There is electricity in the air

What a terribly exciting month; so many things have happened in just the span of the last 5 days; the first African-American to have pushed the Americans into a land brimming with the promise on which the hopes of their forefathers banked on; candidacy that was never expeced to run among the leading; least of all to win. Yet all over the world, there has been a sigh of relief; the Asian stock markets abounded with a new life; perhaps there is hope for the economy and world politics at large?

Blame it on my lack of interest in politics in previous US elections, or blame it on my youth; but this isto me definitely a point of history in the making. Never before has globalization bonded continents across in the anticipation of one common outcome, for a country that isn’t even theirs. Africa’s heartbeat can be heard across the news wires; their celelbrations for their much supported representative Obama evident so blatant and stark; bulls reserved specially for feasting upon when Obama would eventually clear the tiles and declare a landslide victory; this was a magic moment; the one which Martin Luther King would have been so proud of he would cry tears of joy; the day of fulfilment of his dream “that one day this nation will rise up and live out the true meaning of its creed: ‘We hold these truths to be self-evident, that all men are created equal.’” and “that my four little children will one day live in a nation where they will not be judged by the color of their skin, but by the content of their character.”

There is an excitement in the air; his youthful energy and charisma seems to have charmed voters and observers in the USA as well as across the shining seas. America’s economy may be down in the dumps, and may have chain-dragged everyone else (participants and passers-by) worldwide, but the extent of the ripple effect of this historic elections has proven one thing– that America is still so tremendously important that we are all banking that we made the right decision in supporting a young, inexperienced senator with what currently seems like little more than many theories and assured calmness that he will not only weather through the stormy ride but emerge victorious. In this present time; he is a symbol of hope that many are deep down praying will not be a mirage.

Further away from the political scene, November is also a month where I rejoice for my friends around. I can’t say it till I hear it for myself, but I believe wedding bells will be ringing soon; a joyous occasion is bursting to arrive. There is a spirit of festivity in the air; an electricity to light up the world that just a little while ago seemed stale and depressed. Trust me, the world is currently less preoccupied with crazy christmas shopping that will eventually manifest towards the month’s end; right now, there are more and greater things that are happening, and all I can say is, life is for the living.

Oh oh, we’re in trouble; Is someone going to burst our bubble?

In 1997, I was in Primary 6, didn’t give a hoot about the world, nor the fact that the Asian Financial Crisis was hitting all the Asian countries in full force, wrecking havoc whose effects on certain countries like Indonesian have left them still recovering from the shock.

This year its 2007, I’m in University, and through my readings and courses as well as of course, my new interest in the world whose effect on all of us I can no longer deny, I read over and over again, about the 1997 crisis. It’s weird to read a Caucasian’s reports on the effects of the Asian Crisis, and weirder to find that it seems in the field of Asian Monetary Policy, there are more good writers from the Western part of the world than from Asian. Even my Asian Monetary Professor is American.

Apart from that brief digression, I really want to talk about the possibility of another crisis, another crash, but this time, perhaps not just involving Asia, but perhaps America (very likely) and maybe also Europe. I’m not advocating that such a scenario is good; but looking at the news everyday that mark yet another all time high on the stock exchange, in Singapore, China, and many other places, where the prices of goods are going atrociously high. In a time and age where the economy is booming, everyone is busy swiping out their plastics to make use of more and more credit, it seems the stage is set for a market correction. Maybe Crash is a word too harsh; corrrection may be more correct (pun intended).

As I mentioned a few posts ago, hedge funds are taking on dangerous amounts of debt, and together with the package, risks that they may be unable to handle.  Everywhere, it seems the press is screaming with news about inflation curbing, in the USA, Thailand, China; all the Central Banks are scratching their heads over whether to maintain or increase interest rates. If you were to keep up with the news everyday, you’d realize that every country seems troubled by any news that may hint at increasing inflation, yet at the same time, investors with money to act on these news are moving capital in and out of countries, hedging their bets that these interest rates increases or decreases will move currencies and bond prices in the direction of their favour.

Everything happens so fast, many are pumping in much money and taking on leverage to accelerate the growth of their wealth. Suddenly it feels like we’re trapped in an air tight bubble that keeps getting larger and thinner. Will it be another bubble that bursts? How can we identify it? Someone wise one said that you can never identify a bubble until it bursts, but by then it would have been too late.

Alas, writing the history of the future is harder than writing the history of the past (in Eichengreen’s beautiful words). Only time will be able to unravel the mystery that has left so many worrying about.

Why America spends no end, and Asia keeps on lending

Let me be more positive: if I had an agreement with my tailor that whatever money I pay him returns to me the very same day as a loan, I would have no objection at all to ordering more suits from him.

—-Jacques Rueff (1965)

America, america,the land of shining seas?

Virtually everything has been Americanized; the TV shows and the movies that we watch, the style we dress in, the foods we eat (think Big Macs, fries and milk shakes), the songs we so easily hum to, the way we speak or have at least accustomed ourselves to, even the way we think, our culture, our tastes. The land of equal opportunity apparently didnt leave any stone unturned in its quest to revolutionize the way the world worked.

America, with its iconic Statue of Liberty as a boast of freedom and independence, and equality, of chances to start a new clean slate, has dominated every part of our lives. The US Dollar, though not as strong as it used to be, is still one of the hard currencies that everyone(almost) recognizes.

It is no wonder that Americans really believe that they can survive without the rest of the world. Generally, the impression they give is one of snobbishness, which they proclaim is innately American, because they are proud of themselves, proud of their culture, proud of any thing American, maybe, with the exception of their President.

The United States of America is one heck of an interesting nation. They advocate freedom of everything, use their flags as underwear, spend like there is no tomorrow, and borrow from their bondholders (think the Dragon of the East, China) so that they can buy from who they borrow. It’s almost impeccable that they continue to be arrogant and disregard the emerging markets of India and China.

Although, they have been aware of outsourcing to India of telephone operater’s jobs and the likes of such, Americans geenrally still look down on Asians. As biased as this sounds because I am Asian, I find it hard to contain my surprise that a nation that is practically sinking in its debt is still hard at work spending whatever they borrow away. They have to be contained by exogeneous factors such as revaluation of the Yuan to curb their unconstrained expenditure, a very worrying sign that goes deeper than just a burgeoning trade deficit.

 Undoubtedly, America’s news affects all capital and financial markets in the world, and everything they do is closely watched by the world around the clock. Every word spoken by the Fed Chairman, by Bush, by Rice and every other person that is important in the States, is closely analysed and deeply pondered over by the rest of the globe. Their impact and influence throughout Asia and beyond cannot ever be denied.

Yet, with the turn of the century, and the chugging economies of Asia puffing away at an exponentially non-stop rate, the question that remains to be answered is not whether the falling Greenback will lose its grip to the Rising Dragons and Taj Mahals, but, when?