Myanmar and ASEAN

I'm a bit worried for the Economist that they jumped the gun with their new cover. I'm no fortune-teller, but it sure seems like there's at least some chance the whole "Saffron Revolution" could fizzle pretty quickly, given the scale of the government clampdown (or what we're hearing of it, anyway, following the government-imposed communications blackout).

The one article I've seen pushing news of the episode forward in any kind of concrete way is this one, from the Financial Times, saying that Myanmar's revolt is stirring the first major internal crisis at ASEAN, the Southeast Asian trade economic bloc.

To make a long story short, Myanmar's government wouldn't be possible without substantial support from its neighbors. Japan and China are both major economic allies of Myanmar's junta, though Japan has been gradually unwinding some of its investments. India too is busy at work trying to shore up access to Myanmar's natural gas reserves.

This all presents quite a monkey wrench for ASEAN, which was actively seeking to increase economic integration among its ten member states.

The "R" Word

U.S. markets tanked again on Friday. Asian markets caught the same bug on Monday. The gazillion dollar question--the one that nobody seems to be able to agree upon--is to what extent the debt-market messiness will affect, or has already affected, the "underlying" global economy. The FT's lead editorial this weekend argues that it hasn't--yet--but spotlights some ominous signs, including a recent OECD report and troubling data on the U.S. job market. The economist Nouriel Roubini says on his blog that the "utterly ugly" employment stats confirm the worst: "the U.S. is headed towards a hard landing."

The FT's piece says that "if calm returns to the money markets within a few weeks, little harm is likely to be done," adding that the "more substantial threat to the real economy is not from money markets at all" but "from the continued weakness of the U.S. housing market." Housing prices are falling at nearly 4 percent, annualized--a sharper decline than at any point since the Great Depression--and some experts are starting to throw around the "R" word.

There are all sorts of reasons to be cautious right now. But let's also take a good, hard, contrarian look at the silver linings. Goldman Sachs is dipping into distressed debt markets right now. Berkshire Hathaway may be doing the same thing. And, of course, we're still riding half a decade of banner growth, the past six months notwithstanding. Again, there are all sorts of reasons to be cautious--just so long as one keeps clear-headed.

White Gold

Marginal Revolution has a blog entry on soaring global milk prices and the peculiar trade patterns of the milk industry (traditionally milk has rarely been traded across national borders, though Chinese imports are now rapidly rising). The post is interesting at face value, but deserves a closer look. Click on the links for:

"5. Parts of New Zealand are booming."

I think that's blog humor?!

Emerging Market Liquidity

At least thus far, investors worried over the prospects of a global credit squeeze have afforded emerging market funds a bit more leeway than their developed-market counterparts. Things may be getting a bit frothy, says FT's Alphaville, citing data from Standard & Poor's new "Liquidity Vulnerability Index." The measure rates Latvia, Iceland, and Bulgaria as the emerging market countries most susceptible to a broad evaporation of liquidity. Most "sheltered" is Russia, followed by Egypt, the Ukraine, and the Czech Republic.

Should an emerging debt-market shakeout come along, the Economist isolates Turkey as particularly vulnerable, given its large current account deficit, but also notes that today's emerging markets don't much resemble the markets that got whacked during the financial crises of the '90s, given that many have restructured their borrowing and built up large foreign currency reserves.