102 THE BiG DROP
You could have the worst of both worlds if the Islamic State
takes over Algeria because there would be no oil production
disruption. Then you may see embargos and seizing of tankers.
It could get very messy.
With these geopolitical and domestic energy trends, the
biggest question is what the most powerful central bank will
do in 2015?
The Federal Reserve has hinted, teased and implied that
they’re going to raise rates in 2015. The market believes that
to be true, based on some strong data in the US economy re-
cently. If they do that, you’re going to see a massive emerging
markets crisis and debt defaults for the reasons we mentioned.
You’re going to also see massive deflation. The US may
even go into a recession. That’s what happens if the Fed stays
the course.
If the Fed blinks, which I think they will, and decides not
to raise rates, people will realize the Fed is doing more easing
than expected.
You can look at the dynamics, use complexity theory, ob-
serve the interactions between players, and see the problems
before they happen. The one thing I think you can count on,
though, is a lot of volatility and a lot of danger.