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Why subprime housing bust/credit crunch, inflation, high oil price, dollar devaluation and raw material price are happening together? Why? pure coincidence? If you care to think deep, you can easily sum it up as "bad luck". No, I don't think it's a coincidence at all.
First, let's look at the net effect these combination of bad events will produce to developing nations. It's terrible, very very terrible.
1) Developing nations must now spend many times more to buy raw material, 2) Developing nations must now spend many times more to buy oil.
3) At the same time, developing nations will suddenly find that their products become too expensive because the exchange ratio went down.
4) Developing nations will sudden find that shipping cost will sky rocket to make their export even more expensive.
5) In addition to export product shipping cost and price, Developing nations suddenly find that the receiving nations (USA and Europe) are nose diving, driving demand for imports down.
6) At the same time, developing nations suddenly find that food cost is skyrocketing.
7) Adding frost on the snow, developing nations find that inflation is ramping up out of control.
Developed nations (USA) will go through some 7 years of belt-tighteming recession. But that's not the point, the point is that all the negative situations are happening at the exact instance to hit developing nations, it's not just one problem. They a dozen mutually reinforcing forces hitting developing nations.
The end result is very clear. Developing nations will be badly hurt. How badly hurt will they get? You can borrow history to learn a few precedence. For example, Asia in 1990s, Latin America in 1980s... The smaller the nation is, the deeper the hurt will be. China is in relatively better position to fend this onslaught because China is not as privatized and open market as its neighbors. Vietnam is in trouble, Indonesia is in trouble. India is in trouble. Domino effect is starting.
China will be hurt but relatively speaking in lesser degree.
Now, I am connecting the dot. I want to point out that why this tidal wave to damage developing nation is to coincide with a near monopoly control of oil resource by USA? We all know what the US can do after they reached the peak of the Monopoly game. Just like a monopolizing landlord can ruthlessly demand rent increase to his helpless tenants. US can use oil to dictate terms to its helpless developing resource scarce nations in Asia, Africa and Latin America.
Finally, funds will be flying out of developing nations to safe harbor. This is what happened to Latin America in 1980 and in South Asia in 1990s. Many poor developing nations' trade surplus dollars will be recycled back to USA. USA immigration will shoot up due to poor job condition in developing nations.
It's all coincidence? Sure, you can still simplify it luck if you want to. :-)
First, let's look at the net effect these combination of bad events will produce to developing nations. It's terrible, very very terrible.
1) Developing nations must now spend many times more to buy raw material, 2) Developing nations must now spend many times more to buy oil.
3) At the same time, developing nations will suddenly find that their products become too expensive because the exchange ratio went down.
4) Developing nations will sudden find that shipping cost will sky rocket to make their export even more expensive.
5) In addition to export product shipping cost and price, Developing nations suddenly find that the receiving nations (USA and Europe) are nose diving, driving demand for imports down.
6) At the same time, developing nations suddenly find that food cost is skyrocketing.
7) Adding frost on the snow, developing nations find that inflation is ramping up out of control.
Developed nations (USA) will go through some 7 years of belt-tighteming recession. But that's not the point, the point is that all the negative situations are happening at the exact instance to hit developing nations, it's not just one problem. They a dozen mutually reinforcing forces hitting developing nations.
The end result is very clear. Developing nations will be badly hurt. How badly hurt will they get? You can borrow history to learn a few precedence. For example, Asia in 1990s, Latin America in 1980s... The smaller the nation is, the deeper the hurt will be. China is in relatively better position to fend this onslaught because China is not as privatized and open market as its neighbors. Vietnam is in trouble, Indonesia is in trouble. India is in trouble. Domino effect is starting.
China will be hurt but relatively speaking in lesser degree.
Now, I am connecting the dot. I want to point out that why this tidal wave to damage developing nation is to coincide with a near monopoly control of oil resource by USA? We all know what the US can do after they reached the peak of the Monopoly game. Just like a monopolizing landlord can ruthlessly demand rent increase to his helpless tenants. US can use oil to dictate terms to its helpless developing resource scarce nations in Asia, Africa and Latin America.
Finally, funds will be flying out of developing nations to safe harbor. This is what happened to Latin America in 1980 and in South Asia in 1990s. Many poor developing nations' trade surplus dollars will be recycled back to USA. USA immigration will shoot up due to poor job condition in developing nations.
It's all coincidence? Sure, you can still simplify it luck if you want to. :-)
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