New global sources of demand
April 6th, 2012
05:31 PM ET

New global sources of demand

Editor’s Note: The following piece, exclusive to GPS, comes from Wikistrat, the world's first massively multiplayer online consultancy.  It leverages a global network of subject-matter experts via a crowd-sourcing methodology to provide unique insights.

When Americans are warned that the “era of cheap credit is over,” we’re really being told that the inherent advantage of owning the world’s reserve currency is coming to an end. No, it won’t happen overnight, because China’s renminbi is still far from becoming a serious rival.

But the end is coming all right, and it’ll make all that Thomas Friedman hyperbole about a “flat world” a whole lot more real. America simply won’t have the advantage of being able to float debt - of all kinds - as easily as we did in the past, which means we’ll need to compete more intensely on the price and quality of our goods.

The primary driver here is China’s need to shift from a super-saving economy to a super-consuming economy. It’s gone about as far as it can go with export-driven growth, and now it needs to turn on its domestic consumption big-time, but doing that means China’s willingness to finance the debts of others will decrease - thus the end of cheap credit.

So, accepting all that, what can America anticipate when it comes to new sources of demand in the global economy?  What are some of the hot goods and services of the coming years?  We asked Wikistrat's global community of strategists for some ideas, and here’s what they chose to highlight:

The Basics

– Water:  With both aquifers and river flows being consumed at unsustainable rates all over the world, big opportunities emerge for water-constrained agriculture growing techniques (to include drought resistant genetically-modified seeds), desalinization plants (turning seawater into drinking water) and companies that help governments manage river flows wisely (something in which the US has plenty of experience).

– Soybeans and corn: Soybeans are already a huge export item for U.S. farmers, and they’ll get even bigger in coming years, as China looks to further increase its beef consumption (using soymeal as feedstock).  Ditto for corn, which China has begun buying in sizeable blocks from America. US farmers will be China’s best friend in the decades ahead.

– Nuts: As more middle class consumers come online in China, their demand for lower-calorie, high-quality nuts is going . . . well, nuts! It’s already reshaped the U.S. almond and cashew industry and shows no sign of slowing down in its growth.

Energy

– Shale gas “fracking” technology: There is nothing hotter in global energy markets right now, and the U.S. is the clear pioneer in this new “hydrofracturing” drilling technique that liberates natural gas from rock. Today foreign companies are lining up to partner with our firms here, and soon enough, our firms will take this technology global – revolutionizing the industry.

– Demand for LNG: Related to the previous point, global demand for liquefied natural gas (how it gets transported overseas by ships) is skyrocketing, with buyers outpacing sellers by a wide margin. Part of this is Japan and Germany deciding to get off nuclear power, but part is America moving too slow in making its glut of gas available for export.  Look for that to change soon, improving America’s trade deficit considerably.

– US coal exports: America is blessed with the cleanest, most energy-rich coal in the world, which has kept our electricity bill cheap. But with natural gas supplies exploding, look for displaced coal to be exported in far larger volumes. Two big drivers of demand will be India and China, whose burgeoning middle class consumers can’t get enough electricity.

Infrastructure

– Urbanization: Mostly concentrated in Asia and Africa, we’re looking at 75 million new urbanites each year through 2050. When IBM is talking “smart cities” in its commercials, these are the markets they hope to capture.

– Arctic warms up: Thanks to climate change, the Arctic Circle is rapidly opening up for seasonal shipping and exploration and production of hydrocarbons (oil and gas). But to tap all that potential, massive amounts of infrastructure needs to be built – in part for nations to establish their claims.

– Any time a dictator falls:  Iraqis may not love America, but they love our consumer goods.  Same for Cuba once the Castros finally depart. Cars are the signature item, along with iPhones and iPads. Point being, democratization waves unleash pent-up consumer demand, so keep cheering on the protestors.

People

– Japan’s elder laboratory: Nobody’s getting older faster than Japan, so nobody’s experimenting more with selling goods and services to that (generally) well-resourced consumer pool. Japan’s experience here will inform a much bigger future global market.

