Welcome to 2005! - So now what?

I've been wondering what to kick off the new year with for a few days - and to be honest, I've been stumped - the news has been mostly mindless mush as far as political events go - everything has been overshadowed by the Tsunami in the Indian Ocean.

Not to trivialize those horrible events, but every writer this side of creation has written their two cents about the "horror of it all", and how the "world should chip in and help". That's lovely - and, by the way, I agree with them. But the world doesn't need another writer babbling about helping the peoples of the affected countries.

Instead, I thought I would spend a bit of time thinking about what the coming year might bring with it, and what bears watching.

In Canada, we have a shakey minority Liberal government in Ottawa. If there's anything of interest there, it is the question of when, and why the government will collapse, sending voters back to the polls once again.

On the world stage, Iraq itself becomes something of a background story. I think it's pretty clear by now that George W. Bush's plans for a quick "in-and-out" operation in Iraq have bogged down in a quagmire that only Tolkein's Nindalf (dead marshes) could approximate. The odds of US troops reducing their presence in Iraq in the forseeable future is close to zero.

However, Iraq is a big player in the story - along with Iran, Russia and China. The US economy is just starting to dig itself out of the doldrums that were setting in just as George Bush was elected to his first term in office. However, the wars in Iraq and Afghanistan have caused the United States to take on an enormous, and ever growing level of debt as they try to finance the prosecution of George's so-called "war on terror".

Iraq, along with Afghanistan will serve as significant millstones around America's neck on the world stage. Pride alone prevents the current administration from pulling back and letting those countries set their course.

Perhaps more interesting is the Iran/Russia/China triangle. China and Iran are making huge deals with one another for resource and economic exchanges. (Recently, Iran signed a deal worth $100bn with China to supply China with natural gas) China has been propping up the US dollar by buying all kinds of US securities. I doubt that China is going to look too favorable on the US going after Iran - and they now have the raw economic clout with the US to have a considerable influence on their actions.

The second part of the triangle is Russia. With Putin tightening his grasp on the oil sector in that country - not to mention the fact that Russia sits on reserves that rival those of Saudi Arabia, he stands to become a significant thorn in the American side. Not only is Putin an ex-KGB man, but he will soon be in control of sufficient oil wealth to alleviate significantly the EU's dependence on Middle East oil. Potentially this puts a significant hole in the Bush doctrine's plan to prevent any other power from rising to prominence.

With an aging monarchy, Saudi Arabia may not remain a "steadfast" friend of the United States for much longer. I suspect that country will become very unstable when the current king dies. (There are far too many "princes" in that country, and I dare say that more than a few of them covet the throne - and that doesn't even begin to open the conversation around the religious leaders, whose tolerance of the current regime is merely a matter of mutual convenience)

Great - so here I am babbling about all of these large goings-on on the political world stage - how does this affect the US?

To me, the US economy becomes the lead story of the coming year. Everything about the Bush doctrine of 'pre-emption' depends on the US maintaining its military superiority. The only way it can do that is if the US manages to maintain its economic superiority over the rest of the world.

If the dollar were to suddenly free-fall on the world stage because China and other countries stopped buying US securities, how many billions of dollars are going to flock home to the US, leaving the economy in a situation where it has to absorb dollars currently 'lurking in reserve' for other countries? The US already has a massive trade deficit with the rest of the world as it is, with its consumption rate far exceeding its production.

Further, US plans beyond Iraq (e.g. Iran) depend on their ability to stabilize Iraq, and move their military focus elsewhere. With China standing with Iran (China being the fastest growing economy in the world right now), invading Iran just became a lot more complex and costly. Worse (for the US), is that the Chinese government just happens to own huge amounts of US debt right now. That puts them into a position to start dictating to the US...on economic terms.

Right now, everything in Bush's political fortunes rests on the ability of his country to navigate the shallow waters of an economy burdened by mounting debt, and a seemingly intractable foreign policy.