HTC Desire HD Promo Video

This is a very well-made video by HTC on its latest Android smartphone, the Desire HD.

I still can't decide if I should buy it or the iPhone 4 for my next phone.

Oil Market Tightness by 2015

The Oil Drum has reported on the presentation given by geologist Jeffery Brown at the ASPO-USA 2010 Peak Oil Conference. The inventor of the Export Land Model, Mr. Brown was reported to have highlighted that Saudi Arabia could stop being an oil exporter by 2030, and that rapid demand growth in China and India could crowd out the rest of the world's demand:

He pointed to the problems that Venezuela is seeing, and noted that consumption in Saudi Arabia is rising at 6.9% a year. He anticipates that Saudi Arabia, until recently the largest exporter (now behind Russia), will stop exporting before 2030. Looking at the top 5 exporting nations, who collectively supply 50% of the imported oil around the world, he anticipates that they will have shipped half of their remaining export volume in two years. There are now only 33 countries that produce more than 100,000 bd. And, for these, production is sensibly flat over the past five years, while consumption has risen from 16 to 17.5% of production.

While unconventional oil is supposed to be a positive contributor in the future, he noted that when Canada and Venezuela are combined, production is actually falling. The worrying factor is the combination of China and India, who have increased imports from 11.3% of the total in 2005, to 17.1% in 2009. If this continues they will consume 25% of global oil exports by 2015, which will significantly reduce the amount available to the rest of us.

You can read the report from The Oil Drum here.

Perhaps something to think about when you plan to buy your next car.

Video: Meltup

This is a highly-educational video on current US economic conditions which highlights the risks of hyperinflation in that country. While this is not directly related to Singapore, the fact that the US is the largest economy in the world and currently the most important source of global liquidity (due to the Federal Reserve's zero interest rate policy) means that any problems there will have serious repercussions on our small country.

'Biblical' Plague of Locusts Hit Australia

Australia has been hit by possibly the worst locust plague in a 75 years. According to this news report from the UK, farmers are warning of a grasshopper plague of 'Biblical proportions'. Up to 2.5 million hectares of infested land are now being treated by various agencies in New South Wales, as reported by ABC Australia.

Given that Russia now has stopped exports, and Canada is going to lose 17% of its wheat crop due to floods, it looks like the outlook for food for the next year will be increasingly challenging. With a 75-day inventory of rice at present, it looks to me that we are quite near to edge, 1 crop failure away from famine some place in the world.

Look for higher prices in food. Prepare for it accordingly.

Economic Crisis and Class Warfare

While there is now talk about currency wars between countries, there is now also talk of class warfare in the developed nations of the West, especially amongst left-leaning publications and websites. The proclamation of the death of Marxist ideas appears to have been somewhat premature.

Such talk arises because of the perceived injustice of asking citizens to endure austerity and reductions in social spending while their governments bail out banks and their shareholders with taxes paid for by the same citizens. As noted by the International Labour Organisation, worldwide employment is unlikely to recover until 2015, and this reduction in economic prospects for working citizens understandably causes anger about the moral hazards of bailing out people who have made poor investment decisions.

We can easily sympathise with the sentiments of the Irish taxpayers when we are confronted with an example like Russian billionaire Roman Abromavich, (owner of Chelsea Football Club) threatening to sue the Irish government when the latter spoke of exploring the option of defaulting on the subordinated debt of the Irish National Building Society. Why should innocent Irish taxpayers bail out bondholders, most of whom are supposed to be sophisticated investors? We can easily imagine the indignation of American taxpayers when Berkshire Hathaway vice-chairman Charles Munger said ‘Thank God’ for bank bailouts (Berkshire owns are large chunk of Wells Fargo Bank) and told them to ‘suck it in and cope’. Something is terribly wrong when the poor subsidises the rich.

On the other hand, people who advocate class warfare are not without fault either. While bailing out the rich is not fair, thinking that governments can ‘stick it to the rich’ with higher taxes so as to continue present levels of welfare and social spending is equally unrealistic. Raising taxes on the rich will only promote capital flight out of those jurisdictions that try such measures, as amply shown by history. Workers in the developed nations, especially those in the EU, need to wake up to the reality that their countries are broke, and that even if their government taxed 100% of everyone’s income, the outstanding sovereign debts cannot be repaid. They also need to understand that in the age of globalisation, it is not realistic to want to sustain First World living standards when their productivity can’t even match those of the emerging economies in Asia.

Unfortunately, I doubt that the parties involved in this economic conflict will be able to resolve things amicably. From a generational cycles perspective, the Western nations are due for some unsettling times as each side struggle to protect ‘their fair share’ of the economic pie. One likely outcome of this struggle will be an increased level of protectionism, as countries seek to protect their own citizens from global competition.

From a Singaporean perspective, all these things may well mean lower economic growth in the next few years as we move into a more turbulent global environment. We should be prepared for tougher times ahead, and position ourselves to better ride the next wave up when it comes after the storm.

Another Peak Oil Report from the U.S. Military

After the United States Joint Forces Command published its Joint Operating Environment 2010 report in February this year in which the issue of peak oil was mentioned, the US military has one again dealt with the issue in a new report entitled Fueling the Future Force: Preparing the Department of Defense for a Post-Petroleum Environment.

While the report has made some unrealistic assessments about biofuels, it does make an important point, namely that we are currently in a period of relatively cheap oil prices and living under the misconception that there are ample supplies, resulting in prices not reflecting the true value of oil and a lack of incentives to move away from this source of energy. This sentiment is similar to the one expressed by the late Matthew Simmons, who said that oil was too precious to be burnt away in cars as transportation fuel.

The point regarding the lack of incentives is particularly pertinent to Singapore, as one of the reasons for the slow pace of deploying solar energy systems is that they are not economical at current oil and natural gas prices. Whether or not we will be able to make the transition in time towards using more solar energy systems in the future when oil prices are sufficiently high is at present a matter of speculation. That said, from an energy security perspective, it would appear to me to be prudent to start working on the transition now even when it does not make short-term economic sense, since we do not know when supplies will become unavailable even if we are willing to pay the higher prices that will definitely be demanded for the remaining precious supply of oil.

Currency wars

Mexico is the latest country to complain of a strong exchange rate by selling US$600 billion worth of USD options, following loud protests from Brazil. Amongst the developed countries, the EU, Japan, South Korea and Switzerland have all either tried to talk their currencies down or intervened in the FX market to try to weaken their currencies. The reason for such sentiments is plain - everyone wants to export their way out of recession and into economic growth, and with China's exchange rate pegged to the USD, the fear of losing even more market share to China is driving many countries to try to devalue their currencies.

Since balance of payments must always balance on a global basis, it is impossible for everyone to achieve a balance of trade surplus without someone willing to run a deficit. That someone used to be the United States, but since the start of the global financial crisis, Americans have either been unable or unwilling to continue to play this role.

We live in a strange world indeed. In the papers, we read about an economic recovery, but then we also notice that countries are all complaining about strong currencies. 1 side of this story is not true. Which side would you believe?

Looking at things as they are now, if the global economic situation deteriorates further, currency wars could escalated into full-fledged trade wars between nations. One possible trigger could be the US-China row over the RMB exchange rate issue. That may trigger the start of a new wave of protectionism. Sounds a little like what happened in the 1930s, doesn't it?