I had lunch earlier this week with Lakshman Achuthan of ECRI. Our offices are a block apart, and from time to time, we get together to shake our heads in collective astonishment over the economic questions of the day.

We are both data driven, and look askance at the squishy gut approaches to economic forecasting. We were discussing an entire class of issues where many (if not most) observers consistently make the wrong call.  Not just a panicked crowd selling into lows, but broad, erroneous perspectives on recessions (most missed it) and recoveries (ditto) along with all other manner of geopolitical issues.

Our conversation happened upon the following question — where we each expected the bulk of investors to be likely to make the wrong bet:

Over the next decade, what nation or region is most likely to have a spectacular implosion?

1. China
2.
Europe, EU
3.
India
4. Russia Japan
5.
United States

The implosion could be an lingering budget problems to full economic collapse, or a military overthrow or outright revolution.

What would your answer be?

Category: Politics, War/Defense

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

82 Responses to “Where Is A Spectacular Implosion Most Likely?”

  1. Laksman and I surprisngly agreed on our answers. I have it set to post here at noon.

  2. Here is the noon update:

    China!

  3. JohnL says:

    6. Japan

  4. mark says:

    Over the next decade? Sheesh Barry. ALL OF THEM! (See: Jamie Dimon, Congressional testimony.)

    The more interesting question is to put them in chronological order which is also easy because given the lingering fragility of the world financial system an “unexpected event” in any one of them will bring down the rest.

    So who will go first? Jim Chanos says China. So many say Europe (Santander is my pick for this century’s CreditAnstalt). India would have to be the contrarian favorite since it is so seldom mentioned as a possibility.

    Who knows? Maybe Carlos Slim will be this century’s Ivar Kreuger (See this Frank Partnoy presentation for some background: http://vimeo.com/9963640 )

    In the end does it really matter who?

  5. NG says:

    1 of course.

  6. V says:

    Given the links between nations these days, don’t discount ‘all of the above!

    More seriously.

    1. The oil sector, and countries heavily leveraged to it. Everybody ‘believes’ in peak oil, yet the developments ex-oil in the energy sector are diverse and more than capable of substituting for oil given the right market price signals. Sure prices in the medium term for oil will probably rise, however are the heavily dependant oil exporters preparing for what could be a market shift toward cleaner technologies? Will they have incentive to do so if oil increases to $200, $300 a barrel, or will they live like kings for a while? I’m sceptical of human tendencies in this regard
    After all did we reach ‘peak whale blubber’ or simply find a better technology?

    2. Also I don’t think it necessarily has to be a nation or region. Given the greater concentration of wealth and perceived power in a smaller percentage of the global population, is it possible there is an implosion in the class order for financial oligarchs (across the world) in other words the expanding legions of lower-classes and middle classes across the world decide to wrest some power back?

  7. John Purcell says:

    Revolution in Iran, 2018 at the earliest. The massive majority of the population is under 30 and has no memory of the Shah (and his true masters) and thus no sentimental allegiance to Supreme Leader/system of government. Just guessing based on my long chats with Iranian ex-pats with whom I studied.

  8. Marcus says:

    China

  9. MinnItMan says:

    Europe has extraordinarily bad demographics for their tax and social welfare systems, domestic consumption, and household growth. It is also more politically complicated to do anything there. On the other hand, I hope those countries get smart and open up to US emigration (reverse colonization?) – I’d rather be there than here.

  10. dead hobo says:

    BR asked:

    Over the next decade, what nation or region is most likely to have a spectacular implosion?

    1. China
    2. Europe, EU
    3. India
    4. Russia
    5. United States

    reply:
    ————-
    None of the above.

    No matter what happens in the US, the Fed will print money, congress will enact a bailout, Wall Street will use the rescue for a profit opportunity, the media will print whatever the press releases say, and people will lose jobs. But more amazingly, the spinsters will use their skills to redefine words and claim there are no problems, only permabears who won’t invest. Thus, there will be no real problems, only permabears who won’t get with the program.

    China’s statistics will only show growth.

    India doesn’t matter.

    Russia’s next implosion won’t be noticed because Russia is always imploding.

    If Dr Who were to fly to the end of time, the only notable thing left would be Japan’s zombie economy and the carry trade.

    Europe has the PIIGS. That’s where the next action will be. But that won’t be in a decade.

  11. constantnormal says:

    6. All of the above.

    The domino effect will take out the others within days, if not hours, of any of them imploding.

    So why does it matter?

  12. constantnormal says:

    Another nation-state to be added to the list, and a seemingly improbable one:

    Goldman Sachs

    …. there’s a piece over at Jesse’s Cafe Americain that takes a look at banksters and their leverage … GS takes the prize, with a derivative exposure-to- total assets ratio of 457 as of the end of 2009.

    http://jessescrossroadscafe.blogspot.com/2010/04/derivatives-exposure-among-us.html

    I don’t care how good they are, or what degree of control they have over the markets. 457 is deep into the institutional suicide zone.

