Cashing in on others’ misfortune

WE have often said this before. And, we will say it again.
The world is interconnected. Whatever decisions are concocted in some private or public boardroom in a part of the world, which enjoys daylight while we are deep in our dreams at night, will come around to haunt us in our daylight hours.
An economist said early last century that the decisions of economists and politicians, both when they are wrong and right, impact us all in the end. Unfortunately, common men go about our lives without a care for what economists or politicians do or say and, so, they are often surprised by what hits them.
It makes sense, therefore, to pay close attention to what is happening in the United States in relation to its soaring deficits and the decisions it has taken to put a cap on it.
As the Group of 20’s rich and emerging nations prepare to meet in Seoul, South Korea, the US federal reserve has unleashed president Barack Obama’s second stimulus package.
Already, tempers are frayed and finance ministers gathering to prepare a G20’s statement on fixing growth imbalances, which have been exacerbated by China’s runaway economic growth and America’s deficit woes.
Chinese president Hu Jintao was reported by the official Xinhua news agency as saying that other  nations ought to “face their own problems” rather than casting blame for the chasm between debtor and creditor nations, obviously referring to the US discomfiture with China’s closely guarded management of the yuan.
The federal reserve has attracted stinging criticism from all parts of the world when it pumped US$600 billion into the US economy, triggering warnings that there might be a global race to devalue currencies.
Federal reserve chief Ben Bernanke is taking a huge gamble and, of course, Obama will take the fall for him if his wager does not work.
Bernanke is hoping that he can turn around the sinking US$14 trillion US economy, avoid a worsening recession, avoid a depression and, in the end, encourage real economic recovery.
This is what he means by the “qualitative easing” stimulus he has just released. While the main target is the US, of course, the entire world will be affected by his actions.
It is an old trick to gut the currency, to devalue the dollar deeply and quickly in the hope that the US economy can recover. Past experience shows that such moves have not worked and have always ended in disaster as did the first stimulus package that Obama announced shortly after he took power and which, quite obviously, has failed. Hence, this second “quantitative easing” stimulus.
The lessons of history would be familiar to Bernanke as he made this gamble and, in a way, he had no other alternative. He cannot very well dictate the economic policies of other nations but he can force them to change and that is exactly what he has done.
Like it or not, Bernanke is the man in the driver’s seat and the rest of the world will have to lump it. To paraphrase a famous quote of Britain’s wartime prime minister Winston Churchill, “never has the fortunes of so many depended on so few”, in this instance, one man.
The fortunes of many will be eroded by the decision, make no mistake about it.
And, the fortunes of many will be increased by the decision. PNG can surely fit into the latter scenario if it is positioned to reap the benefits.
Producers and investors of precious metals and agricultural commodities, such as PNG, stand to benefit from rising prices as a result of the actions by the federal reserve.
Despite some profit-taking, gold continues to soar well above US$1,400 per ounce, its highest yet and predictions are that it is poised for new record highs with US$2,000 a distinct possibility in the near future.
Gold producers like Lihir, Porgera, Tolokuma and Hidden Valley are well placed to profit handsomely from these rising prices. Silver is trading at US$29.03 per ounce and platinum has risen as high as US$1,805 per ounce, the highest in the history of the metal.
Coffee, oil palm and other cash crops are also taking off, another indication on the eve of the handing down of the 2011 budget for the government to take cognisance of these and make necessary adjustments for the industries and the nation to benefit fully from the misfortunes of others.
The market is explosive and, while there will be some negatives impact, the best defence is to be prepared to weather negative economic storms and to maximise positive trends.