Recently read an article in a Mexican business magazine where they mention that the 500 euro bill is the darling of the Italian mafia.  The simple reason is that while transporting a million dollars in 100 dollar bills cash would need a portfolio or bag weighing up to 10 kg (as previously seen in Hollywood), a million dollars in 500 euro bills would be much more easily concealed and weigh less than 2 kg. No wonder they are starting to find these in seizures in Mexico, Costa Rica and Russia.

I mean, I have never seen even the 100 Euro bill being used normally in the street, much less the 200 or 500.  Given that the larger the denomination the larger the bill, 500 Euro are pretty much a purple papyrus

You might have heard of peak oil, the idea explaining the point in time when we have reached the maximum amount of oil produced, after which starts a decline that affects the world as we know it (and yes, I’m using this phrase on purpose).  Jeff Rubin, a Canadian economist, took the issue head-on in this book, explaining not only why in his view the current economic crisis is at its source one huge oil price shock, but also how will the world economy change once oil is not so plentiful, more expensive and there are more economies hungry for it.

Basically, what he predicts is an end to the current version of globalisation, where you have distributed value chains, cheap travel and products from all over the world at your doorstep.  I don’t know about you, but even if I live more or less ecologically, use renewable energy where possible and don’t have a car, such a future would wreak havoc with my lifestyle as it would be impossible for me to find the food I want and be able to visit my family over the holidays.  The subtitle of this blog is “musings from a child of globalisation” after all, isn’t it?

I think it is time to sweep this issue under the rug every time it is brought up and start thinking about what kind of innovations are needed.  Who’s with me?

I’ve mentioned it before (1,2) how the middle class in Mexico seems to to have been slowly growing and to start becoming more “brown”.  While I don’t know if this trend is still continuing given the current drastic contraction of the Mexican economy, I did find some anecdotical evidence of this trend while observing the local tourists around me in my recent trip to Mexico, both those coming from recent holidays in Europe and those spending their holidays in the country.

If true, that is definitely one welcome development.

Vive México campaign

Originally uploaded by Chiva Congelado

One thing that really caught my attention during our last trip in Mexico is the huge marketing campaigns to stimulate domestic tourism. There were ads not only talking about Mexico in general but also about specific destinations within the country (paid for by local tourism councils).

With the dry-up of foreign tourism due to the publicity given to several recent events, it’s not a surprise they’re turning to the people already living there first. I didn’t see anything out of the ordinary at all, and enjoyed my trip immensely. Given the importance of the tourism industry to the economy, I really hope people start coming back, as the country has a lot to offer to the visitor.

Found this very interesting document on the reasons of the economic downturn and the ways forward at Robert Peston’s blog at the Beeb.

I find especially interesting his thought that global markets need global rules.

Reading a report by the Economist Intelligence Unit on the outlook for this year, I found out that lipstick sales can be a very reliable economic indicator.  As ridiculous at it may sound, theory goes that if lipstick is selling briskly, the economy is not doing well, as women are substituting other purchases with it.

I’ve heard of other unorthodox economic indicators, but this one is the weirdest.

• The Chinese economy is still expected to grow 7-8% this year
• Islamic banking was relatively untouched by the global turmoil as it’s very risk averse
• The Japanese economy has contracted fiercely as its exports have fallen to historic lows
• U.S. skilled immigrants are going back to China & India
• Many Eastern European economies are in trouble and with them their Western European (mostly Austrian & Swedish) investors
• Latin America will mostly just suffer a slowdown, the Mexican economy is expected to contract this year due to its high exposure to U.S. economic cycles
• Some emerging economies are more vulnerable than others

What does this mean? What we are seeing is the shift of economic power from the United States & Europe to markets elsewhere, and especially China, India and parts of the Middle East are in good shape to reap the rewards.  However, since the system is built around the countries of the G7 with the US as the main motor of worldwide consumption, co-operation between all countries is needed, or else the rise of protectionism will amplify the current situation.

I wouldn’t be surprised if in case the crisis lasts long (hopefully not) China ends up bailing the US so that its own economy can keep on growing…

When I moved to Finland to study in the summer of 2000, 8.35 Mexican pesos used to buy one euro (the Finnish markka, still legal tender, was already pegged to the euro, and transition to banknotes would happen one and a half years later).  A non-EU student like me needed to show he had 30,000 markka (5,045 euro or 42,000 pesos of August 2000) for his living expenses for the year in order to be granted a residence permit.  I had to sell my car and got some help from my parents to reach that sum, but it seemed a better proposition than continuing studying at a private university where the tuition per half year cost 50,000 pesos (5,990 euro or 35,600 markka of August 2000).  Furthermore, I didn’t need to pay tuition in Finland.

Today’s rate is 19.1 pesos per euro.  Furthermore, a non-EU student now has to demonstrate that he/she has 6,000 euro every year in order to be given a residence permit, so my present-day equivalent would need to get 114,000 pesos every year to be allowed to come to Finland to study (a 271% increase in almost 9 years!).  The Finnish Parliament is also evaluating the possibility of adding tuition fees for non-EU students.

I hope I’m wrong, but I don’t expect many Mexican students coming here anytime soon.  I guess it was a matter of timing.

Some time ago I argued that the middle classes would help the economic and democratic development of emerging countries.  Again, the Economist takes this subject on with a special report, and Paco Calderón references it with a cartoon.

Will this positive development survive the current economic climate worldwide?

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Via Alt1040.