March 20 to 26, 2006: Iran-USA, beginning of a major world
crisis
Written by LEAP/E2020
Friday, 17 February 2006
or « The End of the Western World we have known since 1945 »
Image The Laboratoire européen dAnticipation Politique Europe
2020, LEAP/E2020, now estimates to over 80% the probability that
the week of March 20-26, 2006 will be the beginning of the most
significant political crisis the world has known since the Fall of
the Iron Curtain in 1989, together with an economic and financial
crisis of a scope comparable with that of 1929. This last week of
March 2006 will be the turning-point of a number of critical
developments, resulting in an acceleration of all the factors
leading to a major crisis, disregard any American or Israeli
military intervention against Iran. In case such an intervention is
conducted, the probability of a major crisis to start rises up to
100%, according to LEAP/E2020.
An Alarm based on 2 verifiable events
The announcement of this crisis results from the analysis of
decisions taken by the two key-actors of the main on-going
international crisis, i.e. the United States and Iran:
- on the one hand there is the Iranian decision of opening the
first oil bourse priced in Euros on March 20th, 2006 in Teheran,
available to all oil producers of the region ;
- on the other hand, there is the decision of the American Federal
Reserve to stop publishing M3 figures (the most reliable indicator
on the amount of dollars circulating in the world) from March 23,
2006 onward[1].
These two decisions constitute altogether the indicators, the
causes and the consequences of the historical transition in
progress between the order created after World War II and the new
international equilibrium in gestation since the collapse of the
USSR. Their magnitude as much as their simultaneity will catalyse
all the tensions, weaknesses and imbalances accumulated since more
than a decade throughout the international system.
A world crisis declined in 7 sector-based crises
LEAP/E2020's researchers and analysts thus identified 7 convergent
crises that the American and Iranian decisions coming into effect
during the last week of March 2006, will catalyse and turn into a
total crisis, affecting the whole planet in the political, economic
and financial fields, as well as in the military field most
probably too:
1. Crisis of confidence in the Dollar
2. Crisis of US financial imbalances
3. Oil crisis
4. Crisis of the American leadership
5. Crisis of the Arabo-Muslim world
6. Global governance crisis
7. European governance crisis
The entire process of anticipation of this crisis is described in
detail in coming issues of LEAP/E2020s confidential letter the
GlobalEurope Anticipation Bulletin, and in particular in the 2nd
issue to be released on February 16, 2006. These coming issues will
present the detailed analysis of each of the 7 crises, together
with a large set of recommendations intended for various categories
of players (governments and companies, namely), as well as with a
number of operational and strategic advices for the European
Union.
Decoding of the event Creation of the Iranian Oil Bourse priced in
Euros
However, and in order not to limit this information to decision
makers solely, LEAP/E2020 has decided to circulate widely this
official statement together with the following series of arguments
resulting from work conducted.
Iran's opening of an Oil Bourse priced in Euros at the end of March
2006 will be the end of the monopoly of the Dollar on the global
oil market. The immediate result is likely to upset the
international currency market as producing countries will be able
to charge their production in Euros also. In parallel, European
countries in particular will be able to buy oil directly in their
own currency without going though the Dollar. Concretely speaking,
in both cases this means that a lesser number of economic actors
will need a lesser number of Dollars [2]. This double development
will thus head to the same direction, i.e. a very significant
reduction of the importance of the Dollar as the international
reserve currency, and therefore a significant and sustainable
weakening of the American currency, in particular compared to the
Euro. The most conservative evaluations give 1 to $1,30 US Dollar
by the end of 2006. But if the crisis reaches the scope anticipated
by LEAP/E2020, estimates of 1 for $1,70 in 2007 are no longer
unrealistic.
Decoding of the event End of publication of the M3 macro-economic
indicator
The end of the publication by the American Federal Reserve of the
M3 monetary aggregate (and that of other components)[3], a decision
vehemently criticized by the community of economists and financial
analysts, will have as a consequence to lose transparency on the
evolution of the amount of Dollars in circulation worldwide. For
some months already, M3 has significantly increased (indicating
that « money printing » has already speeded up in Washington),
knowing that the new President of the US Federal Reserve, Ben
Bernanke, is a self-acknowledged fan of « money printing »[4].
Considering that a strong fall of the Dollar would probably result
in a massive sale of the US Treasury Bonds held in Asia, in Europe
and in the oil-producing countries, LEAP/E2020 estimates that the
American decision to stop publishing M3 aims at hiding as long as
possible two US decisions, partly imposed by the political and
economic choices made these last years[5]:
. the monetarisation of the US debt
. the launch of a monetary policy to support US economic
activity.
two policies to be implemented until at least the October 2006 «
mid-term » elections, in order to prevent the Republican Party from
being sent in reeling.
This M3-related decision also illustrates the incapacity of the US
and international monetary and financial authorities put in a
situation where they will in the end prefer to remove the indicator
rather than try to act on the reality.