  13. ashpelham2 says:

    I am surprised to see the omission of Brazil and other South American nations. The population and development growth in those regions over the past decade has been huge. Brazil itself is booming, and has continued to do so, even through this recession. What makes it a non-candidate? Surely there are credit concerns there as well. Certainly there has been a demographic imbalance that has bubbled up somewhere in their economy.

    When compiling a list of “most likely’s”, you have to include anyone that has unrestrained growth. No one should be left off. Even those who’ve had a rough time through this downturn, are not immune to another step-down.

  14. torrie-amos says:

    1.2.4.5

    india makes it out alive, there rich people are not thieves yet

  15. reddcharlie says:

    Europe: as Krugman has repeatedly stressed, Europe got the cart before the horse when they achieved monetary union before political union. Greece, Spain, Portugal, etc. desperately need to devalue their currencies, but they can’t, because they no longer have their own currencies. Enormous economic stresses are building up and one of the most important relief mechanisms doesn’t even exist anymore.

    China-US: The longer China stubbornly pegs the renminbi to the dollar, the more embarrassing its trade surpluses will become. The longer China delays the inevitable, the more tempting it will be for the US and other countries to impose tariffs on China because of persistent domestic unemployment. Blaming the US and others for not saving enough misunderstands the problem ( hey, if you need to save dough, you shop at Wal-Mart, right? that will do wonders for our trade deficit, I’m sure). Eventually China’s trading partners will wake up and realize they have nothing to lose by imposing a penalty on China until they let the renminbi float. Such a penalty might be a conventional tariff, or it might be something more creative, like a ban on Chinese purchases of US government debt (all the inflation hawks are crying “FIRE” during Noah’s flood…we’re stuck in a liquidity trap and although govt borrowing is up it hasn’t come close to making up the decrease in private borrowing so financing US govt debt is not a problem now, just look at the current rates).

    But it could get very interesting as things go on. Until then, I’m just another Wal-Mart shopper proud to support Communism.

  16. beaufou says:

    Greece-Portugal-Spain-UK.

    And just about all of eastern Europe. (not a good trip for German banks and industry)

    Oh, forget it, everybody eventually, and not in ten years.

  17. peter north says:

    Barry, should I take the omission of Japan to mean that you and LA don’t see their debt/GDP, demographics, etc. to be a ticking timebomb as I do? Sure looks ugly to me.

    Then again, unsustainable situations always seem to drag on longer than I think is possible in a rational world.

    ~~~

    BR: No, I put Russia there as a tease.

    But you make a valid point, and i am going to change it

  18. constantnormal says:

    My guess would put China as the least likely, as they have an advantage the others are lacking when it comes to maintaining social order and controlling behavior — millions of deployed domestic troops, and a willingness to use them.

  19. constantnormal says:

    @peter north

    “… in a rational world”

    There’s your problem.

  20. Mr. Micawber says:

    1. Very few dynasties did not have large scale rebellions – even the “best” ones. I don’t see why the CCP Dynasty should be any different.

    2. Europe is still not a country. Germany and France won’t break up, nor will Benelux, nor the Nordics.

    3. India has the most serious external enemy of the five places listed. Pakistan will be more than happy to intervene if India starts having real problems. I’d say tactical nuclear weapon usage is more likely than India breaking up.

    4. Russia won’t implode so much as fade away. You can’t run a continental empire with a drastically shrinking population.

    5. If fellows like McDonnell and Perry are any indication, there’s a definite strain in this country of those who wish we *had* imploded back in the 19th Century. But realistically? We’d go for coercive central control before we’d go for break up. That might be a moral implosion, but we’re not going anywhere.

  21. JohnT says:

    China.

    The country has built-in factors for splintering. It has many spoken languages with Mandarin being the pretense of the national tongue.

    It has many ethnic groups that do not get along. Unity such as it is, is a single party system. And single party systems are unable to cope with corruption. Please give me some forebearance — there is not a political system on earth for which corruption is not endemic. At best, corruption is contained or minimized. But a single party system is the worst. In order for Beijing to rule such a huge, diverse area, it must rely on local corrupt satraps, and must for its own sake protect them in their corruption, anything from building schools with shoddy construction to seizing peasant land for a publicly subsidized factory. It’s Kelo to an exponential power.

    China has many religions, and cannot tolerate more independent (or ambitious) ones. They are threats to the single party in that they draw more allegiance from their believers than the Party does from the citizenry.

    If we had one single party ruling the vast area of Eastern and Western Europe pretending that, oh let’s say English, was the language, and a fictional ideology of, oh let’s say “actually existing Capitalism”, how long would you expect it to last?

