The new USA with new infrastructure
Obama’s stimulus plan has funded more than 300 billion for US cities while an additional $820 billion is funding healthcare ( hopefully, in just a few weeks) not counting any of the bailouts for the banks and the Car companies
How the Dems have caused a new hole? – Infrastructure spending is sacred, countries aren’t
Infrastructure spending is supposed to reach $35 trillion ( that’s 10 China’s or maybe 5 including the future growth) in the next 20 years according to CIBC World Markets and thus the deficit we have been running in infrastructure spending will soon reflect in national deficits and the economic paradigm may shift too! ( more on that later !)
China has been increasingly activating itself in the last few weeks, what with the $6 billion bid for Nigerian Oil, and the bid for mineral resources in Guinea.
The Developed nations thru OECD and India and China on their own have been funding the economically under-privileged thru bilateral and multilateral aid off their national GDPs as well. Though any attempt to measure it might fail in relating the two figures of GDP and Aid contribution, it is important that this has been done without jeopardising their debt to GDP ratio and now when that ratio may be in threat after the $8 trillion bubble of new 2009 domestic debt. Any such study should include effect on domestic GDP because of the trade and ensuing dialogue. In Europe, a competition commission does look after specific aid packages to banks and companies, but no one has ever sat down to effectively see the question of aid contributions and their effect on International trade, deficits and the GDP
Where will the money come from?
However, China has started facing infrastructure financing blockages of its own and this project could well signify a new rubicon given the increasing deficits and inflation which would emerge from such financing off the national GDP of China
In the meantime Russia has already collapsed from printing money to fund deficits contracting 5% in 2009 and Brazil and Venezuela have gone thru multiple cycles of re-denominating currencies and surrendering debt even as Lehman, IMF and AIG continued extolling the virtues of leverage and printing money. The world hasn’t changed a wee bit but the lessons to learn might be new, whether China or Brazil or Good old USA and India trying deficit financing. The infrastructure spend however, will not suffer this time whether in India, in China or in Kenya.
Unfortunately, Sovereign Wealth Funds including the, and Dubai World have already suffered reverses at the break of dawn and the same cultural anathema that broke global banks in 2001 and 2008 is the culture at banks allowing Taiwan over India and Venezuela and Russia over China in economic decisions..it is the language, it is the global classroom and it is the incapacity to give the economically deserving a place in the face of an opportunity to screw yourself with leverage instead,as in the latest commentary on the pipeline crossing all Western Europe without a bit to the Eastern and in the social catastrophe that was communism.
However, that digression apart Private Equity would be an important element after the first flush of Government debt gets tired and PPP and Take-out models are given enough impetus. Given that then these would be again financed by highly leveraged structures, another disaster would look simplistically the only way forward..With Russia and China inveting on Gold and no one moving to the Euro as earlier feared, Dollar coming back strongly will again hde the defiit in the Whitehouse apron
IPOs have attracted more than $100 billion tis year. Private Equity can generate even more interest but maybe needs to be told firmly to not leverage up its books in the ‘hot season’
Aviation infrastructure would be a germaine example in this case where Private Enterprise has taken root in such large ticket requirements. However in such Aviation , railroad, lifestyle or urban infrastructure as metros and airports the effect of unremunerative operations has also internationally manifested in most cities. Rural and Oil infrastructure has till now been heavily subsidised even in the US and other developed nations, enabling the nholy nexus between war-mongering governments and OIl and Defence companies. The jury is still out and there will be more to write as a quantitative evaluation of these financing models and their results comes out and our children take over from us.
Posted on October 15, 2009, in Financial Markets and tagged Brazil, Emerging Markets, Energy Infrastructure, Gazprom, Infrastructure, Infrastructure Financing, minerals, OIL, oil infrastructure, Russia, Stimulus, TARP. Bookmark the permalink. 1 Comment.