...We are adding about 1.5 million workers to the workplace every year. That means over the next five years we are going to need 7.5 million jobs just to maintain that growth, or about 125,000 a month. That is on the low side of what economists normally estimate, which is around 150,000 per month. If we used the 150,000 estimate, it would mean we need 9 million jobs.
There are at least 1 million (and probably more like 2 million) discouraged workers who would take jobs if the economy got better. You can derive that number by going back to early 2007 and seeing the level of discouraged workers. That means, by the end of 2014 we are going to have 163 million people in the work force (see table above).
Today we have 139.6 million jobs, and that number is likely to slip at least another half million (last month the economy lost 216,000 jobs, with a very suspicious birth-death ratio accounting for a lot of job creation). So let's call it 139 million current jobs.
Let's assume that we would like to get back to a 5% unemployment rate. That would not be stellar, but it would certainly be better than where we are today. Five percent unemployment in late 2014 will mean 8.1 million unemployed. To get to 5% unemployment we will have to create 14 million jobs in the five years from 2010-2014. (163 million in labor pool minus 8 million unemployed is 155 million jobs. We now have 139 million jobs, so the difference is roughly 15 million.) Plus the equivalent of 3 million jobs that Rosenberg estimates, just to get back to an average work week. And maybe the extra 1.5 million a year I mentioned above.
But let's ignore those latter jobs and round it off to 15 million. Let's hope that by the beginning of next year we stop losing jobs. That means that to get back to 5% unemployment within five years we need to see, on average, the creation of 250,000 jobs per month. As an AVERAGE!!!!!
Look at the table below. It is the number of jobs added or lost for the last ten years. Do you see a year that averaged 250,000? No.
If you take the best year, which was 2006, you get an average monthly growth of 232,000. If you average the ten years from 1999, you get average monthly job growth of 50,000. If you take the average job growth from 1989 until now, you get an average of 91,000 a month. If you take the best ten years I could find, which would be 1991-2000, the average is still only 150,000. That is a long way from 250,000.
Even with robust growth of 200,000 jobs a month thereafter for the next two years, unemployment will still be close to or over 9%. That would only be an additional 1.8 million jobs (making the most optimistic assumptions) over the new jobs needed for population growth.
A Double-Dip Recession?
And that is before this administration makes the economically suicidal move to raise the top tax rate by 10%. The popular image is that those who pay the highest tax rate are Wall Street execs, bankers, and corporate moguls. The reality is that 75% of them are small business owners, and they are responsible for the large majority of new jobs that are going to be needed, not to mention a large part of consumer spending. If you tax them more you are going to get fewer jobs (as they will have less to invest) and less consumer spending.
A tax increase of the size being contemplated, with unemployment at today's level, will guarantee a double-dip recession, which of course means that unemployment will rise, not fall.
Without getting too political, think about elections in 2010 with unemployment levels still rising. And fast-forward to 2012, with deficits (optimistically) projected to be almost $1 trillion and rising. With a tax increase giving us another recession?
Today's Wall Street Journal tells us that 5 million people have been unemployed for over 6 months. And the longer you are unemployed, the harder it is to get a job. That means you have to settle for a job with less income than you had before. The only group to see a rise in employment? Those over the age of 55, as they have to take a job, any job, so they can save for retirement.
The Statistical Recovery
The economy is in the process of bottoming. The year-over-year comparisons are getting easier. We will find that new level of spending and economic activity and grow from there. But it is going to be awhile before we get back to full employment. While the numbers may say recovery, it is not going to feel like one.
We have enormous excess capacity - capacity utilization is about 68%. Banks are cutting back on their loans, and consumers and businesses are borrowing less. Housing is likely to be in a funk for at least two years. We are deleveraging, which is causing the velocity of money to slow.
All of this is very deflationary. Will the Fed print enough money to reflate the economy? You better hope so. Will we have to deal with it later? Of course. We have no good choices. We are in for a long five years, at the least. Yes, there will be opportunities, and new industries will be created. But it won't happen overnight.
Welcome to the New Normal.
==================
FOURTH QUARTER FORECAST: INTRODUCTION from Stratfor
Editor's Note: Our fourth-quarter forecast, a supplement to our annual and third-quarter forecasts, is broken into three parts: introduction, primary forecast and regional trends. In this piece, we outline what we expect to transpire over the next three months. Our primary forecast focusing on critical global trends publishes Monday, Oct. 5. Our forecast on regional trends publishes Tuesday, Oct. 6.
Setting the Stage
Events are taking the fourth quarter of 2009 into new territory. The rising confrontation with Iran has taken center stage as a conflict with global participants and global consequences. As the final quarter of the year dawns, representatives from the world's major countries are meeting in Geneva with their Iranian counterparts. The official goal is to see if sufficient international safeguards can be placed on the Iranian nuclear program. Failure could well lead first to sanctions against Iran, and should those fail, possibly a U.S.-Iranian military confrontation.
At its core, the brewing crisis is this: Israel is too small a territory to tolerate a nuclear-armed Iran, and too militarily weak to guarantee that it can deal with the problem on its own. However, an Israeli strike would certainly generate Iranian retaliation against shipping in the Persian Gulf, which in turn would force the United States to act against Iran directly. So the question in STRATFOR's collective mind is whether or not any concessions Iran grants on its nuclear programs will be sufficient to satisfy Israel's security concerns. The Obama administration is obviously a player, and the onus is on the Americans to act, but the decisions that truly matter will be made in Israel, not the United States.
As goes this crisis, so goes the world.
Russia is attempting to lock down the United States in the Middle East so that Moscow can extend and deepen its efforts to re-create its Soviet-era sphere of influence, particularly in the former Soviet Union. Thus Russia is funneling various forms of assistance, primarily technical cooperation on weapons, energy and nuclear industries, to Iran. It is also making apparent its intent to do an end run around any sanctions the West might impose on Iran. An Iran strong enough and independent enough to keep the United States preoccupied is just what Russia wants.
After the worst recession in a generation, the global economy is on the mend. The ending recession was primarily financial in nature, meaning that it evolved primarily into a crisis of confidence. Confidence requires time to rebuild, and as such the recovery is both shallow and extremely uneven, with some regions as likely to descend back into recession as return to real growth. It is a recovery very vulnerable to disruption. A military confrontation in the Persian Gulf would send shock waves through the system, at a minimum interrupting the flow of Iran's 2.4 million barrels of daily oil exports. That alone would be more than enough to break the recovery's back.
Copyright 2009 Stratfor.
John L. Mariotti, President & CEO, The Enterprise Group, Phone 614-840-0959 http://www.mariotti.net http://mariotti.blogs.com/my_weblog/
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