Decoding of the aggravating factor The military intervention
against Iran
Iran holds some significant geo-strategic assets in the current
crisis, such as its ability to intervene easily and with a major
impact on the oil provisioning of Asia and Europe (by blocking the
Strait of Ormuz), on the conflicts in progress in Iraq and
Afghanistan, not to mention the possible recourse to international
terrorism. But besides these aspects, the growing distrust towards
Washington creates a particularly problematic situation. Far from
calming both Asian and European fears concerning the accession of
Iran to the statute of nuclear power, a military intervention
against Iran would result in an quasi-immediate dissociation of the
European public opinions[6] which, in a context where Washington
has lost its credibility in handling properly this type of case
since the invasion of Iraq, will prevent the European governments
from making any thing else than follow their public opinions. In
parallel, the rising cost of oil which would follow such an
intervention will lead Asian countries, China first and foremost,
to oppose this option, thus forcing the United States (or Israel)
to intervene on their own, without UN guarantee, therefore adding a
severe military and diplomatic crisis to the economic and financial
crisis.
Relevant factors of the American economic crisis
LEAP/E2020 anticipate that these two non-official decisions will
involve the United States and the world in a monetary, financial,
and soon economic crisis without precedent on a planetary scale.
The monetarisation of the US debt is indeed a very technical term
describing a catastrophically simple reality: the United States
undertake not to refund their debt, or more exactly to refund it in
"monkey currency". LEAP/E2020 also anticipate that the process will
accelerate at the end of March, in coincidence with the launching
of the Iranian Oil Bourse, which can only precipitate the sales of
US Treasury Bonds by their non-American holders.
In this perspective, it is useful to contemplate the following
information[7]: the share of the debt of the US government owned by
US banks fell down to 1,7% in 2004, as opposed to 18% in 1982. In
parallel, the share of this same debt owned by foreign operators
went from 17% in 1982 up to 49% in 2004.
→ Question: How comes that US banks got rid of almost all their
share of the US national debt over the last years?
Image
Moreover, in order to try to avoid the explosion of the
"real-estate bubble" on which rests the US household consumption,
and at a time when the US saving rate has become negative for the
first time since 1932 and 1933 (in the middle of the "Great
Depression"), the Bush administration, in partnership with the new
owner of the US Federal Reserve and a follower of this monetary
approach, will flood the US market of liquidities.
Some anticipated effects of this systemic rupture
According to LEAP/E2020, the non-accidental conjunction of the
Iranian and American decisions, is a decisive stage in the release
of a systemic crisis marking the end of the international order set
up after World War II, and will be characterised between the end of
March and the end of the year 2006 by a plunge in the dollar
(possibly down to 1 Euro = 1,70 US Dollars in 2007) putting an
immense upward pressure on the Euro, a significant rise of the oil
price (over 100$ per barrel), an aggravation of the American and
British military situations in the Middle East, a US budgetary,
financial and economic crisis comparable in scope with the 1929
crisis, very serious economic and financial consequences for Asia
in particular (namely China) but also for the United Kingdom[8], a
sudden stop in the economic process of globalisation, a collapse of
the transatlantic axis leading to a general increase of all the
domestic and external political dangers all over the world.
For individual dollar-holders, as for trans-national corporations
or political and administrative decision makers, the consequences
of this last week of March 2006 will be crucial. These consequences
require some difficult decisions to be made as soon as possible
(crisis anticipation is always a complex process since it relies on
a bet) because once the crisis begins, the stampede starts and all
those who chose to wait lose.
For private individuals, the choice is clear: the US Dollar no
longer is a refuge currency. The rising-cost of gold over the
last year shows that many people have already anticipated this
trend of the US currency.
Anticipating
or being swept away by the winds of history
For companies and governments, it is crucial to integrate now
action plans in today's decision-making processes, which can
contribute to soften significantly the "monetary, financial and
economic tsunami" which will break on the planet at the end of next
month. To use a simple image by the way, one used in the
political anticipation scenario « USA 2010 »[9] -, the impact of
the events of the last week of March 2006 on the Western World we
have known since 1945 will be comparable to the impact of the Fall
of the Iron Curtain in 1989 on the Soviet Block.
If this Alarm is so precise, it is that LEAP/E2020s analyses
concluded that all possible scenarios now lead to one single
result: we collectively approach a "historical node" which is
henceforth inevitable whatever the action of international or
national actors. At this stage, only a direct and immediate action
on the part of the US administration aimed at preventing a military
confrontation with Iran on the one hand, and at giving up the idea
to monetarise the US foreign debt on the other hand, could change
the course of events. For LEAP/E2020 it is obvious that not only
such actions will not be initiated by the current leaders in
Washington, but that on the contrary they have already chosen "to
force the destiny" by shirking their economic and financial
problems at the expense of the rest of the world. European
governments in particular should draw very quickly all the
conclusions from this fact.
For information, LEAP/E2020's original method of political
anticipation has allowed several of its experts to anticipate (and
publish) in particular : in 1988, the approaching end of the Iron
Curtain; in 1997, the progressive collapse in capacity of action
and democratic legitimacy of the European institutional system; in
2002, the US being stuck in Iraqs quagmire and above all the
sustainable collapse of US international credibility; in 2003, the
failure of the referenda on the European Constitution. Its
methodology of anticipation of "systemic ruptures" now being well
established, it is our duty as researchers and citizens to share it
with the citizens and the European decision makers; especially
because for individual or collective, private or public players, it
is still time to undertake measures in order to reduce
significantly the impact of this crisis on their positions whether
these are economic, political or financial.