– Emerging market students: If there’s one thing that new middle classniks the world over can agree upon, it’s that you can never spend too much money on your kids’ education.  Good news for U.S. colleges and universities, which continue to attract these students in tremendous numbers.

– New middle class: It doesn’t matter where they hail from, once they have their smart phone in hand, the next thing they all want is a car, which means global demand for cars will continue expanding. The global car fleet has just reached 1 billion, but will quadruple by 2050. That’s why Obama saving Detroit made good sense.

Guns, Hired & Sold

– Arms exports to East Asia: “Rising” China’s expanding defense budget, combined with America’s just-announced strategic “pivot,” guarantee a lively market for the foreseeable future.  Vietnam and Indonesia are key targets.

– Ditto to the Persian Gulf: Here it’s Iran that American defense firms need to thank. And if Israel attacks Iran? Then we’re talking a major reloading.

– Private security across Africa: It’s not just the Somali pirates or the remaining insurgencies like the Lord’s Resistance Army. The key driver here is much as it’s been in Latin America for years: a booming middle class population looking for personal protection in societies still ridden with crime.

Media

– Mobile services across Asia: Booming business communities and middle classes, saddled with insufficient infrastructure, clamor for mobile data services that get around those roadblocks. Forget the wires, bring on the wifi.

– Bandwidth across the Middle East: Every time a dictator falls, the number of Internet users skyrockets. So the Arab Spring is unleashing incredible demand for bandwidth in all forms. Expect five-to-ten-fold increases in liberated societies.

– It’s not TV, it’s HBO: Another one we can chalk up to an emerging global middle class. They’ve got their new place and their new flat-screen. Now they want unlimited content to go with it. Hollywood’s revenue is increasingly dominated by overseas box office. This “on demand” trend will only grow.

Recycling

– Burn your garbage here: Developing economies suffer all manner of refuse disposal issues, along with shortages of electricity. The answer? High-tech biomass burners that can turn garbage into power.

– E-recycling: All those computers and high-tech gadgets that get tossed each year are chocked full of valuable metals. For now, much of that waste gets shipped off to India and China, but look for new U.S.-based recycling companies to start capturing that flow – especially after Congress passes a new law to encourage that.

– The new Medicis: Ready to throw out that tired old Rembrandt?  Looking to re-gift that piece of modern art you received last Christmas? Well, China’s noveau riche are becoming the force in global art markets, so everything old is suddenly new again.

We’re sure we missed more than a few, but that’s Wikistrat's crowd-sourced list for this week. Now please chime in with some suggestions of your own.

Topics: Economy • Global

soundoff (24 Responses)
  1. USMC Forever

    According to the above article, it appears that we may need to drastically curtail our unnecessary and excessive military spending and foreign aid. That would be superb all the way around!

    April 6, 2012 at 7:10 pm | Reply
    • Patrick

      Where in the article does it say that?

      April 7, 2012 at 7:56 pm | Reply
  2. matt c

    The Chinese nouveau riche purchasing art by the old masters seems like an intelligent way to rid onself of US dollars.

    April 6, 2012 at 8:20 pm | Reply
    • j. von hettlingen

      Indeed, but it has to be prime antiquities of national interest that the Chinese government would like to buy back on the international market. Otherwise it's privat persons of the Chinese diaspora who are the big buyers. A few days ago a 900 year old tiny bowl from the Song Dynasty was sold by Sotheby's in Hong Kong for $26,7 millions.

      April 7, 2012 at 4:55 am | Reply
      • Patrick

        Everything sold from Sotheby's Hongkong office is in HongKong Dollars.
        Today's rate is HKD 7.75 to USD 1.00.

        April 7, 2012 at 12:35 pm |
      • j. von hettlingen

        The sum was in U.S. dollars! Check it out yourself!

        April 7, 2012 at 3:38 pm |
      • Patrick

        I did.

        April 7, 2012 at 4:26 pm |
    • Patrick

      A proper investment strategy involves a varied program.

      April 8, 2012 at 1:06 pm | Reply
  3. jal

    The world economy needs to go full throttle. We cannot allow the Euro to fail. Time to roll up our sleeves and put the pedal to the metal.

