Low-cost industrial goods from China and outsourcing of services to India have resulted in lower inflation, probably lower world interest rates, and one of the most remarkable and benign set of global economic conditions since the 1950's and 1960's golden boom eras.

As was the situation in the late 1970s, the real problem with oil’s current price is not that it is too expensive, but that it still much too cheap. In real terms, as discussed during the recent OPEC summit in Riyadh, the price of oil is around 1980’s price levels.
As reported by Menafn.com, countries, such as those in Europe or the UK, that buy oil in dollars, have also seen their purchasing power in terms of oil increase, making oil cheaper.
The world is trying to find other sources of energy and use less carbon-based fuel, as well as exploiting carbon-based fuel more efficiently. Putting the price up steeply is one way to encourage such an energy shift.
No politician around the world would have dared impose around a 40-percent increase on the price of oil under a year, but international market forces have done it.
It will be wrong to think that the world’s energy consumers will be weaned off their oil addiction in the short run, as new-technology renewable sources make up only 0.5 percent of the global energy supply and fossil fuels will continue to be essential for the long time.
But current high oil prices do not seem to be a reflection of fundamentals of demand and supply, as one OPEC minister after another point out that the world’s demand for oil is being adequately met.
Critics suggest that speculators are inducing an oil-filled bubble, helped by external factors, geopolitical tensions and technical factors such as refinery shutdowns and industrial action.
The second element in the volatile mix has been the problem of real estate markets around the world. Against an international backdrop of rising commodity prices and steadily increasing inflationary pressures, there has been a noticeable burst of property speculation, and Saudi Arabia has not been immune to this, as latest inflation indicators point to real estate price rises as being one contributory factor.
Rent costs have jumped 11 percent compared with 7.2 percent for food for the period ending September 2007.
Just as today, the earlier 1970’s real estate boom was brought to a halt by rising interest rates, resulting in a credit crunch, with central banks now scrambling to cut back on interest rates to avoid a financial domino effect to secondary financial institutions, as the UK’s Northern Rock depositor panic reaction showed.
Given uncertainties about financial market conditions, and a slump in consumer confidence, house prices are beginning to slump across both side of the Atlantic. What is making crystal-ball gazing over interest rates, house prices and oil prices even more difficult is that globalization has changed the name of the game.
What happens on the streets of London, New York or Paris in terms of real estate no longer depends on the actions of central banks in these countries, but also on events in Beijing and Delhi.
Low-cost industrial goods from China, and outsourcing of services to India, have resulted in lower inflation, probably lower world interest rates, and one of the most remarkable and benign set of global economic conditions since the 1950’s and 1960’s golden boom eras.
Globalization seemed to produce a miracle that equaled lower import prices that equaled lower inflation that equaled lower interest rates, and equaled faster world growth.
However, the sub-prime market has dented this optimism, as investors around the world have realized that free flow capital markets have made the life of central banks to manage domestic economies more difficult. Changing one set of monetary tools for another is still a central banker’s prerogative, but they are becoming less confident about what the outcome will be.
For investors in the Persian Gulf, boom-bust stock market cycles, creeping inflation, exchange and interest rate uncertainties, whether driven by domestic considerations or through international linkages, are transmitting itself in the real estate market, some segments of which are overheating.
However, real estate, especially in prime areas such as in Mecca and Madina are desired by investors, as demonstrated by the strong gains in the Jabal Omar IPO in the Saudi market.
However, it will be interesting to see what effect a reduction in oil prices will have on the real estate market in general in the long run. Unlike the property price slowdown in the US, and now the UK, a large element of current real estate and rental price rises in the Saudi Kingdom and the Persian Gulf is genuinely driven by supply shortages due to oil-induced construction booms.
Oil once again, is a central player in determining the volatile mix of the equation between property and inflation in the region.

