Futures Group

I’m a lover of infographics, as you probably know. The Financial Times recently came out with a new map of global banking, and it has been reorganised over a mere eight years. The ‘rise of the rest’ comes in dramatic spurts sometimes. China’s three big banks dominate the rankings and so do Australian and Brazilian banks.

Harvard Business Review’s latest list of Breakthrough Ideas for 2009 (Feb 2009 issue) is a compilation of 20 interesting trendy issues, and worth a read. Particularly:

- Rise of peer-to-peer lending (with tightening credit availability)

- Harnessing Social Pressure (and how to motivate social behaviour)

- Rise of Economics Forensic (rather interesting new field)

- American Diaspora (a mention about Singapore’s success in attracting US scientists)

- IKEA Effect (why people willingly pay more to DIY and become attached to their object of labour)

- Western Union (tapping the consumerism of immigrants)

- Social Networks (information discovery and integation in creative teams)

- Central Nervous System for Earth (using nanotech sensors to monitor virtually everything)

There’s been a lot of conflicting views on the future of demand, as in the capital D for demand. Michael Porter states that as long as the USA is able to keep producing commercial innovations, it will be saved. Juan Enriquez on the other hand sees the US’ off balance sheet spending on the war etc plus the current bailout bringing the day of reckoning closer from 2025 to 2015. Of course, the more common and optimistic view is Obama’s bailout (unfairly tagged to Obama as it is not of his own doing) will create jobs through infrastructure investment and we will see a turnaround by 2010. And then there are others that forsee the collapse of US demand to be replaced by Asian demand. And this is the article that I am attaching below, more for a diversity of views.

Having said that, I just saw some presentation on China’s public spending, and it states we may never see China demand replacing US demand in our lifetime. It will still be China govt-led public infrastructure driven. But for now, here’s Mr Moeller’s article on the decline of the US dollar. The full article can be accessed here.

Asia Looks Forward: The Decline of the US Dollar

Joergen Oerstroem Moeller
18 Dec 2008

The world faces a depreciation of the US dollar, a phenomenon that will result in the transfer of purchasing power from the US to other parts of the world, specifically to Asia and to a lesser extent, Europe. An unprecedented economic decline for the US, never evinced in its history, is on the cards….

…It is almost pathetic to read President-elect Obama talk about creating new jobs to stimulate the American economy by injecting up to one trillion US dollars. The money is simply not there. In good times, the US spent lavishly instead of preparing for weathering a storm many observes were predicting, albeit not on the scale that was recently witnessed.

…..If the US goes on to print money, and that seems to be the plan, debt will escalate. Some people say that increasing debt will not be a problem, but how can they say that knowing that it has to be serviced, putting an extra load on an already overburdened federal system? It can only be done if spending results in increased production and income, thus enlarging the size of the economy, and even this presumption cannot be taken for granted. Ironically, there are considerable risks that further spending will keep the economy in a stalemate…..

The most recent Global Financial Centres Index confirmed New York and London are the only two truly global financial centres while highlighting Tokyo, Hong Kong and Singapore as Asia’s regional financial centres. With the rise of the rest, Asia’s financial centres will rise in importance. The City of London did a study on what might the future of these three centres look like. There is a full listing of City of London reports on their webpage, where you can download the full ‘Future of Asian Financial Centres’ study here.

Some interesting points raised are as follows:

While Singapore has done an excellent job as a centre of high networth individuals, and as a financial gateway for India, it’s Indian role will fade with time as Mumbai rises. It lacks a hinterland, which Hong Kong and Tokyo both have.

Tokyo has lost its chance to be the pre-eminent financial centre of Asia, and with declining demographics and shrinking domestic market, and the peculiarity of Japanese culture, it will remain a regional center serving Japan.

Hong Kong’s great fortune is to be reunited with mainland China. With China’s rise, it’s own fortune looks good. There are competing centers in Shanghai and Beijing, so the situation is fluid still.

The report ends with noting that it is unlikely a pan-Asian financial center would emerge yet. Rather it’s more of the same regional centers. Asia is more integrated trade wise then financial flow wise. Place and past history, as the report eloquently sums up, cannot be easily overcome. With the collapse of G3 demand, China and India both have a chance to deepen and widen their domestic markets, this further entrenches Hong Kong (and Beijing, Shanghai) and opens up an opportunity that Mumbai will likely grab. Is Singapore content to be the Switzerland? Is there another role it can play?