Friday, August 19, 2011

Is the answer to print?

Looking at America’s debt figures always comes as a shock. They are truly staggering and rather incomprehensible to a normal citizen. To date, America’s debt stands at approximately $15 trillion, and has topped 100% of GDP. Amazingly, these numbers look set to keep on rising. Some analysts predict that American debt will increase to $19 trillion by 2015. I thought to myself – How in the world are they going to pay up?

At present, America’s economic outlook is grim at best. Stubbornly high unemployment figures, a recent credit rating downgrade and shaky unconfident markets do not exactly paint a very pretty picture of the current state of the US economy. In the meantime, while their economy is spluttering along, other countries are coming up from behind looking to catch up.  Frankly speaking, they look very ill positioned to pay off anything.

Despite this, America still has an ace up its sleeve. When the time comes for America to pay its bills, it can actually just print more of the dollar. Of course, the Fed would not just churn out $15 trillion worth of currency, as the fact remains that paper money has to be backed by gold. Doing so without increasing their gold reserves would cause the greenback to become banana money – completely worthless. However, by printing dollars in a controlled manner, America will be able to pay off some of its debt, because it’s denominated in USD. Going by the basic demand and supply principles of economics, increasing the supply of the dollar would cause it to depreciate relative to other currencies. Although holders of American debt would be getting their money back, its true value would have decreased.

As it would no longer be as favourable to convert American currency into other currencies, the best way to make full use of these dollars would be to spend it in America. Its export markets will start to grow again, which will hopefully stimulate its economy further to generate more cash to pay up.

Obviously, printing obscene amounts of money is not a long-term solution, nor is it enough to pay off everything. Congress needs to start rolling out a series of policies and plans that will make the American economy structurally sound. Without a firm foundation to back it, even this ace will not be able to save them.

Wednesday, August 17, 2011

London Burning

Following the fiasco over the US debt ceiling, its subsequent credit rating downgrade, as well as the uncertainty over the Eurozone crisis in recent days, markets have been thrown into a panic. The British economy, although fraught with its own problems (such as tough austerity measures), was viewed as a sanctuary of some sort – strong in its credit ratings, comparatively liquid and hosting a relatively promising property market.

Unfortunately for the struggling British economy, this perspective has now been tarnished by the violence and unrest that was sparked off by the shooting of Mark Duggan, a 29 –year-old black man. The videos and images online are shocking – people in hoods looting shops, cars vandalized, windows smashed and fires ablaze. The riots have hit London especially hard, with violence and crimes not only occurring in the poorer areas of Tottenham, but also closer to the heart of the city – Camden, Hackney and so on.

The opinion of many is that the shooting had broken the floodgates of frustration of many impoverished Londoners. The austerity measures put in place in a bid to control Britain’s crippling debt have left many struggling to make ends meet, or even put a roof over their heads. After all, the riots began in Tottenham, which has the highest unemployment rate in London. Despite the speculation, the true cause of why the rioters are causing havoc has yet to emerge.

Whatever the reasons may be, it is time for the government to step in and put a stop to the chaos. The city plans to host the Olympics next year, and certainly cannot afford to have people lose confidence in the ability of the Metropolitan police to keep the peace. With its debt problems and hints of a double dip recession approaching, these riots could seriously damage Britain’s economy if not swiftly dealt with.

Should the root cause of the problem be poverty, how is the government going to help the frustrated and suffering while reining in its debt at the same time? Outreach programs and unemployment benefits all cost money that the British economy may not be able to come up with. As David Cameron puts it – “It is clear that there are things badly wrong in our society.” Question is, how are they going to right it and restore order to the once vibrant city of London?

Friday, August 5, 2011

The Importance of Tolerance

I admittedly frequently take tolerance for granted. I grew up in Singapore, a cosmopolitan and mostly harmonious city populated with a web of people of different colours and backgrounds. Growing up in such an environment has made it easy for a young Singaporean such as myself to forget that my country once struggled to achieve racial harmony as well – which is why I am often shocked by the level of prejudice there is all around us. 

Take the recent attacks in Norway for example. On July 22nd, anti-Islamist Anders Behring Breivik set off a car bomb in Oslo and proceeded to murder 69 people attending a summer camp on a nearby island. Although horrific on a multitude of levels, the sad thing is that the event was simply one of the many that has occurred over the history of humankind that showed that in spite of the human ability to love, much narrow-mindedness and hate exists in the world.

Although Singapore is a peaceful city, upon closer examination, we too are often guilty of intolerance (though no one has gone on a killing spree because of it). For instance, Singaporeans kicked up a massive ruckus over the building of a temporary dorm for foreign workers near a residential estate. As much as we like to proclaim that we believe in racial harmony and what not, a lot of underlying feelings of xenophobia were exposed during that episode.

We are now living in a shrunken world, where huge distances no longer have the same meaning as they did in the past. Air travel has allowed millions to criss-cross the globe and experience a variety of cultures. Countless businesses have operations in various countries, and it has become ever more imperative that we express tolerance and build acceptance to build strong working relationships with overseas clients.  

So the next time that you experience a negative feeling towards someone else because of a superficial quality such as the colour of his skin, or the sound of his accent, take a step back and rethink it - because the world could use a little more tolerance.