Government

US Sen. Chuck Hagel of Nebraska had this great quote:

"To question your government is not unpatriotic — to not question your government is unpatriotic."

As clear as black and white

Who said "God caused Hurricane Katrina to wipe out New Orleans because it had a gay pride parade the week before and was filled with sexual sin?" No, it wasn't Barack Obama's loose-talking black pastor, the Reverend Jeremiah Wright. It was John Hagee , the ultra-conservative white pastor from Texas. He also said this: "All Muslims are programmed to kill and we can thus never negotiate with any of them."

Republican presidential candidate John McCain actively sought and got the support of Mr Hagee whom he has praised and embraced. Here are the questions you need to ask yourselves: why did the American media and many Americans knee Mr Wright in the groin for his outrageous sermons but give Mr Hagee a free pass for his hate-mongering remarks? Why was so much poop flung at Mr Obama for his association with Mr Wright but none at Mr McCain for being pals with Mr Hagee? Why was Mr Obama forced to denounce Mr Wright but Mr McCain wasn't made to do the same with Mr Hagee?

Actually, the answers are easy. They're as clear as black and white.

SCMP, Michael Chugani
May 21, 2008

THE price of oil may soon hit $200 a barrel—or so, at any rate, believes Shokri Ghanem, Libya’s oil minister. A few years ago such a prediction would have seemed absurd. But the price has doubled in the past year and has risen by 40% this year alone. It touched yet another record, of over $135 a barrel (before dipping slightly) on Thursday 22nd May. So more spectacular increases seem all too plausible.

The immediate trigger for the latest jump seems to have been an unexpected fall in American oil inventories. But stocks, although falling, are not particularly low: in America, they are only slightly below the average of the past five years. Supplies of petrol and other refined fuels are actually a little above average. And since demand for oil and petrol are falling in America, lower stocks are not as much of a worry as they might normally be.

Mr Ghanem’s explanation for this curious state of affairs is to blame speculators, who are investing ever more enthusiastically in oil futures. Many others share his view. Joe Lieberman, an American senator, points out that the value of investment funds that aim to track the price of oil and other raw materials has risen from $13 billion to $260 billion over the past five years. He blames these “index speculators”, for a big part of the commodity-price increases. He and his colleagues in the Senate are so worried that they are contemplating measures to curb the traders’ exuberance.

Yet few bankers agree that speculation has much to do with price rises. For one thing, indexed funds do not actually buy any physical oil, since it is bulky and expensive to store. Instead they buy contracts for future delivery, a few months hence. When the delivery date approaches, they sell their contract to someone who actually needs the oil right away, and then invest the proceeds in more futures. So far from holding oil back from the market, they tend to be big sellers of oil for immediate delivery.

Thanks to Economist.com 26/5/08

Singapore feels inflation squeeze

INFLATION is now public enemy No. 1 in economic terms, as fast-rising prices replace slowing growth as the Government's main worry.

'We are facing risks on both sides, but the balance of risk has shifted towards inflation,' said Ministry of Trade and Industry (MTI) Second Permanent Secretary Ravi Menon at a press conference yesterday.

'We expect food and oil prices to remain elevated in the near term and to feed through into domestic prices,' he said.

The MTI released figures yesterday showing that the consumer price index (CPI) had reached a fresh 26-year high of 7.5 per cent last month. The CPI is a key inflation indicator.

The ministry also yesterday raised its inflation forecast for this year.

Its full-year forecast range for CPI inflation is now 5 per cent to 6 per cent, up from 4.5 per cent to 5.5 per cent. This is the second time it has revised its forecast since the start of the year.

Straits Times 24/5/08

Emerging Market inflation revisted

Back on one of my favourite hobby horses again today - global inflation. The graphic on the left is courtesy of Economist.com

It's really difficult to see what the medium long term implications of inflation in oil and other commodities are likely to be. Thei seems to be the end of a golden age. The future looks expensive, uncertain and more risky! Could we be looking at the embryo trigger points of more global conflict?

Oil over USD135 a barrel

Really entering uncharted territory here for the global economy. No one can say what the implications are with the current price level. Of course we have been here before with global fuel crisis and 'black gold' but it's been a long time now. It's difficult to assess the implications in the 21st Century context - some of the shifts in the power balance include:

• rapidly developing BRIC economies and influence
  
• power shifting from mainly (US) corporation owned oilfields to mainly sovereign state controlled oilfields - many of which are at best ambivalent to US interests
• instant global communications and the power of hedge funds and speculators
• genuine and powerful environmental concerns, pressure groups and lobbying
• general recent global decay/neglect in development of nuclear technologies post 3 mile island etc
  

What effect these disparate factors have on the global economy is unclear but what seems obvious at the moment is that oil prices will continue to trend upwards - whether a bubble is forming remains to be seen.

Olympian Quake Response

Interesting set of opinions in todays press. One drawing my attention compared and contrasted the response of China to their national disaster with that of USA to Hurricane Katrina. Premier Wen Jiabao was on a plane within hours - a sharp contrast to President Bush who dithered. Once on the scene Wen got his hands dirty. Now we can all suggest that there is an element of political cynacism in his actions but some credit and admiration is due.

"Compared with the rescue effort, the Olympic torch is an oversized cigarette lighter, a mere bauble. It is China's response to the earthquake that is truly Olumpian." Peter Gordon, The Standard 21/5/08