    April 6, 2012 at 8:32 pm | Reply
    • jal

      Schrodingers mirror.

      April 6, 2012 at 9:28 pm | Reply
  4. Jesse Parent

    I agree that water should be a top priority. Water and Energy are going to influence many of the other related issues mentioned here.

    April 6, 2012 at 11:53 pm | Reply
  5. 100% ETHIO STRONGER!

    Let US reverse the gear back into 200 Years, and think what has been changed since then? ...why not try to fix the income and cost of living, similar to the last 200 Years?
    *********************************************************************
    As we are aware of, every Countries have few greedier who took much advantages on their Majorities of people.
    These greedier are the Mothers or Creators of all the Problems that the World keep facing. They implanted their Satanic Mind-Sets against Billions of the World Populations. If we don't go on their blueprints, we can't be Rich.
    Their ways are the only ways, to make US existed.

    Let US say, Technologies for good and bad has been created, developed and spread around the World, since the last 200 Years. In the main time, the Populations are also grow and the Earth's few Percentages of land keep disappeared, because of Hurricane and Water erosions.
    Back then, to get $200.00 was hard, as Today, to get $200,000.00 is hard.

    April 7, 2012 at 2:01 am | Reply
  6. j. von hettlingen

    How about coming up with a technology that helps clean the polluted air?

    April 7, 2012 at 4:47 am | Reply
    • Patrick

      We live in a society where people have been trained to expect simple answers to complex problems. Conventional wisdom holds that if one cannot prove causation then we can dismiss the concern. This could not be further from the truth. The real truth is that we live in an environment that is full of environmental (such as pollution) stressors. At some point these stressors can trigger disease. But no 2 individuals experience the same collective set of environmental stressors and no 2 physiologies are going to respond in the same way to those stressors. That is why we have to resort to looking for correlations to look for tipping points.

      April 7, 2012 at 12:40 pm | Reply
  7. Patrick

    What would happen if solar panels were free? What if it were possible to know everything about the world—not the Internet, but the living, physical world—in real time? What if doctors could forecast a disease years before it strikes? This is the promise of the World Changing Idea: a vision so simple yet so ambitious that its full impact is impossible to predict. Scientific American’s editorial and advisory boards have chosen projects in five general categories—Energy, Transportation, Environment, Electronics and Robotics, and Health and Medicine—that highlight the power of science and technology to improve the world. Some are in use now; others are emerging from the lab. But all of them show that innovation is the most promising elixir for what ails us.

    April 7, 2012 at 12:42 pm | Reply
  8. SHIAZIM= EVIL

    SHIAZIM= EVIL

    BUL SH IT WE MUST ATTACK IRAN NOW, THOSE EVIL CULT EMPIRE OF SHIIA THUGS MUST END. WHEN WE GET RED OF SHIIA IRAN ALL THE OTHER MINOR EVIL LIKE HIZBOALLAH WILL FALL ALONG WITH SYRIA , KOFI ANAN IS NO BODY AND HE SHOULD NOT ALLOWED TO HELP SYRIAN THUGS AS HE IS BLACK, THE SHIIA WILL NEVER LISTEN TO BLACK THEY CONSIDER THEM LOW RACE AND INFERIOR HUMAN BEEN , THATS WHY THEY KILL KURDS, SUNNI AND OTHERS.

    April 7, 2012 at 3:57 pm | Reply
  9. HALAL MEAT..HA HA

    HALAL MEAT..HA HA

    The caller ID on Eman al-Obeidi's smart phone says private number. She guesses the call is from a fellow Libyan and promptly silences the ringer.

    "I think the halal meat seller gave out my number," she says, picking up another piece of sizzling beef fajita. "That's why I don't buy halal meat anymore."
    MMMMMMMMMMMM HALAL MEAT, U EAT SO MANY FK CO KS IN LIBYA
    WHATS THAT GOT TO DO WITH STUPID MUSLIM WHO GAVE YOUR PHONE!!! HALAL IS BETWEEN U AND GOD

    April 8, 2012 at 12:24 pm | Reply

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