  22. trail says:

    My answer would be “yes”

  23. VennData says:

    Bonds

    …of all of them. But it won’t be an implosion, if a 30% drop in price is an implosion. If a 50% drop in price is an implosion, then it’s an implosion.

  24. destor23 says:

    China.

    You probably wouldn’t count this as data but I don’t think the talks of China’s rise to ascendant power in this century jives with it being a closed society. I think investors will one day hit the brick wall reality that they are plowing money into a dictatorship that is not to be trusted and that the crushing poverty endured by the vast majority of its population will have to one day have consequences both for the dictatorship and for foreigners who put hard assets on the ground there.

  25. Transor Z says:

    It’s Kelo to an exponential power.

    JohnT, for fear your excellent reference to a landmark Supreme Court case may be lost on many non-lawyers/non-Connecticut residents:

    http://en.wikipedia.org/wiki/Kelo_v._City_of_New_London

    ———————————-
    I’m with the commenters above who link any coming “implosion” to external factors like looming resource/energy crisis. To that I would add whatever the odds of global pandemic are over the next decade. The countries with largest populations and least developed infrastructure (China, India) would be destabilized the most by pandemic. I just don’t see balkanization in China like some do.

  26. purple says:

    This decade ? None of them will implode.

    All have major problems coming in the 20′s, because populations everywhere are going to be shrinking or aging, and it’s hard to see how that fits in with the economic model of the last 500 years – that of ‘growth’.

  27. The Curmudgeon says:

    With all of the areas on the list, possibly excepting India and the US (but only by dint of immigration), facing a demographic implosion, pick any one and all of them. Japan got there first. It imploded in the 90′s, and is still a basket case economically, fiscally, demographically and politically. My guess is Europe gets there next. The assumption that economies naturally grow undergirds virtually every economic policy of the day. But they don’t, unless the population also grows, and the native populations in these areas are not growing. In fact, Europe, Japan, China and Russia, are all aging and in decline.

    The next crisis will be of deflation. Population decline means less monetary velocity, which means it becomes nearly impossible to print away the deflationary impact of declining demand. Japan has been trying now for nearly two decades, and simply can’t do it. That will likely be the experience of all the rest, as the developed world and China slowly commits suicide through demographic implosion.

  28. jonathanb says:

    My answer would be:

    6. Paulson & Co.

    It would prove that God exists!

    Since God doesn’t exist, I’m sure a John Merriwether fund will explode, but all the aforementioned countries will be fine, continuing their ritual extraction of wealth from the masses for the benefit of the few (ie. miners in the US and China dying so that John Paulson and David Tepper can make BILLIONS of dollars.)

    Sorry for the sermon, but mining accidents make me a little bit insane.

  29. scharfy says:

    If by spectacular implosion, you mean, in stock prices/ asset prices? Then everywhere very often, and alot. And then back up again. These things cycle.

    If by spectacular implosion, you mean, in actual things that matter? Nowhere.

    Humans have this annoying little habit of surviving. We even improve our lot in life across time.

    Tenuously thriving. Color me optimistic.

  30. Sri says:

    I would say India is a very high probability as people here swear by real estate (residential and commercial). Every Tom, Dick and Harry educated or uneducated want to either become a broker or investor in the above. I am really bullish on agri land rather than the above.

    Politicians are stumbling over each other in doling out subsidies for food, cooking gas and even offering free TVs so that the public are able to watch the particular private channel associated with the party. No politician dare says ‘NO PAIN, NO GAIN’. The politicians see to that the public is dumb and getting dumber.

  31. JD says:

    I would’ve picked Russia, but that is now crossed out, so I pick Japan. Russia because of unstable power structure and corruption, Japan because their cost to borrow will eventually crush them.

  32. srvbeach21 says:

    I’m not sure what criteria a country needs to meet to be eligible, but what about Pakistan? Iran seems another possibility, especially if Israel decides to act in some way in response to the nuclear issue.

    Not that those listed don’t have merit…

  33. nofoulsontheplayground says:

    China is my choice. They will likely have a Japan style property bubble bust. However, it will probably not get going in earnest until later in the decade. The initial bust will likely take down the state controlled banks, but the state can take them private, recapitalize them, and re-float them. However, a second more severe crash in the property market would likely shake the entire foundation of the PRC.

    The US could default on its debt, but that would be minor compared with the upheaval in China. The property market is a Ponzi scheme, but the government is also a Ponzi scheme. Instead of Maddoff style 10% returns every year, the government spins 10% growth every year. Like Maddoff, the PRC’s numbers are inflated and predicated on an unsustainable scheme, in the case of the PRC it’s the property bubble.

