How countries spend money

Yesterday, the infographic shows that China now has more highways than the US which got me thinking about how countries spend their money.

Last year, Economist made a chart that looks at this very question.

It's fascinating that US spends the least on food, considering the percentage of obesity in America, I thought that Americans would be spending more money on food. I guess that food is relatively cheap in America and so that's the reason for the obesity?

Australia really loves recreation and spends the most in that category, more than US, Japan, or the EU. 

Hopefully, the Economist will update the chart and include more countries this time around. 

Massive Wealth Destruction in China

Yesterday was some information about the Chinese equity market. 

Bloomberg made a chart about the massive wealth destruction that's happening in China. This chart was back in July, but the market still hasn't fully recovered.  

From http://www.bloomberg.com/news/articles/2015-07-09/the-chinese-stock-meltdown-that-makes-the-greece-saga-look-trivial

From http://www.bloomberg.com/news/articles/2015-07-09/the-chinese-stock-meltdown-that-makes-the-greece-saga-look-trivial

Singapore is Top 10 in Creativity

The results of the Global Creative Index from Martin Prosperity is pretty interesting this year. 

I'm not sure how Iceland and Singapore made it to the top 10, not because I don't think these two countries are amazing in their own rights, but simply the fact that I don't know anyone who can tell me elements of Icelandic or Singaporean design. Swedish, Danish, and Finnish designs are pretty famous. US, Australia, and Canada have global brands. 

According to the report, Singapore reports the 3rd largest share of the creative class (47%) — which spans science and technology; arts and culture; and business, management, and the professions. Singapore's technology is rated a "7" and its talent pool a "5''. Those measurements seem accurate, but creativity, generally defined as the use of imagination or original ideas to create something new and somehow valuable, is somewhat lacking I think. The Singapore education system and Singaporeans are not exactly known for "use of imagination" and so it is strange that the country is ranked so high on the Global Creative Index. 

In terms of ranking though, Singapore is hitting it out of the park this year. Top 10 in the Global Creativity Index. Two local universities are ranked higher than Yale based on the QS world university ranking. If anything, it demonstrates the country, like the by-product of it's education system, performs exceptionally well on standardized tests. 

From http://martinprosperity.org/content/the-global-creativity-index-2015/

From http://martinprosperity.org/content/the-global-creativity-index-2015/

World Map of Dominating Websites

Here's an interesting map from webempires

It's 3 years old and it would be interesting to see if the dominating websites are still dominating. I'm particularly interested to see if Yahoo is still the leading website in Cameroon and if Mail.ru is still leading in Central Asia. 

Hopefully, webempires will update this map soon. 

From http://webempires.org/dominating-websites-map/

From http://webempires.org/dominating-websites-map/

What is Petrocurrency Mercantilism?

Found this flow chart and explanation on Zero Hedge, petrocurrency mercantilism is when a national bank and an energy producer collude to generate artificial demand for a currency at the expense of the purchasing power of other currencies.

Pretty fascinating when you think examine all the tools available for a petrostate. 

From http://www.zerohedge.com/news/2015-03-03/petrodollar-mercantilism-explained-one-simple-chart

From http://www.zerohedge.com/news/2015-03-03/petrodollar-mercantilism-explained-one-simple-chart


How Oil Prices Affect Currencies

Yesterday, I posted an infographic from howmuch.net that shows us the correlation between lower gas prices and increased travel over this year's Labor Day weekend. 

Going along with the idea of the effect of lower gas prices, here's an infographic from the Visual Capitalist about petrostates.

From http://www.visualcapitalist.com/the-petrostate-hex-how-plunging-oil-prices-affect-currencies/

From http://www.visualcapitalist.com/the-petrostate-hex-how-plunging-oil-prices-affect-currencies/

US vs China: Military Powers

Another cool infographic by Alberto Lucas López which compares US and China's military prowess.

US easily dwarfs China in terms of nuclear warheads (7315 to 250) but China has been increasing their military spending and a few key Chinese statistics are still unknown (ie. the size of their cyber command, etc). Interesting to see how the two powers are trying to balance each other. 

From http://www.scmp.com/infographics/article/1815609/infographic-balance-superpowers

From http://www.scmp.com/infographics/article/1815609/infographic-balance-superpowers

Thought Experiment - Pangea Now

No idea how accurate this is, but it's still a pretty cool thought experiment.

Massimo Pietrobon made a map of what Pangaea, the original supercontinent that existed 300 million years ago, would look like if it had stayed connected. 

It's pretty fascinating to imagine how strange that world would have been. The US right next to Morocco and Mauritania. Travel time between Indonesia and Australia would be insufferable. Certain landlocked countries would find themselves next to the water. This might make for a really cool sci-fi premise for any sci-fi readers out there. 

