Trends in Global Economy

Just would like to share my thoughts on some of these issues that I have been reading about more frequently in the past few weeks in economic papers, business magazines and mainstream media. As SA is quite an open economy, global trends affects us as well.

• Inflation - the entry of China, India and the rest of South East Asia as a production hub has kept labour costs down and suppressed inflation throughout the world for about a decade. However, this situation is starting to change, but few people know what this would mean in the short, medium and long term. E.g. what the implications will be for monetary policy if we come to realise, with the advantage of hindsight, that the low inflation of the past decade had more to do with the global trading system and less to do with inflation targeting and interest rates?
  
• Financial risks - the rapid rise of hedgefunds is making some people nervous, especially the central bankers. The ability of these funds to shift/spread risk around the world and into various other financial instruments has certainly been useful and probably resulted in fairly low interest rates in many countries, but there are some persons who are afraid that some of the risks are accumulating somewhere in the system and they are not able to identify where and what precautionary measures to take. (think "Matrix" or "I, Robot" where the error/residual accumulates over time and has to correct sometime in the future, or lead to catastrophic consequences)
  
• Inequality is rising - IMO it is mainly between capital and labour in the US and the developed world, but more between skilled and un-/semi-skiled labour in the developing world, though skilled labour is closely correlated with the owners of capital in the developing world
• Global infrastructure constraints - not enough capital has been invested in infrastructure over the past 2 decades to meet the rising demand. There are numerous reasons for this, including privatisation and subsequent lowering of investment horizons, poor policies in many countries, poor modeling, higher than expected growth in demand, changing consumer demand, paying shareholders rather than investing, global concentration of investment in China over the past decade and neglecting it in many other parts of the world, etc. The sudden rush for infrastructure investments has also fueled the global shortage of skilled labour
  
• Global skills shortage - The global economy needs more and more highly skilled labour, and the global economy is not able to supply enough skilled labour at the right locations at the right time. The changes necessary to allow skilled labour to move freely throughout the world is slowly being enacted to balance it with other requirements, but not fast enough for the likes of many businesses. Remaining constraints include attitude / cultural changes (willing to live in another country / community) and the acceptance of foreigners in a local community (xenophobia), immigration laws (the developed world is most advanced in thinking about this, but even there this is changing very slowly).
  
• Global power crises - oil production is peaking, meaning we will have to shift to other sources of power to meet the ever growing demand, which has been more expensive to generate/capture than simply pumping oil out of the earth - nuclear, coal, ethanol, bio-fuels, solar, wind, etc
• Climate change is having a more marked effect on human activity and leads to more volatile natural environment, and also ncreasing risks in the economic system. Are we still underestimating the potential impact our activities have on mother Earth due to our short sighted nature and need for "instant" satisfaction, or will we be able to develop a good enough insurance mechanism to protect us from this growing risk, e.g. is carbon credits really good enough??
  

The details may proof me wrong, or my explanations above may be quite poor / flawed, but this is my opinion - and striclty speaking, opinion is never wrong :)