There will be a considerable amount of turmoil in the region for 2009. Hamas will play it cat and mouse games with Israel. This will cause additional severe hardships for the Palestinian people. As the world economy worsens Iran will play its game of nuclear chess and threaten the existence of Israel. The retaliation from Israel will be in the form of bombing. It will be a get even play to take out the nuclear facilities and to pay Iran back for providing assistance and support for Hamas. The act will come sooner than later in the year. The farther into the year Iran remains low key on its threats the harder it will be for Israel to garner U.S. support. At present the U.S. has given its wink and nod support for such actions in the Bush administration. Until that unofficial approval is revoked by the current administration the Israelis will play that card unless the approval is revoked.

Unfortunately this act will play into the hand of Iran who is desperately seeking an increase in the price of crude oil to fill its meager cash flow. The bombing act will most likely raise the price of crude oil to about $70 a barrel. It will also raise the tensions all over the Middle East arena. Part of the Iranian plan is to garner support of their nuclear efforts from Russia and China. The Russians will work with Iran especially if they have gains a seat at the OPEC table. China will support the Iranians because it is another place from which they can purchase oil and cut a good deal for stronger and specifically dedicated supply guarantees.

In addition the turmoil from the attacks will bring the Arab world to demand the U.S. stop supporting Israel and to condemn their acts as criminal. The U.S. will bow to the pressure on the surface if the Israeli attacks are successful in retarding the Iranian nuclear program for several years. If this becomes the case then the Iranians will start to pressure the Pakistani government to provide some nuclear assistance in the form of weapons. This is how the pot can spin out of control. Once a Genii pops out of the bottle it will not go back in. This is a scenario for a course to war which no one will win.

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The U.S. will end the year of 2009 with a GDP in the range of negative -3.4%. If the price of oil moves back to $70 per barrel by mid-year the GDP will probably be a negative -4.7%. Oil will start its move back in the early spring and will continue to move up for some time. The slower the move in the price of crude the less negative the GDP will end up. The faltering U.S. economy will cause the cutbacks at home but the same economic events will hurt the rest of the world. To that end the oil producers will cut back production as much as they need to attain the pricing they need.

The trillion dollar debt will buy many things but we will not see the results of the spending in the economic numbers until July or August. Just about that time the markets will start to move as some consumer confidence becomes visible. It will not be until the end of October that the markets become self confident. By that time the credit problems will have eased and the real-estate market will have found its bottom.

The troop roll back in Iraq will slow down and stretch out to the end of 2010. There will still be at least thirty thousand troops remaining until 2012. Afghanistan will become a hotter war and will expand by enlarging the arena to include the areas around the Pakistan Border as part of the war zone. This will cause many problems and could destabilize the region. This will compound the U.S. negotiations to bring Israel and The Palestinians together.

The U.S. will pull together a coalition of nations to address the antics of terrorist countries such as North Korea and Iran. The coalition will take on North Korea and tell its president to stop or be put down with all necessary force. If the coalition slaps down North Korea that will be a strong message to Iran that they may be next. That will also be a back street signal for both Israel and the Palestinian governments.



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North Korea - The word is that Kim Jon IL has suffered a stroke and is quite ill. He has already backed away from North and South talks on his missiles and nuclear weapons. This is an attempt to show he is still in power. To further punch up his show of power he will make within the next six months several threatening moves which will go too far. At that point in time, with world economic woes shredding the patience of all countries, a few powerful nations will come together or he and his country will suffer grave military consequences. It is a coin toss to see if he will back down or if those who have had enough will trounce him to show the rest of the world's tyrants enough is enough.

Taiwan - This small nation will play a big part in in the politics between the U.S. and China. The desire of China is to incorporate Taiwan into the mainland sphere as it did with Hong Kong. At present about 55% of the Taiwanese population do not want to rejoin the mainland. That number was much bigger a few years ago. The U.S. has stated it will defend the wishes of Taiwan but that will not play if the majority of the citizens do not want to remain sovereign. China has been encouraging the populace with open invitations to talk things over at the same time there have been behind the scenes talks to move the two nations closer to the bargaining table. The heavy ground work will start later this year as the economic problems of Taiwan start to wear down the people providing an economically better off China with a carrot to win the majority of the people over. The Taiwanese will want the talks but will not capitulate on their freedom from the mainland.

At this point the Chinese will push for the formal government of Taiwan to vote on the situation. Prior to that open request the Chinese will try to cut a deal with the U.S. agreeing to buy U.S. bonds in the open market at its historic levels if the U.S. will agree not block the vote. The U.S. will agree. From that point on the U.S. rhetoric will slowly move to let Taiwan go and perhaps even assist in convincing them to return to the Chinese sphere of influence. Though this may seem like the wrong way to go at this time things will look quite different after the year end numbers show China as the only country to end 2009 with a positive GDP.

