Another week – Another Disaster (Mon 11/11/2013)

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As we learn of Typhoon Haiyan which thrashed through the Philippines over the week-end, totally devastating that country, On this Remembrance Day, we would do well to perhaps think also of those poor souls who lost their lives – Over 10,000 by the latest reckonings – and no doubt this figure will rise as the latest information comes in, With Vietnam now on the receiving end of the now tropical storm, we need also to consider what the costs will be to the wider economy.

Many purchasers of tech products will no doubt have seen “Made in Vietnam” or “Made in the Philippines” stamped, if not on the outside of the box, then on components and sub-assemblies on the insides.

Global supply chains now extend over many countries, and particularly in South-East Asia, with the skills and abilities of the people to build and repair the many damaged factories and logistics chains perhaps unavailable as these people are occupied just surviving and re-building their own lives and homes – will this affect global markets?

This may have devastating consequences for Global Corporations with facilities in the area of the Storm.

Insurance corporations too, may well be hard hit, as the strongest storm ever recorded with wind speeds in excess of 320Kph were recorded. With Hurricane Sandy still so fresh in Americans minds, Katrina of a few years ago, and now the most recent of these storms causing billions of dollars worth of damage, many will be questioning, “What do we need to do to stem these devastating events?”

One answer maybe to take personal responsibility and to slow consumption of oil-based commodities – particularly those which do not get re-cycled. Though even here, one has to consider whether the amount of energy spent in re-cycling, exceeds that which would be used to produce another product of like or greater capability – “What’s the point of re-cycling my old phone, if I also need a new one, which uses less energy to produce and uses energy more efficiently going forward, and recycling would use more energy than that retrieved?” we might ask.

One also has to consider the cost of capital and energy used in building the plant and equipment used to carry out the re-cycling with efficiency.

In a world of limited money (as was the case before the world of elastic currencies) the users of capital would compete for scarce funds, and this would drive up interest rates, as happened in 1906 when the San-Francisco earthquake caused devastation to that city, and Insurance corporations had to disburse to companies and individuals to help in the re-building process, which caused a liquidity trap, and helped precipitate the 1908 financial crisis, which eventually ushered in the Federal Reserve some 5 years later.

These are not easy questions to answer. Without the statistics readily to hand, individual consumers cannot make these decisions easily. This therefore places greater emphasis on transparency and full-disclosure made available by enforcing legislation at the State and International levels.  European legislation here therefore has a bigger role to play in proposing and enforcing these legislative practices.

But we might also wonder, if some countries return to commodity backed currencies (Precious metals being the most likely) then the chance of that happening again increase unless savings increase in line with interest rates. BUT, what would rising interest rates do for the Western economies, given how much has already been borrowed from the printing presses of the Federal Reserve and PBOC and Banks of England and Japan? 

The South East Asian area has had more than its fair share of disasters in recent years too, with the Boxing day Tsunami of 2004, and the one which devastated Fukushima in Japan in October 2011, and to make matters worse, there is increasing volcanic activity in the region with explosions and plumes in Sumatra, and Sunda Islands of Indonesia, Papua New-Guinea and all along the edge of the Australasian tectonic plate.

Is this the start of an era which calls upon the whole world to come together, to assist one another, or are we going to revert to type and become protective of our individual territories and economies, that resulted in the events of the early 20th Century? 

We shall see…

W.

 

 

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