From http://capitan-mas-ideas.blogspot.com.au/2012/08/pangea-politica.html

From http://capitan-mas-ideas.blogspot.com.au/2012/08/pangea-politica.html

World's Economy Divided by Size

Yesterday was an infographic about language size throughout the world. Today's infographic is about the economy.

HowMuch.net produced an infographic that divides the world's economy by economic size. The part that I found fascinating is the size of the rest of the world (8.8%) and that it's all entirely a service-based economy.

From http://howmuch.net/articles/one-diagram-that-will-change-the-way-you-look-at-the-us-economy

From http://howmuch.net/articles/one-diagram-that-will-change-the-way-you-look-at-the-us-economy

Drug Problems In Asia

Doing some research on drugs in Asia for a story and I'm honestly surprised that quantity has been steadily increasing in the region. This helps explain China and Indonesia's tough stance on drugs. 

From http://www.csmonitor.com/World/Asia-Pacific/2015/0503/Breaking-Bad-in-China-how-meth-is-spreading-across-rural-heartland

From http://www.csmonitor.com/World/Asia-Pacific/2015/0503/Breaking-Bad-in-China-how-meth-is-spreading-across-rural-heartland

Greece - Grexit, Grimbo, and Gone?

From http://www.zerohedge.com/news/2015-07-01/next-steps-greece-complete-post-referendum-roadmap

From http://www.zerohedge.com/news/2015-07-01/next-steps-greece-complete-post-referendum-roadmap

All eyes are on Greece as the overwhelming majority has rejected EU's proposed austerity measures and people are scrambling to figure out what happens next.  

From http://blogs.wsj.com/briefly/2015/07/03/greeces-debt-the-numbers/

From http://blogs.wsj.com/briefly/2015/07/03/greeces-debt-the-numbers/

In essence, it seems that Greece wants the best of both worlds. They don't want the austerity measure but they still want to be part of the euro project and they want the EU to provide them with a line of credit.

Understandably, certain parties are saying that Athens has ruined any chance of compromise with its EU partners. 

Personally, I'm confused by the actions of Greece prime minister Alexis Tsipras. On one hand, he's been advocating for additional assistance and on the other, he masterminded the rejection of the austerity measures. It seems like Alexis Tsipras is gambling that the EU will not force Greece out of the 19-nation currency area. 

It's a very risky bet and so we probably should consider what happens if Greece does default on its debt. 

If Greece doesn't pay the debt to the IMF and ECB this month, then the country will be defaulting on its loans. This is significant for a variety of reasons: 

  1. Greece will be the 1st advanced economy to default in the history of the IMF.
  2. Greece will have the largest single overdue payment in the history of the IMF.
  3. Greece will be joining the list of IMF debtors that defaulted, debtors like the Taliban and Robert Mugabe, people you generally don't want to associate yourself with. 
  4. If Greece is unable to pay back its debt after 2 years (which seems very likely if they leave the EU), then Greece will most likely lose its IMF membership. 
  5. Greece might be force to exit the eurozone. 

IMF rules does not permit any grace period for Greece so IMF will probably try to figure out a way for Greece to pay them back asap (not sure how though). Both IMF and Greece actions are limited so not sure what options are available for either party. 

How will Greece exit (Grexit) the eurozone? Interestingly, no one knows because the euro project wasn't designed with an exit strategy. The Maastricht Treaty doesn't mention a way for a country to exit the eurozone because exiting was never considered. Perhaps this is what Greece prime minister Alexis Tsipras is gambling on.

If Grexit is successful, then the eurozone can technically be unbundled so that whenever a country suffers too much financially, the EU partners just might kick them out. Naturally, this isn't good for EU solidarity and so that's probably the reason why the EU has been trying to stop the Greek headache. 

So, if Grexit doesn't happen or happens very slowly, then the country might go into Grimbo (Greece + limbo), where the country is in a state of political and economic limbo since no one knows what to do with them. 

From http://www.visualcapitalist.com/the-greek-exodus-in-one-chart/

From http://www.visualcapitalist.com/the-greek-exodus-in-one-chart/

Right now, it already feels like Greece is in Grimbo and if Greece Prime Minister Alexis Tsipras doesn't figure out something soon, the country will probably face all three: Grexit, Grimbo, and Gone. I say gone because it would take decades for Greece to recover and Greece looks like it is on its way to becoming a gigantic ghost town. The chart on the right shows that capital and people are leaving the country in massive numbers. 

Just consider these heartbreaking statistics: Greece economy shrunk 25% since 2008, a Grexit is predicted to cause a further 25% contraction of the economy, 25% of the population is unemployed, and for people under the age of twenty-five, the unemployment rate is at an unsustainable 52%. 

French economist Thomas Piketty, author of the influential Capital in the Twenty-First Century, recently said that “Europe was founded on debt forgiveness and investment in the future. Not on the idea of endless penance. We need to remember this.”

The interview seems to suggest that Mr. Piketty wants the EU to consider debt forgiveness. Furthermore, Mr. Piketty stated that, "Germany is the country that has never repaid its debts. It has no standing to lecture other nations." (The whole interview is available here)

The Size of China's Maritime Power

There's been a lot of talks lately about China's movement in the South China seas and how it's literally building an entirely new island in the area. If we look at the chart below, we can see that China has more ships than other claimant countries combined. This might explain why the US is increasing navy movements in the region and why other countries are uncomfortable with China's growth. 

From http://www.businessinsider.sg/this-chart-shows-why-china-thinks-it-can-take-over-the-south-china-sea-without-triggering-a-war-2015-4/#.VVxLGlmqqko

From http://www.businessinsider.sg/this-chart-shows-why-china-thinks-it-can-take-over-the-south-china-sea-without-triggering-a-war-2015-4/#.VVxLGlmqqko

The rise of China's low-carbon energy

Bloomberg reports that by 2030, China's low-carbon capacity is expected to be larger than the entire U.S. power grid. So, in 15 years, China will surpass the US in the production of low-carbon power sources. By 2030, China will produce enough low-carbon power sources to power the entire US. 

This report is not just surprising because of the speed with which China can develop their low-carbon power sources, but also disturbing because of the US inability to do so. The US should be able to take the lead on this, but yet it's not happening. How sad is that?

From http://www.bloomberg.com/news/articles/2015-04-21/here-s-why-apple-is-building-solar-farms-in-china

From http://www.bloomberg.com/news/articles/2015-04-21/here-s-why-apple-is-building-solar-farms-in-china

Greece and its IMF Credit

IMF, the International Monetary Fund, is an international entity comprised of 188 nations where the goal is to promote sustainable growth and provide economic assistance when needed.

From https://capsidea.com/share/State-of-Greece

From https://capsidea.com/share/State-of-Greece

Capsidea has provided an easy to understand infographic about the dangerous situation that Greece is in. Greece is the largest borrower of the IMF, twice that of all the other borrowers combined, and has extremely high unemployment rate as compared to the rest of the EU. What does all of this mean?

Greece is in a world of trouble and on the verge of bankruptcy if they don't get their act together and convince the IMF that they have a viable recovery plan in place. 

From https://capsidea.com/share/IMF-Outstanding-Credit

From https://capsidea.com/share/IMF-Outstanding-Credit

Saudi Arabia's Petroleum Politics: A Double-Edge Sword for the US

 

Yesterday, I posted an infographic that shows how the US dollar performed in 2014. It was the only currency to gain against all other major peer currencies. This is partly due to the fact that oil price was down by 60%

Why is oil price so unexpectedly low? 

This is because of Saudi Arabia, the sheik of OPEC and pretty much the entire oil industry.

The cheaper oil prices achieved multiple goals for Saudi Arabia and I reckoned that it is one of the most strategic and brilliant moves in recent diplomacy. 

For one, the depressed oil price assist Saudi Arabia’s major ally, the United States. Low oil price is detrimental to anti-US countries that derived much of their power from oil. Russia and Venezuela, major producers of oil, are experiencing major hemorrhaging in their domestic market. The Russian ruble is down and some expect the Russian GDP to decline by 4.5% this year. Venezuela might possibly default and Iran isn’t able to finance their budget. So, Saudi Arabia’s insistence on maintaining oil output, and hence the low oil price, is doing major damage to anti-US countries. 

Western media have generally viewed this positively and US consumers love the low oil price. But, while it’s nice to think that an ally is willing to forgo billions of dollars to assist the US, the realpolitik of modern diplomacy makes it unlikely that the House of Saud did it simply for ideological or moral premises. 

Saudi Arabia is maintaining the low prices to bankrupt US shale oil companies. The very same companies that allowed the US to become the biggest producer of oil in 2014 and helping it to realize the path towards energy independence.

It was profitable for shale oil companies to extract oil from difficult-to-drill places and used a new drilling technique like fracking because the oil price was high. Now that the oil price has dropped by 60%, it’s difficult for these shale oil companies to conduct their business profitably. So the “oil boom” that the US experienced during the last 5 years may be coming to an end and it’s all because of its good ally. 

Low oil price is not only detrimental to oil regimes, but also US energy producers. If the US manage to achieve energy independence, its foreign policy will not have to factor in energy reliance as much and many countries will have less leverage in negotiation. 

The last thing to bear in mind is that the US trade deficit would have grown even larger these past few years, if not for the “oil boom”, and that if these energy companies are gone, then the US trade deficit will descend to an even steeper precipitous level than it is now. 

Given that oil is the source of their power and wealth, it’s unlikely that the House of Saud didn’t consider all aspect and ramification of the decision to maintain the low oil price. 

In essence, what Saudi Arabia offered the US was a double-edge sword, able to hack away at its enemies, but also injuring itself along the way. 

From http://www.economist.com/news/international/21627642-america-and-its-friends-benefit-falling-oil-prices-its-most-strident-critics

From http://www.economist.com/news/international/21627642-america-and-its-friends-benefit-falling-oil-prices-its-most-strident-critics

Please note:

The ideas were derived from the following readings:

http://www.vox.com/2014/12/16/7401705/oil-prices-falling

http://www.ft.com/cms/s/0/2946a4f2-8f97-11e4-b5a4-00144feabdc0.html?siteedition=uk#axzz3QrVuRLMb

http://www.economist.com/news/international/21627642-america-and-its-friends-benefit-falling-oil-prices-its-most-strident-critics 


The Rise of E-residency

Eric B. Schnurer, founder and president of Public Works LLC, a private consultancy agency, has written an article on Foreign Affairs about the coming digitalization of public services and governments. In it, he talks about the increasing commercialization of government services, like selling citizenships to anyone without any actual connection to  the countries themselves. He lists Malta and Bulgaria as examples and discusses the e-residency program of Estonia, whereby anyone in the world can become an Estonian e-resident and enjoy usage of the country’s leading online government services. 

The question after reading the article is that of competition. Will Estonia e-residency still be as attractive when other countries start offering their own version of an e-residency? Since the e-residents don't actually have any affinity for the country, mostly getting it for practical reasons, there's no actual loyalty or nationalism toward the country. It'll be as easy as changing banks and here lies the conundrum. Countries would want to promote the successes of their e-residency programs, but those very same successes would encourage competition. And when heavy players, in this case, countries with a large population and strategic advantages (Canada, Australia, South Korea, etc), start getting into the market, it leaves very little room for smaller countries. This is not to discount the advantages that the e-residency program is bringing to Estonia now — the largest number of startups per person in the world, a tech sector that accounts for almost 15% of its GDP, and an expected revenue of $565 million from people registering for e-residents (there is a registration fee after all)  but Estonia should have a plan of where to go from here.

Eric B. Schnurer cites Nevada as an example of a place that used a specific government service —rapid divorce certification — as an incentive to entice visitors during the Great Depression and that these "migratory divorces" reached its peak 1940s, bringing in nearly 20,000 visitors a year to the state. He states that these visitors fueled a boom that served as the foundation of Nevada’s tourist economy. This example illustrates the very same problem that Estonia will face. When Nevada's rapid rapid divorce certification was no longer unique to the state, it could no longer rely on it to fuel the economy. The state had to shift to something else entirely — gambling. 

So when Estonia's e-residency is no longer unique to Estonia, what is it going to do? 


What is the "Singapore standard"?

Yesterday, a friend wrote that something wasn't up to "Singapore standard" and I took a second look at that term. I emailed her and told her that I wasn't sure if people know what exactly is "Singapore standard".

Thinking further about it, it is interesting that Singapore - a well-regarded, affluent city-state with a high standard of living - is unable to position itself as a country with high standards. German engineering, Swiss Made, and Japanese precision illustrate how countries are able to market themselves to the world due to their perceived exacting standards. In many regards, Singapore should also be on that list. 

Singapore is one of the most affluent countries in the world, ranked second in terms of safety, third in global education, and placed top ten in terms of innovation. Granted, it's not easy for countries to change the mindset of consumers, but the mass admiration for Korean products now versus 10-20 years ago shows that it is entirely possible. Hyundai cars, LG TVs, and Samsung phones were previously perceived as inferior to Japanese made product, but Korean chaebols poured millions into R&D and marketed themselves extensively. Now, Korean products are held in the same regard as Japanese products, if not better. If we look at the chart below, South Korea now leads the world in innovation. Of the top 10 countries on the list, I think Singapore is the one that would seem foreign to most people. 

Global Innovation Index http://www.bloomberg.com/graphics/2015-innovative-countries/

Global Innovation Index http://www.bloomberg.com/graphics/2015-innovative-countries/

Some might argue that Singapore Airlines, which consistently ranked as the best airline in the world, means that people do know that the Singapore standard equates to quality. I would argue that it just means great service, not necessarily high standard. All Nippon Airways or Asiana Airlines may not rank as high as Singapore Airlines, but the perception is that Japanese and Korean products/engineering are superior to Singaporean products/engineering. Just because you're good in service doesn't mean that you're good at producing quality products. 

Given the adage - "It is easier to criticize than to do better" - my suggestion is that the government works with companies to encourage them to use the country in their marketing, much like how most Swiss watches use the phrase "Swiss Made" and how German luxury car brands Mercedes and BMW tout "German engineering". Given Singapore's successes and it's kiasu spirit, it should try to achieve a market position where "Singapore standard" actually means something to the world.