Globalization is based on cheap energy. The "2500 mile salad" assumes that you can truck lettuce from California and put it on the table in New York City at a reasonable cost. Cheap transportation costs propelled China’s industrial sector into a world class supplier. This phenomenon allowed them to build their infrastructure with money from the West. This transfer of wealth provided the "priming of the pump". Conventional oil peaked in May of 2005. What most believed to be an unlimited supply of energy has now proven to be the opposite and there is no silver bullet on the horizon. Economies based on the cheap energy paradigm will go through some radical changes.
Inflation will continue to work against globalization. Besides peak oil, the inflation impact on the price of oil will negatively impact lower and middle class society. Increased prices of food and other staples will force people back to the garden. Many retailers are filing bankruptcy or closing stores. The contraction will be severe. The government’s economic indices understate the problem and will continue to do so. It normally take two quarters for the government to admit the U.S. is in recession and that is now the case. Other statisticians report that the U.S. has been in a recession for more than a year and has a severe employment issue.
Scarcity in resources does not promote globalization, scarcity promotes protectionism. The countries with resources do not want to share their resources but prefer domestic consumption to maintain civil obedience. Hmm! It looks like the great experiment isn’t working too well unless the end game is to bring countries to their knees to promote "merger and acquisition" in the political arena. After 9/11 Americans were convinced of the need to give up personal liberties and freedoms for perceived protection from the bad guys. However, nearly 8 years later and the bad guys are still out there. What a complex world we live in!
On a subtle note, the globalization of currency is working. Once again gold and silver are seen as storehouses of value as they have been for the last 5,000 years. The problem is that governments cannot manipulate them as they have done with fiat currencies. Throughout history every fiat currency has fallen and society has returned to gold and silver. It appears that we are on the fast track once again. Central Banks will fight the upward push in the price of gold for as long as possible. They will do anything possible to keep gold down but to no avail. Once the masses finally catch on, the price of gold will go parabolic. The smart money which is already accumulating gold will be happy to sell to Joe Six-pack at that time just as they did in the tech boom. The transfer of wealth is based on revelation, not information (or all those web surfers would be rich).
America’s financial system continues to fall apart. Alt=A loans will be the next wave of defaults. These loans were made to people with reasonable credit scores but no documentation of assets or employment. What were those lenders thinking? As reported earlier the FASB has delayed their compliance rule to force institutions to place their "off balance sheet" liabilities on the balance sheet. I guess that their sanctioned fraud will continue another twelve months. These acts will continue to erode the credibility of the American financial system and will force foreign capital to find other jurisdictions for their investments. This will severely impact the U.S. consumer nation who has forgotten how to save money- the source of capital investment.
As financial institutions were growing, they were spreading their reach across the globe. Britain’s Royal Bank of Scotland acquired businesses outside their normal market and began to globalize. They are now in reverse: http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4449834.ece#cid=OTC-RSS&attr=1185799
PS Keep an eye on Pakistan, it’s a very dangerous place with nukes.