  34. I think China is too strong and ruthless politically to go under though they could have turmoil. Economically, in order of importance Japan, the US and Europe all have to get their ships back on course

    If it is not limited to economics then:

    Venezuela, South Africa

    Since that white supremacist in SA was killed some days ago I was doing some reading on them. That nation is a seething racial cauldron that is about to eat itself alive. Whites are already leaving the country in fear and the ones that remain aren’t very welcome. Something like 30,000 murders per year are occurring

    The social experiment that is the ‘new’ South Africa is not going very well from what I understand.

  35. steve from virginia says:

    Wow! What an interesting question. Who goes off the gangplank first?

    I look at the issue through the crude/dollar trade with the dollar getting harder and harder all the time. Which country/region is most vulnerable to a hard dollar? Eurozone, with the euro creation as an alternative to the dollar and the Middle East oil suppliers saying … “Non!” It is Europe’s energy use (waste) that is killing the euro right now with the dollar as the lever.

    Japan is next in line because their current account surplus depends on the increase in energy waste world wide. Japan’s finance tactic has been to export its own energy waste for a profit but the days of this are numbered. The oil producers’ dollar preference will become more entrenched causing a yen crisis.

    The comment above remarking Santander being CreditAnstalt was intriguing; I figure Greece is! Angela Merkel as Pierre Laval, how ironic. Keep in mind, we are having an energy crisis, not a finance crisis. Bond buyers in Europe are arbitraging between the different countries’ relative inability to obtain the vital crude they all rely on to profitably waste.

    Note the remarks by Colin Campbell yesterday, “”They are no substitutes for what we have built the economy on so far …”

    http://www.reuters.com/article/idUSTRE63539420100406

    “Campbell’s oil depletion theory has been published in books and through the Association for the Study of Peak Oil, which gave its first workshop in 2002.”

  36. Entrepreneur says:

    Isn’t Europe already starting to have one?

    As for the rest, they’ll have their implosions in inverse order of their government’s ability to coerce public opinion. That means China and the US will exhibit problems after outfits like Europe.

    Ironically, those power states that defer reality the longest will likely suffer the worst collapses. They’re just storing up negative economic “potential energy”, and will pay the piper later (and more dearly).

    Best guess for sequence of trouble?

    1. Europe (happening)
    2. China
    3. USA

    Not really up to speed on Russia or India to proffer an informed opinion.

  37. Munish Hingorani says:

    “Spectacular implosion” – highly improbable.

    India needs to repair its deficits more than any other on the list but the government shows little eagerness to do the same.

    We may not be dependent on external factors for demand but we are dependent on them for resources (including food and energy). A drop in growth rates and/or a run on the rupee and India will be in for a rough ride. We are among the few that can boast of 16% food inflation and 9% WPI.

    The disparity in income levels is increasing exponentially. Naxalitie-Maoist insurgency haunts India. Geo-political issues only hide these more serious internal issues.

    We are growing at “enviable” rates from a low base. But we need to tackle income-disparity, resources for a billion, insurgencies, deficit and external affairs – in that order – to ensure that we continue to grow.

    We have no other choice but to grow lest we implode.

  38. jconners says:

    I’m tempted to vote for the United States, given my frustrations with our short-sighted economic policies. However, my guess is we will simply devolve into another Greece or Portugal.

    China has throughout its long history cycled between centralization and fragmentation. As businesses leave China for the cheaper pastures of Vietnam, Cambodia, Indonesia, et al., unemployment will increase and the government won’t be able to gloss over political problems with economic growth. Imagine what Japan has gone through in the last 20 years, minus the social cohesion.

  39. Sircornflakes says:

    EU and USA in the order.

  40. rktbrkr says:

    California is my nominee, world’s 6th,7th,8th largest economy depending on measurement, definitely bigger than Russia, India & Brazil.

    Their fragile RE market is going to get hammered by waves of ARM resets over the next couple of years. Unless The GSEs step in and take the bullet for the Banksters it’s going to be an ungodly mess. The Great California Drecession.

    #2 is Euro zone currency disintegration, the little PIIGS are dancing on eggshells.Greece could be their Lehman Bros and they don’t have a Paulson ready to ladle out cash to their other little PIIGS to stop the runs.

    http://www.doctorhousingbubble.com/option-arms-enter-the-eye-of-the-hurricane-the-189-billion-recast-problem-targeted-directly-at-the-california-housing-market-of-189-billion-in-securitized-option-arms-109-billion-in-california/

