Except of course this is impossible. A DM cannot possibly simulate reality, no one person can. It will ultimately react in a way you feel is realistic, not necessarily what truly is.
Also, what about the parts of the world that have no interaction with the PCs? DO you create stories and events for those parts of the world all on your own?
For example, if the PCs are on continent A, with no connection to continent B, do you keep track of the factions on continent B completely separately? Do you track the sociological, political, economic, and environmental factors of the factions in continent B to check to see if they gain the will or means to travel to continent A? Are the Bs explorers, merchants, conquerors? How can these complex relations happen realistically off screen without it being DM fiat (not that there is something wrong with that - but it is not "realistic")?