The inevitable shortage of oil is going to cause real problems, as there's very little that can replace it.
The energy density of diesel is roughly sixty times that of cutting edge lithium batteries (i.e. 60 kg of batteries to replace 1 kg of diesel), and that's going to make life difficult for shipping (wind or nuclear powered cargo ships) and aviation.
That said, the
Skylon project is hydrogen powered, could be developed into a hypersonic passenger plane, and looks like something out of a Gerry Anderson TV show. So it's not all doom and gloom.
So I'd guess that you'll see increasing manufacturing on a local basis. A friend is working on a project to build windsurfing boards in Tunisia for the European market, whereas his competitors use the Far East. That could prove to be a smart strategy.
The issue of an ageing population is only a problem if retirement is set at 65. My father's 67 and is still doing a job that can be physically demanding, and he knows older people in the building trade.
One solution is mass migration, and politicians seem to like that as it doesn't mean any sacrifices by the current generation. But that strikes me as deferring the problem rather than solving it.
There was an interesting piece on asset prices and ageing populations posted
here on the FT Alphaville blog.
My guess is that attitudes are going to change. Retirement in the 70s could well become the norm within a generation, and that's not necessarily a bad thing. It won't be popular with the unions though.
I suspect that the financial industry is in a bubble, and at some point in the next ten or twenty years it's going to be a lot smaller than it is now.
The reason that I'm saying this is that the banking sector is behaving in
exactly the same way as it did prior to the crisis, has been actively lobbying to block or water down reform, but now has an
implicit government guarantee that any losses will be socialised.
So any retrenchment is going to be painful for the rest of us.
The US could go the way of Greece, only a couple of orders of magnitude bigger. Its fiscal position (national debt and budget deficit) are in the same category as the PIGS, only its economy is significantly larger.
Unless they bring in some sort of austerity programme, the best case might well be a Japanese style lost decade or two. The worst case could be a sovereign default on an epic scale.
China probably won't continue to grow at 10% a year.
They've actually got a serious demographic problem there. The one child policy is now over thirty years old, and is going to lead to a rapidly ageing population (the rate will be faster than the EU's).
A few years back there were commentators suggesting that China might never make it to First World living standards as a consequence.
I also suspect that the Party will lose its grip on power at some point in the next decade or two. Whilst the Chinese that I've met aren't that political, I'd expect increasing education and wealth to drive change. The Party isn't that popular, is widely viewed as corrupt by the population, so when it becomes seen as a hindrance it'll go. And probably very suddenly like in Eastern Europe.
Lastly, house prices.
Procter and Gamble and Unilever are predicting that consumers won't be buying much in the next five years, and that the economy will be pretty flat for that time. (See
here and
here.)
OK, that refers more to the US and EU market than Australia, so it depends on what extent they're decoupled. But it looks like the next few years are going to be a lot poorer than the last decade, unfortunately.
If I can put my Doom and Gloom hat on a for a second, it's possible that prices in 2033 might not be that much higher than now.
Suppose that Steve Keen was proven right, and thereafter prices rose with incomes (I'm using 3.5% per annum as a rough figure) then they'd be worth about 30% more in 2033 than they are now.
My last prediction is that house prices will collapse by 50% the minute I buy one.