  41. willid3 says:

    if i were to guess it would be China first (if the world’s economy continues to tank they will have major control problems, and only a small minority has shared any of the wealth from their economy, they have a shrinking population (like Japan), they have a very diverse and antagonistic population sharing only one thing, the party is in charge as long as it has the military under control), India (similar to China in some ways, a very diverse and antagonistic population, no really shared language, only a small sliver has shared any of the wealth from the economy, has major corruption problems (even the court system),but it is the largest democracy in the world, and it has that threat from Pakistan to keep it together). Russia has already done that explosion and has shrunk to a much smaller country, short of it trying (and being successful) rebuilding its old empire by forcing disparate populations back together again, it probably won’t change much. EU may split members off, but that about it, or not. The US has always had internal strive, at times much worse than today. we just don’t remember it as we look back with rose colored glasses all the time. not sure that economics will make a country collapse, not sure that it has before. the major empires that have failed have done so for reasons other than just that (Rome actually failed because of a major drought that had gone for so long that it had reduced their ability to keep it together). what might impact the US (and Europe) more is the hallowing out of the countries as they send so much of their economy to others with no replacements in site. that will reduce the standard of living in both as their populations try to compete with countries that have a much lower standard of living. and that is what is happening today

  42. hue says:

    governmental & financial oligarchs on vacation http://bit.ly/ahh6yi (via Rusty Shorts @ZH) spectacular implosion or explosion?

  43. Brendan says:

    Some people around here have a pretty liberal definition of implosion. Europe is hardly imploding by historical standards. Greece’s problems are a hiccup in the grand scheme of things.

    If I were to guess, I’d say none of them truly implode, but that’s not the question; the question is which one is most likely to implode. In that case, I have to say China. In reverse order of the list:

    The unwashed masses have to participate for there to be a true implosion. The average American has about as much faith in his or her currency as they do in God. I don’t see us all becoming “Atheists” anytime soon. Uncle Sam will keep finding ways to manipulate things without most knowing for at least another decade.

    Japan has problems, but has also known about them for a long time and are acting accordingly. So while they aren’t going to do a perfect job, they also aren’t going to implode.

    India has so much growth potential that threats to it’s economy can quickly be steamrollered by growth. See China during the ’00′s.

    The EU quickly discovered that being #1 isn’t necessarily a good thing, so they’ll keep happily chugging along, with plenty of bumps in the road but no implosion. Energy will probably be the biggest issue, and they are ahead of the curve on that.

    China is the only one that has serious underlying issues that could create the kind of environment that causes implosion. People there will become more aware of their government’s cover-ups about, well, just about everything, and that could cause the kind of lack of faith in their currency to cause implosion. As much as we complain about backroom deals here, transparency in the US is still way better than that of China.

  44. investorinpa says:

    Brazil will def implode (or have a severe correction) AFTER 2016..right now, they are going China 2008 style in terms of building infrastructure and cities for the Olympics in 2016 and the World Cup in 2014…with the nice price of oil and their role as a food producer, they definitely will be on the way up for the first 6 years of this decade…

  45. Marcus Aurelius says:

    constantnormal Says:

    6. All of the above.
    ________________

    Correct. We’re global, now. We’re tied by chains. No one drowns alone.

  46. red_pill says:

    US, China and Russia.

    More prone to bubbles and the subsequent collapses. China and Russia have a lot of repressed political problems.

  47. arbitrader says:

    China.

    Their economy is managed, propped, and false. They will take it as far as they can to save face, which will make the eventual collapse worse. Everyone talks about China and all their people. 90% of them live in a hut with a pig. I am not impressed by China’s economic power. They have no domestic economy. People who think they are going to sell products to 1.3 billion chinese need to realize that only 100 million of them have any money at all. Rumors of their budding economic super power have been greatly exaggerated.

  48. Marcus Aurelius says:

    And, I’ll add:

    The world economy is based on debt-money, but there is insufficient cash-money (in a fiat system, yet) to pay that debt off. When the big default comes, debtor and creditor will both fail.

  49. Casual Observer says:

    I don’t see how you can separate out nations anymore in a globally interconnected economy. Small nations don’t matter but large ones do. Expect small blowups around the world before the big one – any major nation defaulting will cause contagion in the financial system. Take your pick. I’d pick Japan, EU or the US from a financial standpoint. From an environmental standpoint, China is destined to collapse.

  50. Sunny129 says:

    As long as ‘Enron style accounting, off the balance sheet chicanery and the infamous suspension of M to M accounting’ is continued, NONE will implode! ‘Pretend and extend’ will carry the day till the effect of ‘kool aid’ wears off!

    Since the Gobal Economy is interlinked, the starting implosion in any major G20 countries will affect ball but varying degree leading to global depression2!

    Don’t discount Nuclear blast, successful inter continental plane (Terror) explosion or Cyberspace terrorism with freezing of communications! The latter can be initiated by ANY renegade individual or fanatic groups whose hope lies in ‘after life’ than here!

  51. genomik says:

    MEXICO!

    there is a civil war on our border right now. Either the US decrimilizes many drugs or Mexico slides into chaos and the US military gets really involved. That either takes political huevos or money, so it look s bad there. I vote for decrim as our military should be used for real existential threats (Religion, North Korea, Somalia), not to fight against the vertical markets created by US consumers.

    there are so many places to look. Now that we had a collapse tho, I think there are many people and coutries hedging better so rapid financial collapses by themself are less probable. On the other hand, external problems such as terrorism, war or other Black Swan events could precipitate a massive problem quickly almost anywhere.

