ARTICLE: “The Fever for Exotic Stocks: Unfazed by Risk, Investors Pour Money Into Faraway Markets,” by Landon Thomas, Jr., New York Times, 18 May 2006, p. C1.

This story starts with some hedge fund trying to convince an investor that Zambian T bills are the next great thing. If that doesn’t say bubble, few things do.

And yet, in many ways, as the article points out, this zeal for higher returns leading funds to wade deeper inside the Gap is a reflection of the fact that the New Core pillars (the so-called BRIC of Brazil, Russia, India and China) have all sort of tapped out for a while as markets that will provide the sort of high-scale yields these funds live for. So when the benchmarks seemed exhausted, investing funds turn to more exotic emerging markets, giving us a brief glimpse of how willing all that aging Old Core money will eventually find its way into the Gap.

I got this question at a recent talk I gave in DC: “Why do you think all us aging Boomers will be willing to invest in these more dangerous Gap countries, especially postconflict or postdisaster?”

My reply was basically that greed would drive the process: Boomers won’t be interested in accepting lower standards of living in retirement, so they will--in aggregate--be willing to accept high levels of risk far later in their investing careers. Plus, as I and others have noted, the New Core pillars are hardly the inexhaustible pool of cheap labor, so once their labor rates rise, the most risk-accepting money will move on, eventually reaching the deep Gap en masse.

So is the world going to hell in a handbasket, with terrorists ruling all? If so, then why is the government bond interest rate spread between Old Core pillars and New Core and Seam States like Turkey and Pakistan smaller than it’s ever been?

As one expert analyst, Marc Faber notes, “For the first time in modern history, poor countries are financing the rich. I would not rule out one day that Brazil will have a better credit rating than the U.S.”

What America can do in the meantime is work with other Core powers to deal with the worst security situations there, connecting up these economies whenever and wherever possible to the larger global commercial nets that will act as the conduits for these investment flows. In short, the U.S. military is increasingly in the business of enabling globalization’s advance. That is, pure and simple, the military-market nexus.

So yeah, call it cowboys and Indians if you want, but remember that the spread of networks favors our side over the long run. Was that way in the Wild West way back when, and ultimately it will be that way throughout the Gap.

And it’ll be driven by our greed, not charity. And that greed will be a function of demographics: our old money chasing young labor.