India is falling to rank 128 in the Human Development Index of the United Nations Development Programme (UNDP) is not really a decline. Even though it was ranked 126 last year, reported Hindu.com.
Each year since 1990, the Human Development Report (HDR) of the UNDP publishes the Human Development Index (HDI). This index looks beyond GDP to a broader definition of well-being.
The HDI seeks to capture three dimensions of human development: a long and healthy life (measured by life expectancy at birth). Being educated (measured by adult literacy and enrolment in primary, secondary and tertiary education). And third: GDP per capita measured in US dollars at Purchasing Power Parity (PPP).
El Salvador, which saw a bloody civil war for over a decade from the 1980s, ranks 25 places ahead of India at 103. Bolivia, often called South America’s poorest nation, is 11 steps above India at 117. Guatemala, nearly half of whose citizens are poor indigenous people, saw the longest civil war in Central America. One that lasted close to four decades and which saw 200,000 people killed or disappear. That too, in a nation of just 12 million. Guatemala ranks 10 places above India at 118.
In Africa, Botswana--ranked below India in the 2006 HDI at 131--climbed four places above India at 124 this time. It replaced fellow African nation Gabon which quit that slot to move upwards to 119 this year. The Occupied Palestinian Territories, with all their woes, slipped six places to 106. Still well ahead of India.
In Asia, countries like Vietnam--victim of the bloodiest conflict since World War II--rose further in the charts, to rank 105 this year. Sri Lanka, of course, is way ahead of India at 99. So are nations like Kazakhstan and Mongolia. They too have risen in the ranks. The former from 79 to 73 and the latter from 116 to 114.
Note that some of these nations rank up to 30 slots above India. Others fall within 30 nations below India. Not one of them has had the 9 percent growth. Few of them have been touted an emerging economic superpower. Nor even as a software superpower. Not even as a blossoming nuclear power.
Together, they probably do not have as many billionaires as India does. In short, even nations much poorer than India in Asia, Africa and Latin America have done a lot better than India has.
India rose in the dollar billionaire rankings, though. From rank 8 in 2006 to number 4 in the Forbes list this year, but India slipped from 126 to 128 in human development.
In the billionaire stakes, India is ahead of most of the planet and might even close in on two of the three nations ahead of it (Germany and Russia). It will, of course, be some time before India erases the national humiliation of lagging behind the top dog in that race, the United States.

If the risk of foreign-government involvement is that the government might pursue a strategy that's not in the interest of profit-maximizing for shareholders, then one need only limit the influence of the government shareholders.

Given the breadth of financial stress, it is likely that even more sovereign wealth fund money is going to flow into key US firms in coming months.
The potential cash flow is enormous. Today, the funds manage an estimated $2 trillion to $3 trillion. To offer some perspective, that’s significantly more than all the world’s hedge funds combined. Some financial analysts estimate that the total quantity of assets managed might grow to $12 trillion during the next eight years.
According to Bloomberg, it is startling when one pauses and considers the scale of these enterprises. The world’s largest sovereign wealth fund is the Abu Dhabi Investment Authority, which manages $625 billion, mostly coming from windfall oil profits in the United Arab Emirates.
The funds in Norway, Singapore, Kuwait and China each manage $200 billion or more. The US even has one, the $40 billion Alaska Permanent Reserve Fund, which has invested the proceeds from mining in the state since 1976.
The world’s oldest such fund is the Kuwait Investment Authority, which was founded in 1953 to take advantage of excess oil revenue. Sovereign wealth funds have long been used to generate an endowment to invest the proceeds from diminishing natural resources, and not just oil.
The Kiribati Revenue Equalization Reserve Fund, established in 1956 to invest the profits from a tax on bird-manure fertilizer exports, manages an investment portfolio that is about nine times the size of the economy of the diminutive Pacific island.
Purchases by these funds are different from those by normal shareholders for a simple reason. Governments might not always care about maximizing profit. They have strategic interests as well.
The Chinese might invest in a US semiconductor manufacturer, and then use their influence on the board to reduce activities that compete directly with Chinese producers. Or they might encourage activity that competes with Japanese manufacturers.
Such manipulation isn’t unprecedented, although the primary culprits to date have been US state governments. In California, Safeway Inc. found itself fighting against both its own unions and Democrats in the state government when the California Public Employees’ Retirement System attempted to influence the election of more union-friendly board members.
US Congress needs to think more carefully about legislation that can ensure the funds and other government investments are tame. Fortunately, a simple solution presents itself.
If the risk of foreign-government involvement is that the government might pursue a strategy that’s not in the interest of profit-maximizing for shareholders, then one need only limit the influence of the government shareholders.
There’s an easy way to do that: simply pass a law that prohibits governments from exercising the voting rights of shares they purchase.
Under such a rule, governments would rely faithfully on private shareholders to make the key governance decisions of the assets they own.
Since private shareholders care about maximizing the value of their investments, sovereign wealth fund investors would have their interests fully aligned with those of their partners, so long as those interests are solely focused on long-run returns.
Given that government meddling could be pernicious, and already has occurred at the state level, it seems essential that such legislation be on the agenda in 2008.