Supply of Rubber

I’ve been talking to a friend of mine and she’s very much interested in the rubber production. And because of that, I went to reading about it. I was a bit surprised to know that the market is close to having a shortage in supply.

With the booming automotive industry in China and India, their rubber production has a deficit of more than 50,000 tonnes (if I remember correctly since I just browsed through). They are having problems not only because of the increase in demand, but also in the climate. Rubber grows well in a tropical climate, and although these two countries have a big chunk of land at their disposal, not all of it is suitable for rubber cultivation. Continue reading Supply of Rubber

Economics explained in a different light

I can’t remember the last time I wrote something that doesn’t really have a direct implication on me. I guess I’ve been selfish. Now I’m feeling guilty about it so I decided to browse on the paper, business page of course. There’s this news that caught my attention:

NEW YORK : A record 46 million tourists visited New York in 2007, in a sign of the city’s dramatic recovery from the aftermath of the September 11 attacks six years ago, according to estimates unveiled Sunday.

The record figures included 8.5 million foreign visitors, who together with domestic tourists pumped some US$28 billion into the local economy, Mayor Michael Bloomberg announced.

“This incredible surge puts us well on our way to reaching our goal of drawing 50 million annual visitors by the year 2015,” Bloomberg said.

“It’s helping to bolster our local businesses even as the economy is slowing down nationwide,” he added.

I’ll be a little too serious again, but please bear with me.

See the thing is, New York is a place that is basically made by steel and concrete, yet it is able to command such a strong income from tourism alone. This is the same strategy that Dubai is doing. Continue reading Economics explained in a different light

Is America really in trouble this time?

There is quite a number of articles about the US Government’s dilemma with their economy. I thought about a month ago when I wrote about the US Fed cuts, their economy would stabilize.

Then there is this news (from Channel News Asia) recently about Citigroup’s announcement of 17,000 lay offs for April of next year. Now this is something that should really rattle USA. For one, Citigroup is the second largest banking group in US. For a country as America that would entail a certain level of stability and a sound financial health.

Apparently, the lay offs are due to their massive losses from delinquent mortgages. They are not able to cover up for these losses. Normally, write-offs would be a standard operating cost for banks. Whatever happens, there will always be people who will not be able to pay.

This time though, there is a significant number of write write-offs. If I’m not mistaken, the range is between 8-11 Billion Dollars. In lieu of this, the Abu Dhabi government is reported to invest 7.5 US Dollars in exchange to 4.9% worth of equity units.

This means that Abu Dhabi government will own that same percentage of the second largest banking group in America. Although they have waved the rights that common shares would normally have, like designating a member in the bank’s board of directors, I think it would be taken into opposite lights by US citizens.

Still… well it is their country. So far, Asia has not manifested any adverse reactions to US’s predicament. Here in Singapore, real estate is still booming including tourism. At the very least, most of the countries here has not been daunted by what’s happening on the other side of the globe.

I think it’s safe to say that investors here are still confident that they will get returns from their money. I have always believed that a country can only be as strong as its people. If the problem of Citigroup is caused by delinquent mortgages, there are a few things that can be deduced from this.

One, the people are getting more irresponsible. Paying debts are individual’s responsibilities. The same as it is their decision to mortgage their houses in the first place. Second, probably the cost of living in America can no longer be supported by the minimum wage. That means they should start rethinking all their Fiscal and Monetary policies.

These are just a few of the many reasons. Bad judgment call from officials, inadequate planning or even wrong attitude from the masses. The list can be very long, and Economists can stay up for days, weeks and months trying to solve this problem.

One thing I’m sure though. If the rest of America does not take this seriously and remain lax, they would still be forced to suffer another recession. That wouldn’t be good.

With a lot of economies currently surging upwards like China, America couldn’t afford to slack anymore. Otherwise, tables might actually turn on a different direction.

Note:I have been too engrossed with my social life recently that I forgot something that I am really passionate about. I hope I corrected that right now.

US Fed Cuts Interest Rate

Recently there has been a lot of news about US’s interest rate cuts. The whole world is looking out for the Fiscal Policies of US. Usually, people will just assume that since US is so big, tendency is it will affect the world economy.

But why?!

Actually, it’s not supposed to be this way. A single country’s Fiscal or Monetary policy should not be able to affect the rest of the world. The real reason is that the world’s economy is distributed unevenly that’s why if US, Japan, Europe and even China changes their economic policies there’s a big probability that the rest of the world will be affected.

That is a fact. We can not change that. So how are we affected by the Fed cuts? For one, since interest rates are cut this means that savings will be cut. Sounds bad? Not really.

Although savings is cut, investors now are able to borrow money in confidence due to the lower interest rates that they have to pay. In other words Fed cuts actually encourage investments. More investments means more new businesses and this equates to more jobs as well.

How does it affect the rest of the world? Pretty simple. US is a rich country. Meaning if you compare, people there are richer than people from third world countries. (I mean in comparison ok?! you know what I mean) So if investors are to build their businesses there, it would be more costly.

That’s why American firms invest in other countries and actually put up business there. Everything will be comparatively cheaper. And whatever the surplus of the production is, they can also sell this to the local consumers of that country.

This is one of the reasons why Fed cuts were even made in the first place. (One of the reasons because you don’t really expect economics to be this clear cut)

So, remember when I wrote about the invisible hand theory of Adam Smith? You can relate that to this. Let me fill you up about what it means:

“…[B]y directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was not part of it.”

Going back to the Fed cut, in a macro economic perspective. If US is able to stabilize it’s economy either by it’s fiscal policies or monetary policies, it will also be good for the rest of the world.

Meaning… Americans and the rest of the world can not afford to have a moron sitting in their public offices. haha!But seriously US should hurry up and fix their problems. Otherwise, economies of different countries will continue to be confused as most of the business news are saying now.