Globalization

The much talked about, much heralded Beijing Olympics are set to kick off in a week's time. This week, a story on the British Broadcasting System (BBC) caught my attention and made the hairs on my neck stand up.

It turns out there is a bigger issue at play that just smoggy air that could hurt the athletes. Turns out Chinese authorities are bracing for possible terrorist attacks and have installed anti-aircraft guns along with a host of other weaponry.

I seriously hope nothing of the sort happens, but if it does it will sweep China into the realm of America's war on terror. The implications of such an event are staggering and too complex to discuss at this point. But, if something of the sort does happen, the already shaky global financial system will suffer another body slam. I am keeping my eye on Gold for if something nasty does unfold in China, we will see the price of Gold do well as money gravitates to the safety of a hard physical asset with stable value.

I invite feedback on this issue from visitors to this site. The question is – what do you think the implications will be should the Beijing Olympics be marred by a terrorist incident? Read more »

The gigantic experiment in globalization may be about to turn ugly in a classic Jekyl and Hyde type scenario.

In previous blogs I wrote about the fragility of the economy in Iceland. For the past several years, global financial players have been flooding the Icelandic banking system with capital in order to cash in on the higher interest rates being offered. In other words, the classic "carry trade" was at work. The bloated banking system started lending this capital to individuals who predictably went on a spending spree and to corporations who likewise went on an acquisition spree. I can think of 2 major firms right here in Canada that were acquired by firms from Iceland. I can recall thinking at the time – Iceland?, where are these companies getting the money to come to Canada to make acquisitions? But now, this money is seeping out of the system in response to the recent financial turmoil in the global banking sector. In an effort to stave off this outflow, interest rates in Iceland have risen to 15%. The backlash has resulted in the currency shriveling and the trade deficit ballooning. Read more »