The problems in the US and world financial markets have had me thinking about the financial system and its stability given the amazing array of financial instruments that are now available and the speed and volume of transactions around the world.
I have been saying for a while now that a confidence/credit crunch could badly affect the Australian economy due to the following facts:
- The percentage of household income that is spent on interest is at an all time high due to much higher indebtedness (yes that is right – higher than during the recession we had to have)
- The growth in the Australian economy, as well as driven by the resources boom has been driven by higher and higher levels of debt.
When interest rates rose and confidence fell there would be a triple whammy on retail spending:
- People would have less money to spend because they would be spending much more on interest repayments.
- Even those that were not in a crisis because of this would start trying to reduce their loans more rapidly as a safety measure against further interest rate rises
- People will become less enthusiastic about taking on debt. Slowing growth in debt funding of the economy
In reality I have been a bit of a Jeremiah as I have been predicting this for about five years and as someone once famously said “economists have predicted 15 of the last 7 recessions” or something like that.
However there are now significant risks in the financial system. I would recommend reading the articles at the following two links to gain an understanding of what the worse case scenario for the US and Global financial markets might look like. The links were sent to me by the Arlington Institute in the US.
http://www.marketoracle.co.uk/Article3677.html
http://www.homerdixon.com/download/from_risk_to_uncertainty.pdf
In an article in the Guardian (Wind power urged for computers ) Professor Andy Hopper of Cambridge University has urged that computer server farms should be moved to areas where wind power is abundant. While this may seem initially silly on the surface it raises the important issue of power transmission losses. Increasingly computer services are bring offered through what is called cloud computing where software and computer storage is run on the web from remote servers rather than on your home PC or laptop. This is resulting in larger and larger “server farms” where large banks of computers are run together to provide the cloud computing services. These server farms use a large amount of power and can be located just about anywhere. Therefor locating them where the power is actually generated will save the transmission losses involved in getting the power from where it is generated to where it is needed. There are a number of issues to be dealt with under this scenario including making computer systems vulnerable to terrorist attack in remote locations but the idea of either bringing power consumption to where the generation is, or bringing generation to where the consumption is has its merits . As Arthur C Clarke once said “
I don’t pretend we have all the answers. But the questions are certainly worth thinking about
This article in the NY Times David Pogue is about the fact that a small camcorder snuck up on him as one ht of the major hits of 2007 and 2008 and as the technology writer for the paper he is embarrassed about the fact that he missed that fact. However if you read the article it is fairly obvious why the product has succeeded - it gives people what they want and it works. So much of tech innovation is focused on adding features that people mostly don’t want - how many times have you heard people complain that they just want a mobile phone that just makes calls. Giving people what they want instead of being a technology focused company can create a great hit.
http://www.nytimes.com/2008/03/04/us/04homes.html?th&emc=th
Eco-terrorism is suspected in house fires in Seattle with a message on the site signed with the letters ELF - short for the Earth Liberation Front which is an organisation that uses arson and other destructive means where it believes that the natural environment is in danger
http://en.wikipedia.org/wiki/Earth_Liberation_Front
There are some fears that eco-terrorist organisations and other more radical terrorist groups may join up under a goal to significantly reduce the earth’s population of humans in order to save the planet. Just on more wild card and trend to keep an eye on
mysupermarket is an internet company which allows you to compare prices on line of the supermarkets that are registered on the site. The site allows you to compare costs between supermarkets but also suggests cheaper or healthier alternatives to some of the products that you have chosen. The combination of this sort of service plus the rising numbers of people with handheld wireless devices and broadband internet access is going to continue the inexorable pressure on prices and margins in retail supply chains.
This article in the New York Times : http://www.nytimes.com/2008/03/02/fashion/02sabbath.html?th&emc=th
describes some of the ways in which people are logging off from being in a connected world, at least for some short periods.
I must confess to feeling somewhat uncomfortable when I do not have some web access for even a short period of time and I recognise that as unhealthy. I have friends who have gone on overseas holidays because no-one can get them there. When I tell them just to switch off their phones and leave a message saying that they are on holidays they are incapable of doing it. I predict that the supply of environments and services where people can log out and relax and reflect will become one of the major new services in the next few years.
Marc Andreessen’s blog has a post on meeting Barack Obama before the Presidential campaign got under way - It is a personal and interesting insight into the man who may become the most powerful person in the world.
An hour and a half with Barack Obama
An article in the New York Times
Number of Adults in US Jails
states that more than 1 in 100 adults in the US is actually behind bars at any one time.
How can we live in a world where that is true in a modern developed country.
There are many things to admire about the US but when we try to emulate them we should be careful we do not go down this path. I read an article a few years back that looked at comparisons of unemployment in the US and Australia because some people were speculating that we needed to adopt US policies to achieve better employment results. I cannot recall the exact numbers but when the figures were adjusted for the number of people in jail and the number of people employed in correctional facilities the numbers basically evened out ebtween the two countries. Food for thought.
Investment funds formed from high oil prices such as those described in the New York Times story
Petrodollar funds
could completely change the strategic international balance purchasing stakes in large ailing multinational companies as we have seen in the wake of the so called sub-prime crisis in recent months. I am not saying that this is right or wrong but that we need to factor these changes into possible futures in order to inform strategy. On a national basis countries like the US also need to consider whether strategies to significantly reduce oil use will have both an effect on oil prices, current account deficits and international geopolitics. One has to question if pouring billions of dollars in oil revenue into the coffers of your strategic competitors is a smart long term move? These factors will all pour into the potent mix that is the debate on what to do in response to climate change.
Eco-mums
The NY Times has an article on how concerned mums are replacing Tupperware parties with meetings on how to be more environmentally conscious and active in their every day lives. While applauding the sentiment I am extremely concerned that assuaging middle class guilt in developed nations is more of the driving force than achieving real change. If we take the example of greenhouse gases we need a wholesale system change rather than small gestures on an individual basis. The sort of activism that these women are involved in can go two ways - it can raise the profile of the issues so we get more action, or it can get rid of their guilt and reduce change. I am worried that the latter is more likely than the first