A review of 2008 and the future of 2009

If I can summarize the events of 2008 it would be with one phrase: "Global Economic Crisis." Some of us have been predicting this for a long time. One of my colleagues several years ago predicted the collapse of Western power. His reason was based on the simple fact that the U.S./Western system was victorious over the communist system because it practiced free market principles, whereas the communist system could not compete. When communism fell, many of the former communist countries embraced free market capitalism while the U.S. and the E.U. have in practice become more socialist. Therefore, it is logical to conclude that if you believe in the free market system and, capitalism, then you must also conclude that when you depart from those principles the economy will ultimately fail. Even in the United States, where Republicans embrace the ideology of the free market system, the Republicans themselves took charge with expanding the size of the U.S. government and its socialist system. Even the republican President Bush himself "apologized" for his "abandonment of free market principles," after enacting the greatest government intervention of the economy in U.S. history.

I once had the opportunity to meet Newt Gingrich in Washington back in 2005. He predicted privately, that the Republican controlled Congress would be defeated and the Republicans may also lose the White House. Gingrich's reasoning was that the Republicans would be punished because they departed from the free market principles of capitalism which would lead to failure and make it easier for the Democrats to criticize their performance.

Interestingly, there are economic experts who have been warning all of us that the U.S. economy could collapse if its continues on its departure from capitalism. One of those experts is Peter Schiff, an advocate of the Austrian or "Vienna School" of economics has been warning the public since 2006. Both left-wing ideologues and pro-Bush Republicans ridiculed him on Fox News and other news programs. Now both sides are taking him seriously. This video below shows his accurate economic predictions as far back as 2006.


Despite the global economic crisis, 2008 can also be characterized by the following events:

• Independence of Kosovo - Metohija. U.S. policy set a dangerous precedent with the declaration of independence of Kosovo, which was also recognized by mostly Western states. Most of the rest of the world including some members of the EU have and do not plan to recognize Kosovo. The Eurasian powers led by Russia (See map of countries recognizing Kosovo independence) have strongly resisted recognition. It is also worth noting that as of this writing, there are still four members of NATO that have not recognized Kosovo, further demonstrating that the U.S. has become less relevant globally.
• The Georgian-Russian War led to the failure of the U.S. experiment in Georgia and complete destruction of Georgian military by the Russian military. Russia previously resisted recognizing Ossetia and Abkhazia based on Russia's policy to not change borders of recognized states. The outcome of this event was a severe blow to both U.S. influence in the Caspian Sea area and NATO's presence in former Soviet space. One can conclude, that the recognition of the break-away republics inside Georgia is irreversible and was a direct result of the U.S. policy to recognize Kosovo.
• Russia's reassertion to break away from communism was symbolized with the the loss of two important figures in shaping the new destiny of Russia. His Holiness Alexy II, the Patriarch of "All the Russias" passed away leaving a legacy of reestablishing religious freedom in Russia and for re-unification of the Russian Orthodox Church. His leadership in uniting the Russian Orthodox Church Abroad helped to reconcile the splits amongst the Russian people dating back to communism. Another was the loss of a great dissident writer Aleksandr Solzhenitsyn who once was living in exile, returned to live the rest of his life in his Russian Homeland. Both were recognized and decorated by then President Vladimir Putin for their contributions to the Russian people.
• Deployment of the "Home Mission" military force inside the United States was barely noticed in the "commentariat," (U.S. media). An entire combat brigade from the U.S. Army's 3rd Infantry has been deployed to the U.S. in case of civil unrest. The new U.S. military strategy of "Strategic Shock" to deal with internal threats caused by civil unrest was also revealed raising fears that the U.S. is preparing for a future crisis.

These important events of 2008 will definitely define the future of 2009. Unfortunately, the same analysts who correctly predicted the economic crisis of 2008, have even grimmer predictions for 2009. We all know that economies are cyclic. Many times in U.S. history, the economy boomed and other times it was in depression. What will happen to the world's greatest economy in 2009? Some say it will be a repeat of 1929 when the U.S. experienced the Great Depression. Others say it will resemble more like 1979, a recession that followed by a strong revival. However, my prediction is that the U.S. will experience an event similar to 1989. What happened in 1989? The collapse of the Soviet economy which resulted in its break up into separate countries. All three events have one thing in common, and that is that state intervention in the economies was the main cause of these events. However, the U.S. capitalist system always corrected the problems itself from the free market. In the USSR however, it was different. The Soviet socialist state intervention contributed to its demise. Likewise the U.S. government's interventions and state bailouts will also contribute to its own economic failure similarly as did the USSR.

The entire world has been impacted by the economic crisis. Countries that adhere to free market principles will eventually recover as did the U.S. in 1929 and 1979. However, the U.S. has made a departure from capitalism. The U.S. elite have a common belief that governments can solve any problems by just pouring money on them. Once the greatest manufacturer on Earth, the U.S. transformed itself into a service economy that is driven by consumerism rather than creating tangible goods. U.S. economic system has become a gigantic "Ponzi"scheme. Basically, the government spends and borrows money from foreign creditors. Countries like China, Saudi Arabia and Russia will stop providing credits because the U.S. cannot pay all this debt back. Nor can the creditors continue providing this credit as the dollar loses its value. Therefore to solve this problem, the U.S. will just print more cash. This will surely result in hyper inflation (like the USSR experienced) and eventually cripple the U.S. economy entirely.

How rest of the world recovers or not from this crisis will ultimately depend on the directions they make in their own policies and how the the global economic system redefines itself. Will they pursue sound conservative economic policies or will they experiment with socialism and printing more money. One thing is for certain in 2009. The new Obama Administration will bring about no change nor does Obama have any magic tricks to cope with the problems of hyper-inflation.

The other big question is if Russia can remain on course with its free market economic development. The Russian economy is also impacted and the demise of the U.S. economy is not a good scenario for Russia in the short-term. Russia has emerged as a significant energy supplier for the United States but is in the process of establishing more markets in the so called emerging markets of Asia. Certainly Russia may experience a "bump" on its road to economic development, much like the U.S. system had various times in its history. Although Moscow has lots of work to do, the biggest difference between the U.S. and Russia, is that Russia has reduced its size of government, lowered taxes, and has huge reserves of cash. On the other hand, the U.S. has expanded its government (thus increasing incompetence), and has accumulated huge debt that will certainly lead to hyper-inflation and possible civil unrest.

2009 shall be an interesting year.