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England - The English Pound will find itself sinking and in for a difficult future. This will be lead by more banking problems as well as widening cracks in the market's financial institutions. Capital will remain somewhat scarce at least to the end of 2009. The markets will trade lower and bounce in fist and starts as has the U.S. market. The English will keep their heads down as they do when the world around them is coming apart. The stiff upper lip and a solid start to a comeback will begin just as 2010 begins.

Europe - Europe is generally in bad shape. Western Europe will fair very much the same as England. Germany, France, Spain, and Italy will see a comeback start by the end of 1009. The biggest problem will be the value of the Euro. When the economy tightens up, as it is now, countries like to adjust the value of their currency to ease problems and aid in trade. The problem Europe is having is the single currency when adjusted to meet the needs of one country may compound the problems of one of the other countries in the union. There will be a lot of behind the scenes infighting over this problem.

Eastern Europe will be hit harder than its western counterparts. Their economies are small and still fragile as they have had only a few short years to grow. They are also very dependant on European trade. The problem is the European consumer is not spending money as they all wait out the economic storm. For this area the recovery will come just about Q3 of 2010.

The European Union - The union will be heavily stressed into 2010 when the last of the states start to see recovery. They will master the Euro and find ways to use to advantage just about everyone. The fabric of the union will take a beating but it will be standing when all is said and done. This will be the big test for the Union for if it falters there will be chaos in the region and there are many predators who not think twice about having one of the former Eastern Block countries re enter their orbit. That will not happen but there will be many intense moments around the globe over this situation. All will be on the road to recovery by the end of 2010.

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China - Is presently spending more money on fixing their economy than the U.S. is. They are working to establish their GDP for 2009 at a minimum of 8% but they will only get 6+% or so. As they started to cut back from their previous double digit GDPs they failed to take into account the possibility the world economy could slow down. They never dreamed the U.S. would be in such bad shape. They needed a slower economy but they did not need an economy that would cause so many people to loose jobs. To counter that condition they are spending to add jobs and to keep factories open.

They are still working on the building of their infrastructure and using that as a way to maintain jobs and still get a good bang of their money spent. They had to do this because the international corporations started to pull back investing to some degree as their individual national economies deteriorated. China's new plan is to make their population into a consumer oriented nation. To do this they are manufacturing and selling the products that were going all over the world to those in China who are now working. It is capitalism in Chinese robes. Unfortunately, their stock market will do poorly in 2009 as most of the money for their economy will come internally and most of the outside investors will sit and wait for a better world economy outcome before they invest more money in China.

Note: If the country can keep civil unrest under control in these times they can weather the storm with little trouble. At that point they will have pulled off a turnaround the likes of which have not been seen before.

India - The outcome of the year will be based on what happens in Cashmere, Pakistan, the Mid East. India's relations with the U.S. Cashmere, Pakistan and the Mid East are separate problems but a disruption in one area can lead to collateral disruptions in the other areas. The possibility of having war like conditions in all three areas is a better than a fifty-fifty chance. Middle East conflicts will definitely affect Pakistan and that form of rage can spread easily and run rampant. Attempts by India to thwart such actions will be met with force. At that point the U.S. relationship comes into play. The U.S. must try to keep the nuclear combatants apart yet it will not want to pick India over Pakistan or vice versa.

At present the policy of India for 2009 is to stay low and practice business. They wish no conflicts to take their eye off the path of economic expansion. In these times such an effort will yield them a much better 2010 if there are little distractions for the year. For 2009 the economy, GDP and their stock markets will not do very well. However, there will be progress over the entire 2009 period if they stay conflict free. If India can stick to business as planned they will have an extremely good 2010.

Russia - The economy is in big trouble with energy prices down and their stock market falling apart. The cash flow has been cut by seventy five percent because of falling oil prices. They are looking for Mid-East turmoil to help increase oil prices and then their cash flow will come back. In an effort to leverage oil prices as much as they can Russia is looking for a seat at the OPEC table.

The seat at the OPEC table may be hard to attain but the Russians have a hole card. It is their ability to covertly exercise pressure on the leaders of other oil producing countries who fail to maintain the production limits set by the group. It is not the under producing but the overproduction of crude and its secret shipment to the marketplace that the Russians could stop. Action of that sort would significantly enhance the hold OPEC would have on the market because their restrictive limits could easily move the price of oil from day to day in the direction they wish.

As the year moves forward the military bluster of Moscow which has been used in the past year to distract the citizens of the country from their economic woes by blaming others, will be used again as the economy continues to falter. The fear is there is a tendency for such foolishness to be carried too far. The last thing the world needs now is foolish bluster that can only be backed up by extreme violence or even non retractable threats. If a seat at the OPEC table is put off or rejected the foolish bluster approach will take hold and the recovery of the economy will take second seat to the unrealistic sense of Russian honor being impugned as perpetrated by Moscow.

My economic take on Russia is no recovery until 2011 at the earliest unless there is a seat at the OPEC table or there is a severe conflict in the Mid East where oil flow would be disrupted to the rest of the world. At that point the price of oil will help Moscow out of its economic problem in the short term. At any bet investment in Russia should be avoided at all costs.

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