The revaluation of the Singapore Dollar this week is one of those quiet events that often precedes a larger, tectonic shift. First, it’s apt and fitting in a rather classical way that while most were focused on a coming revaluation of the Chinese Yuan, that “little” Singapore should move first. Second, the over-focus on the Yuan as an issue exclusively framed within a geo-political context has very much crowded out the larger issue of inflation, in the developing world. And finally, the question of revaluation in Asian currencies I think now has an answer: instead of a weaker currency through which to export goods, it may be time to have a stronger currency through which to import resources.
The naivete of Western leadership, especially in Washington, towards the developing world’s hunger for resources is very much part of an overall, generational philosophy that the US can always obtain energy cheaply while innovating its way to wealth. Oh yeah? As I am often known to ask: why, in the midst of the worst post-war recession, is oil at 85 dollars a barrel and not 15 dollars a barrel? (This week I addressed some of these issues in a piece titled Pacific Story in StockTwits Macro Weekly.) The problem in its current form, as I see it, is that the developing world is once again racing ahead and driving up the price of resources–but that this forward-macro-thrust from the developing world hurts, more than helps, the economies of the OECD.
Appropriate also to this story is yet another flurry of resource deals, wherein China buys whatever energy deposits it can lay its hands on. Coal, Oil, Natural Gas. It doesn’t matter. China buys in Africa, China buys in South America, and China does deals with Russia. This week they are buying in the Americas–most recently a new offer from CNOOC for offshore Brazilian oil, but more notably the deal that Sinopec struck Monday with ConocoPhillips for a large piece of Syncrude, in Canada.
The revaluation of the Singapore dollar, therefore, is the signal to look past the noise of Washington-Beijing politics over the Yuan, and realize that when the tipping point arrives China will revalue because they have to. The long-awaited revaluation of Asian currencies appears to finally be at hand, but pay no attention to the Boston-Washington political-science class that ponders these changes from its axis of comfort. The stale, geo-political analysis that passes for expertise in the US has completely missed the deterministic underpinnings of oil and coal, and they will no doubt greet Asian currency revaluation as a kind of victory. Well sure, a victory for Asia. Because oil and coal producers from Africa to Russia, from Indonesia to Brazil will only be too delighted to set their prices based on Asian demand, accumulating those newly strong currencies in the process. As the world embarks on the next phase of the commodity bull market, Washington–populated by “our best and brightest”–has as one of its highest priorities that the USDollar become weaker, and that Asian currencies become stronger.
Further Reading: The Next Empire (China in Africa) by Howard French, in The Atlantic Magazine.