  52. zitidiamond says:

    Contrary to the predictions of Rick Perry and the Virginia slavery apologist, Bob McDonnell, the most likely nation to implode is the Confederate States of America.

  53. Then there is that rogue country Canada. After our stunning Olympic gold medal tally the nation has become restless……and hungry

  54. Its Me says:

    “Laksman and I surprisngly agreed on our answers. I have it set to post here at noon.” Times-up ^^^

  55. gloppie says:

    Israel will preemptively strike Iran, which will trigger a chain of event not unlike the assassination of Archduke Ferdinand precipitated WWI. Unless Georgia (the country, not the state) gets embroiled in some East-West fueled ethnic dispute, or maybe North Korea gets desperate enough and finally goes after their South brethren, or Georgia (the State) runs out of pension money and the elders decide that they will go out and rob Walmart in droves…..
    I don’t know where it is going to hit the fan. I know gravity is calling the dark smelly stuff back to earth, and the blades of the fan are furiously spinning. Where will it splatter ? Who cares ! Try to predict it and you’ll go bubkis.
    It’s coming, and there isn’t much we can do.

    Right now, I don’t give a s..t anymore. I just watched Chris Martenson’s crash course and I’m pretty depressed, (again). Bring on the frikkin locusts all right, I can’t wait for us to go bye-bye in the night. We’re so stupid.

  56. destor23 says:

    @Its Me: He posted it as a comment, which confused me too but you’ll see it as the 2nd comment on the thread.

  57. Peter Pan says:

    Aside from placing Japan in front of India, that’s a fairly agreeable list. But if China goes kapowee, then what about the commodity countries with property bubbles like Australia and Canada? I think those should be placed in front of the USA. Don’t underestimate the power of having the global reserve currency.

    But where is a spectacular implosion least likely? Norway based on CDS, but it’s oil based, n’est pas?

  58. Nat says:

    “The implosion could be an lingering budget problems to full economic collapse, or a military overthrow or outright revolution.”

    How can you equate “lingering budget problems” as an explosion equivalent to (1) “full economic collapse”; (2) “military overthrow”; (3) “outright revolution”?

    I know, its kinda titillating to talk about all of these in the same vein but they are not.

    More importantly, I can sit and speculate about these as well. Of course that would be foolish if I can’t come up with concrete rationale behind such speculation. But, yes, idle speculation is still titillating.

  59. Greg0658 says:

    I think the question is backwards .. Q: who is to survive the spectacular implosion? A: the super corporations of the WTO and their minions connected with cell phones & paypal

  60. Transor Z says:

    Bring on the frikkin locusts

    Isn’t that an old Echo and the Bunnymen song? :-)

  61. sinomania says:

    Ten years ago everyone said China was overheating and ready for collapse and revolution without Deng Xiaoping. Ten years before that same story. Ten years before that….every year since 1949 when we “lost” China, we say China is ready to break apart, implode, explode, collapse. By 2020 China will be TBTF, if it’s not already.

    Out of that list my money is on Japan – fundamentals, debt, demographics, the overall anomie of the people, and rising anti-Americanism don’t bode well.

  62. perra says:

    1. EU
    2. US

    75. China

  63. [...] Financial analyst Barry Ritholz recounts how, over lunch with a fellow analyst this week, the conversation took an interesting turn: [...]

  64. JSchmid says:

    Since our politicians have enrolled us in to the frame work of “mutual economic destruction” a full collapse of any one of the 5 would result in a almost collapse of the rest!

    If you are not familiar with “mutual economic destruction”, the basics is to intertwine the economies of every country so much that any collapse would result in the rest to collapse. It was originally promoted by progressives in the 60s as a means of preventing nuclear war, or any war to end with an all out victor.

  65. Julia Chestnut says:

    Darn it, I got an advanced degree in this question (international relations and international economics), and yet I don’t feel like I have an informed opinion. To me, the places that seem most likely to “implode” aren’t on the list. Japan isn’t going to “implode,” so much as totally disengage (again) from the world economy, I think. I don’t think that the central government of China will allow/admit failure, just another few million peasants will die. That’s how they run an economic disaster over there.

    I agree that Mexico is disintegrating. Mexico has experienced increasing theft and worsening social injustice since the 1920s, which I think was the first round of failed land reform. Things have been getting increasingly worse, incredibly worse. I believe that a violent revolution or a civil war between the narcotraficantes and the government is coming. I expect that they will be the next country to genuinely “implode.”

    As someone notes about South Africa above, there are a number of countries in Africa set to implode. Pakistan is in bad shape. Iran/Iraq is in serious trouble.

