Another year, another set of predictions. The definitive* guide to 2022.
*Citation Needed
As I repeat every year when I make these prediction posts: predictions are difficult, especially predictions about the future. Fair warning, my track record for predicting what will happen in the coming year is rather poor (though I suppose I’m hardly unique in that), as such this should be seen as more of a fun exercise than a definitive guide to the year ahead (who am I kidding, no one takes me that seriously). The goal when making predictions is to appear prescient so I will avoid things which are already a given, i.e. President Biden loses the midterms, and focus on things which will have big impacts while not being overly mainstream.
1: Russia will attack Ukraine
Russia has been massing troops at the border with Ukraine recently which has eastern European states nervous about an invasion. The US has come out with an extremely weak counter: sanctions. The US seems to think that sanctions can solve most problems ranging from halting Iranian nuclear ambitions to forcing Maduro’s government from terrorizing Venezuela. And sanctions do work in lower stake conflicts, but a Ukraine friendly ro Russia isn’t just nice to have, it’s a core national interest as well as a very important symbolic issue. Russia doesn’t recognize the legitimacy of the Ukrainian state nor of the Ukrainian nation, and it will take more than economic sanctions for Russia to leave Ukraine be. When I’ve read commentators on the current situation between Russia and Ukraine many have argued that Russia doesn’t want a protracted conflict in Ukraine, nor the trouble of annexation and I agree, but that doesn’t preclude other forms of military action. I won’t speculate on the size or exact form of the conflict in Ukraine, but I’m certain something is going to go down.
2: Taper Tantrum 2 Electric Boogaloo
Inflation has started picking up for real in the US, which I reckon will be a theme for the 2020’s. US public and private debts have ballooned over the last decade and lamentations about student debt in the US are ubiquitous. At the same time modern silicon valley lives and breathes cheap capital. Firms like Uber and Lyft effectively privately subsidise meal delivery and taxi fares which would be absurd were it not for the current ultra low interest rate paradigm. But with interest rates firmly in the liquidity trap and inflation soaring the policy prescription is obvious: start tapering and raising rates. Last time the federal reserve began tapering the infamous taper tantrum took place where stock and bond markets reacted poorly to tapering which made the fed reverse course. Nine years and who knows how many billions of assets purchased later it’s safe to say markets will throw a tantrum like we’ve never seen before when the Fed gets serious about fighting inflation. The Nasdaq will drop like a rock and every financier from San Francisco to Miami will urge the Fed to support markets until it’s forced to step in. Inflation will continue to be a problem for the poor and middle class while being a solution for high public and private debt levels. This will not be official policy but it makes too much sense for the Fed to let inflation run rampant for it to make real efforts to stop inflation.
3: Turkey & Greece Sabre Rattling
Speaking of inflation, the Ankaran school founded by Turkish President Erdogan holds that the solution for inflation is lowering interest rates. A strategy which, needless to say, has not paid off. Ordinary Turks are understandably not happy with the situation and will get increasingly angry as their hard earned cash quickly becomes worthless. Erdogan may have hollowed out Turkey's democratic institutions but as Nursultan Nazarbayev and President Tokayev just found out the hard way in Kazakhstan, no one is immune to public opinion. If things are bad at home the premier distraction method is enemies abroad, and Erdogan has a convenient arch nemesis in Greece just next door. It could be a major diplomatic spat, a border crisis, or any number of things but mark my words: Erdogan will try to distract from economic misery at home with a fight with Greece, be that a literal or figurative fight.
So there we have it, three fresh and hopefully accurate predictions about what will happen in the coming year. How wrong am I? Let me know in the comments.
If you liked this post you can read my last post about inflation here, or the rest of my writings here. It'd mean a lot to me if you recommended the blog to a friend or coworker. Come back next Monday for a new post!
I've always been interested in politics, economics, and the interplay between. The blog is a place for me to explore different ideas and concepts relating to economics or politics, be that national or international. The goal for the blog is to make you think; to provide new perspectives.
Written by Karl Johansson
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