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The world is in a period of transition. The populations of East Asia and Europe have reached their numerical zenith, and from now on they will begin descending. With the fall of communism, China, Central Europe and Russia returned to their natural, historical positions on the world's scene. Turkey's ambition is to follow in the former Ottoman Empire's footsteps: it intends to extend its influence in the Middle East, the Balkans and Africa. Europe and the US are in the process of disintegration of their respective populations.
The economic, social and political situation in Europe is tense, with people increasingly voting for anti-establishment parties. There is a deep divide among European leaders over the euro, the fiscal, monetary and immigration policy.
The European Union's actions against Hungary and Poland will stir up resentment and increase polarisation. The Gefira team believes that Brexit is a sideshow. European economies are heading slowly for a new recession which will spark off another euro crisis. Italy, Spain and France will not be willing to reduce their public debt, and Rome will be the first to rebel against European budget rules. By 2020 it will be clear that France and Spain are also not able to fulfil their fiscal obligations.
The ECB is already warning that growth is slowing down. The rising price of oil will be the last straw that breaks the camel's back. Unlike it is the case with money European governments cannot print oil, and if consumers and producers have to pay more for energy, corporate profits will be negatively affected, and there will be less money for consumption. The 2008 financial crisis began when oil was about $130 a barrel, and the euro crisis in 2011 started when it was $125 a barrel, so when the price is again above $100, the next crisis is just around the corner.
While oil is abundant for the coming years, the 3 significant producers will keep the markets in short supply.
The Gefira 26 is about the oil price and why it will continue to increase. Although President Trump tweets that he wants oil prices down, his administration is pursuing a policy that is running counter to this statement. The US needs a higher oil price to shore up its shale industry. To this end President Donald Trump has had Venezuela and Iran effectively removed from the oil markets. This policy overlaps with the objectives of the Saudi rulers who need a higher oil price to cover their public expenses and prevent social upheaval. In this Gefira we explain why a higher oil price is inevitable and why we evaluate Russian oil companies more positively than their Western counterparts like Shell and Exxon Mobil.
The Gefira financial bulletin is a monthly periodical that the Gefira team releases ten times a year. We give a clear projection of the future of energy and politics.From Trump's election to the steep increase in the oil price and the value of bitcoin, it was all in the Gefira before it happened.
According to the Gefira team, the next systemic crisis will happen around 2020 as the oil price is back at 100 dollar and German mass retirement begin. There is a high risk of war on the Old Continent. However, it is not Russia but Turkey that is the most imminent threat.
It is not the emerging markets, nor public or private debt that should be of interest to investors but instead the shrinking populations in the developed world. Japan is the first country that experiences a diminishing number of people, and for that reason, it pursuing extraordinary monetary and fiscal policies. The decrease in the European and US populations will have dire economic consequences, and after 2025 China will join the club of dying nations.
Apart from China and Russia, economic growth in Africa, the Middle East and South Asia is dependent on the developed countries which see a dramatic shrinkage of their populations.
In the Gefira bulletin we provide investment suggestions and give a coherent vision of the time ahead from a macroeconomic perspective.