    I don’t think that “implosion” as I would use that term is likely in any of the places that you list. At least not within the next decade.

  66. DiggidyDan says:

    China due to hubris and disparity.

  67. DiggidyDan says:

    Definitely NOT Australia!

  68. Guambat says:

    OK, I peeked. But I still think Japan. Its population is already imploding:
    http://guambatstew.blogspot.com/2010/03/getting-bit-long-in-ha.html

  69. TripleB says:

    China on ‘Treadmill to Hell’ Amid Bubble, Chanos Says

    http://www.bloomberg.com/apps/news?pid=20601109&sid=an0ehK2dtdXg&pos=11

  70. perra says:

    This new 2010 Political Risk Map from Aon is very interesting:

    http://www.aon.com/risk-services/political-risk-map2/images/2010_PE_Risk_Map_low%20res.pdf

    If the link to the pdf does not work you may have to register here (free):

    http://www.aon.com/risk-services/political-risk-map2/index.html

    The map includes various political risk, including sovereign debt non-payment risk.

  71. hpinRaleigh says:

    No implosion likely for North Carolina.

  72. Dow says:

    Saudi Arabia

  73. andrewp111 says:

    I say Japan and the EU are the most likely to have a spectacular implosion. Japan has been doing QE for 20 years and should be reaching the end of its tether sometime this decade. The EU has high leverage, and poor internal political cohesion. And those two have the very worst demographics in the world. China is a dictatorship, and has already reversed its 1 child policy. If they needed to they could implement a 10 child policy tomorrow, and require all their fertile women to be pregnant all the time. The US can have some hard times, but will make it…. Although the Democratic Congress could have a spectacular implosion this November !!! And India is early in its delayed rise, and will be fine.

    Iran and Israel will probably be the first countries to fight a nuclear war since WW II. But the destruction of Iran will probably pave the way for the creation of the third Caliphate, which will be very very bad for us all. A new Caliphate would guarantee WW III.

  74. pdzxc says:

    Greenland. This country has never defaulted, so the odds are really stacked against it. How much longer can it hold out?

  75. PhilM says:

    Canada, Chile, Mongolia, New Zealand, Switzerland are probably stronger in the future.

    A major implossion is likely in Greece, but the Europe is still a highly heterogeneous region with growth engines. In the short run, the economies might boom after the Euro falls to 1,1-1,2. European car makers will become competitive again, offering highest quality at low prices.

    The most likely trigger for a major implosion is probably the oil price and this will lead to food price increases.

    Therefore, my candidates for MAJOR implossions are countries with strongly growing populations, low resource endowments and relience on food imports. That’s why, I would set Egypt and Bangladesh (maybe India) on top of the list – even though the economic consequences on other countries might be limited. Some scientists argue that the sea level will slightly increase. If that is the case, millions of people in Bangladesh might be in danger. The ratio of agricultural land to population is getting more and more extreme in many countries, not least Bangladesh. (by the way, even though Japan has a shrinking population, they still highly depend on food imports – in this sense, they might also be a candidate).

    In the short term, China is overheated and will see a contraction that affects the stock market, real estate markets and will put millions out of work, but I don’t think that there will be MAJOR problems. The same applies to Greece. They are already practically insolvent, but will not starve or have revolutions with thousands of people dying. I think the Americas and Europe will be a comparatively stable region.

    Malthus is probably the most disliked scientist of all time, and so far his warnings have not proven correct. But unfortunately the race: food production vs. population growth is still on. The population might loose this race (by growing stronger then food production) in some countries like Bangladesh… Interestingly, exactly this anti-marxist thought has led China to impose their one-child-policy – with mixed results at best.

  76. Darkness says:

    India is a raft economy and rafts are very hard to sink outright. 1. China being monolithic is ripe for a serious correction, not sure implosion will be the right word. 2. Mexico, for all the reasons listed above. Maybe we can have the national guard actually guarding the u.s. like they are supposed to be this time around. 3. EU hasn’t fixed their banking problems and this time there is no backing from the U.S. via AIG to bail them out. Germany only bailed out Greece in a bid to kick the can down the road and avoid a real reckoning on the current leadership’s watch. 4. Can I list California rewriting their constitution from scratch?

  77. mathman says:

    @ PhilM:

    Yeah, scientists like Malthus, environmentalists like Ehrlich (population) and Hubbert (Peak Oil), & even sociologists like Catton are discounted because they can see the end result of our unsustainable global policies and direction, given enough time. Most of humanity, being far less intelligent, only react to conditions as they are (“i don’t see a problem”) and continue along until they can’t.

  78. Greg0658 says:

    “if they needed to they could implement a 10 child policy tomorrow” .. that is not an answer

    and Thanks for the followup posts .. for doing that business for me very fine.

  79. pm says:

    That is a short list and there are so many possibilities.

