04 Jan The Best and Worst of 2025 – Part 2

“The 2025 ‘Word of the Year’ is ‘volatility’.” – The Lonely Realist

As highlighted in last week’s TLR, America is looking forward to an economically and politically volatile 2025. More extreme volatility can be expected internationally. Although many disagree with Ray Dalio’s forecast of geopolitical (and economic) calamity at the end of the current Big Cycle, few can disagree with his conclusion that “When countries have big internal disorder, it is an opportune moment for opposing countries to aggressively exploit their vulnerabilities,” already a reality.

What also is true is that big internal disorder is not limited to America. Israel is at war in Gaza, Lebanon, the West Bank, Syria, Yemen and Iran, and Turkey and “Kurdistan” are being drawn into expanding Middle East conflicts. China is threatening to invade Taiwan (China increased its military presence around Taiwan throughout 2024 and now is stepping up the pressure: per President Xi, “no one can stop the historical trend of reunification”), it’s increasing its military activities in the East and South China Seas, and it’s multiplying its aggressions against the Philippines (and others). Democratic South Korea is beset by instability, there have been recent “coups” in Georgia and Romania, France’s and Germany’s governments have collapsed, war continues in Ukraine with Russia at a significant advantage, a new era of war has begun in Africa, and an increasing group of European, South American and African nations are being drawn into Russia’s and China’s orbits. There is the risk of humanitarian crises spreading from Sudan, China continues to buy global influence through aggressive trade, cultural and investment policies, and the imminent ascension of President-elect Trump foretells escalating trade wars. As Trump spokeswoman Anna Kelly recently warned, “World leaders are flocking to the table because President Trump is already delivering on his promise to Make America Strong Again. When he officially takes office, foreign nations will think twice before ripping off our country, America will be respected again, and the whole world will be safer.” TLR hopes she is correct, but recognizes that this will increase volatility…, plenty of volatility…, with President-elect Trump’s appointments for senior Administration positions evidencing a strong desire to dismantle the status quo by undoing globalization and “breaking” things, such as Western bureaucracies, immigrant flows, tax collection, Justice Department enforcement, vaccine policy, etc.

In a Truth Social post last week, President-elect Trump made explicit his Greenland intentions: “For purposes of National Security and Freedom throughout the World, the United States of America feels that the ownership and control of Greenland is an absolute necessity.” TLR predicted this in November. The Trump Administration accordingly will move to pro-actively “protect” American interests, perhaps by stationing “military advisers” in (a newly-independent?) Greenland to safeguard its vast resources from potential Russian and Chinese incursions. President Trump’s former national security adviser, Robert C. O’Brien, last Sunday told Fox News that “Greenland is a highway from the Arctic all the way to North America, to the United States. It’s strategically very important to the Arctic, which is going to be the critical battleground of the future because as the climate gets warmer, the Arctic is going to be a pathway that maybe cuts down on the usage of the Panama Canal”…, which brings us to that very same Canal about which President Trump is “100% serious” about repossessing. Can there be any doubt that American expansionism would trigger robust responses from China, Russia, North Korea, etc.?

And there’s the Ukraine War. President-elect Trump has indicated that he will pressure Ukraine to accept an American-brokered peace. Doing so in the current Russian-favored military environment would reduce Ukraine’s size and significance and result in a de facto Russian border with Romania, Moldova, Hungary, Poland and Slovakia, the very heart of Europe. What then for the immediately-vulnerable Lithuania, Latvia and Estonia? And what possible response can be mustered by a sclerotic (and militarily incapable) EU and U.S.-hesitant NATO?

And what will President Trump do with Iran? President Biden failed to execute an Iran strategy, neither offering Iran a sanctions-relieving olive branch nor electing to pressure the Iranian regime with escalating sanctions (including by sanctioning China and India, prolific buyers of Iranian oil at a discount). President-elect Trump has promised at least the latter, with sanctions, tariffs and volatility-creating pressures designed to bring down the Khamenei regime. If so, how will the Axis of the Sanctioned respond? Moreover, how will India and America’s other allies react? And to what extent will the Trump Administration be prepared to enforce sanctions, tariffs, etc., especially with senior Administration isolationists J.D. Vance and Tulsi Gabbard urging the opposite?

And then there’s China, a frequent TLR subject. Among other things, how will the Thucydides Trap play out? The U.S. Treasury only recently disclosed that the Chinese government had hacked into its classified documents, breaking into a system inaccurately called “BeyondTrust.” What was already known is that Chinese cargo cranes used at U.S. ports could allow Beijing to control them. And the FBI had previously announced that the Chinese government had hacked America’s electricity networks as well as 260,000 internet-connected cameras, routers and other devices that the U.S. government uses for court-authorized network wiretapping requests, exposing 22 million current and former officials to extortion. The list of Chinese preparation-for-war hacking (and other) aggressions is extensive. As FBI Director Wray warned, “China’s hackers are positioned on U.S. infrastructure in preparation to wreak havoc and cause real-world harm to American citizens and communities if and when China decides the time has come to strike.” TLR warned in one of its first commentaries that China and its Axis of the Sanctioned allies were waging a successful war against America, and urged American officials to adopt successful (rather than ineffective) tariff and sanctions responses against China, Russia, Iran, Venezuela, North Korea, Syria, etc. This became a recurrent theme that focused on the escalating militancy of the Axis. There has been no comprehensive American response. Foreign policy experts today are forecasting economic turbulence in China…, with money supply growth in decline, falling loan demand, sinking interest rates, deflation, and a residential real estate bust. Autocratic leaders faced with economic crises often distract their populace through foreign adventurism. What will China do?

We know what Vladimir Putin has done. What will Iran, North Korea and the rest of the world do in 2025?

Finally (from a good friend)

Something to look forward to in 2025: