The World Is a Complicated Financial Mesh.
By Manny Singh, November 2011
I recently visited a mildly glamorous property show in
London, hosted by several leading Indian luxury property developers hoping to
capture the hearts and wallets of British Indians who could be willing to
purchase second homes in India. Having strong ties with India as well as
being a regular visitor, I am familiar with most geographical locations and
calibre of properties on offer. But most
properties at the show were not something I would spend my money on, yet resistance
like mine does not prevent Indian developers pricing out most resident Indian
citizens. On the other hand, unlike in the western world, a quarter of million
pounds will buy you the ultimate luxury apartment (freehold) with a private
swimming pool, waterfall and views to die for – certainly for the majority of
those poor Indians who can only dream of owning such properties while living in
conditions ‘well’ below the poverty line.
While walking around the exhibition it dawned on me how
reliant the Indian property market had become on European resident Indians
purchasing their products over the last few years and how this was the very
same chink in the armour of most developing and exporting nations reliant on
European and US citizens. But what will happen if we Europeans stopped buying
and as Europe and the US fall deeper into depression (recession if you are a
politician or journalist), what will happen to the Indian property market in
India, Chinese export market and Middle East oil markets?China and India, though self sufficient by growing their own
food and producing many products which it consumes is largely reliant on
European and US markets for their financial income and GDP. If Mr and Mrs
Bloggs do not buy their clothes from Primark, why would Primark pay factory
workers in South India to make more clothes? If Mr and Mrs Texas do not buy
their new iphone, why will Apple continue to pay slave factories in China to
produce the iconic product? The answer is: they wouldn’t! The buck does not stop
with developing countries either. Canada’s exports market is heavily reliant on
the US consumer – over 60% in fact and nearly all of Russia’s natural gas
supply ends up in Europe.
China and India are not the only exporters which heavily rely
on Europe and US. Indonesia, Japan, Vietnam and S Korea will all suffer also
terribly during a major downturn. China, the biggest consumer of raw materials
will determine the happiness for many raw material producers such as Brazil and
Australia and their populations. A trader’s secret on trying to gamble on how
the Auzi Dollar will perform is to simply keep an eye on the Chinese economy
because the Auzi Dollar and the Chinese economy are very much interlinked. When
the Chinese do well, the Auzi Dollar goes up in value and vice versa. The world
is an interlinked network of supply and demand in this very same way and when
any one major consumer or supplier is affected in performing what is expected
from them, the whole world suffers.