    My guess is that it is China. Remember that they still have 800 million people that are dirt poor, let alone the big city people that are learning too much for their own good.

    Add to that demographics, their need for continual growth to keep everyone happy and employed and you have a recipe for instability.

    Big question is how severely the government will enforce their will and not evolve. They are pretty good at enforcing – this is the same government that starved 30 million of its own people.

  80. cyaker says:

    I would say the U.S. but not for the obvious reasons. While I didn’t read all the posts only the choices I didn’t notice very many people focusing on our Military Empire and I am not referring to Iraq and Afghanistan. According to Chalmers Johnson (of Blowback fame) we can not continue to project our military empire worldwide.

  81. bc0203 says:

    The question is too simplistic because everything is interconnected…

    China does have massive problems due to it’s most recent stimulus spending, but most of those can be contained within it’s borders. Banks are under government control and therefore that crisis “managed” politicallly (extend and pretend, etc.) The real damage will be done to it’s trading partners and investors as domestic demand for imported goods tanks and foreigners get stiffed on their investments (e.g., municipal bond holders, etc.). This will probably start to play out in the 2012-2014 timeframe.

    The European Union will probably not survive the next 10 years in it’s current form, as political and economic forces put it under increasing stress. Beyond the short-term sovereign debt issues of the PIIGS and the still unresolved banking crisis, the new structure enacted by the Maastricht Treaty leaves smaller nations feeling like their polical interests are not fully being taken into consideration. On top of all this, massive demographic shifts in most EU countrries that will increase entitlement spending such that budgets will breach the 3% GDP limit allowed for membership in the Eurozone. My prediction is for another banking crisis and multiple sovereign defaults over the next 10 years. When it’s all over, the EU will probably continue as a trading bloc, but there will be several currencies, and the Euro will play a much diminished role. All this is startting to play out right now, and will continue to play out over the next decade (and beyond). Whether it plays out as an implosion or a slow boil will depend on a) how well it’s managed from within the EU and b) interaction with the rest of the world.

    India’s biggest vunerability is it’s reliance on external sources to fund it’s public debt. The situation looks sustainable for the next 10 years – unless the global economy tanks further and there’s no one to buy their debt – at which point they’ve got problems, and not just from a sovereign debt standpoint.

    Historically, Japan’s soverign debt has been financed internally. There are conflicting accounts as to when they are going to need to switch over to external financing , but within a few years of doing so, the situation is rapidly going to become unsustainable based on having to pay market rates for their debt. I’m betting this process will begin within the next 10 years, but they won’t be the first to implode.

    The most likely scenario for an implosion with the US is as follows: increasing numbers of states and municipalities defauut on their debts; there is another wave of CMBS and RMBS failures, peaking in 2012; there is another banking crisis as a result of not fixing what happened the first time around (then giving the bankers free money to “invest” in equities – and even derivatives!); the Fed takes more toxic assets on their books as a result of said banking crisis; and govenment entitlements continue to increase. All of this will result in rates going up sharply on US Treasuries, making the long-term cost of financing unsustainable. The only thing that could keep interst rates low for the US is if another country blew up first and more specacularly, at which point there would be a “flight to safety” in the US dollar. Still, this would only be forestalling the inevitable.

    So, with the above in mind, in terms of what’s going to happen in the short term, I’m betting on series of sovereign debt defaults in Europe concurrent with a series of municipal defaults in the US. Shortly after that will be the start of a new global banking crisis, which will hit earnest no later than mid 2012. Governments that can will step in and “help,” which will set the stage for another wave of sovereign debt defaults later in this decade.

  82. oulous says:

    China: Implosion yes but not spectacular. They have too much momentum, too much hunger. Somehow they will find a way out of whatever bubble they pop and emerge stronger.

    Europe: Ooooo tough call. Europe is a delicate place knit together by a brilliant idea poorly executed. The EU will soon stand for Everyone Unemployed if things keep going the way they are. The corruption of places like greece and italy are so bad, so epidemic they could bring the whole thing down even without the help of a global crisis. I think europe has the most potential for a spectacular or a Secuspectacular implosion. The core group that consists of countries with actual real economies will emerge wounded but ok, the outlying Wurm’s will go into third world mode. Not really spectacular because it wont lead to a huge war but seeing the EU implode and die will be a grand scale event.

    India: No way. Also too much hunger and too many people already living in hell… if things fell apart people would just deal with it and rebuild. To have a spectacular implosion you can’t have a country that already looks imploded.

    Japan: no.

    U.S.: Such a hard call here…. we have pinned so much on distraction and the handling of money. We buy distraction and send our best minds to wall street. We are losing innovation on a global scale and failing to implement a new economy that should be based on science and technology and not manufacturing. We have resilience and thats our only hope. For a grand spectacular implosion the US is number one, for a crack up boom not so grand implosion the EU.