Sunday 10 January 2010

2010: Happy New Year and welcome to the New Normal

Happy New Year to all of you and welcome to the new normal economy in 2010.

In the new economy, unemployment levels are going to stay high and all the politicians are under tremendous stress of the need to cut into public spendings.

It is election year for both the UK and the US, and you can expect a lot of discussions relating to public spendings.

We can only hope that the time for complacency and misguided economic politics have come to an end.

Troubles are unfortunately still brewing in many parts of the world. It is important to track the below countries and situations.

Take Venezuela for instance, they have just announced a 50% devaluation and are facing inflation levels of around 20% and rising. They also have escalating tensions with their neighbors Colombia. Although Venezuela is highly dependent on the prices of oil, it looks like Chavez Socialist Revolution is heading towards a Zimbabwe situation.
Argentina is also facing troubles, with the president removing the president of the central bank.
Greece hasn't yet come up with a drastic plans to rebalance its books and the EU doesn't want to come to bail out Greece until they have done their homework in the first place.
In Iran, civil unrest is gathering momentum and one could expect its president to follow the same fate as Nikita Khrushchev.

But there are also some bright spots in all that doom and gloom, you can expect the BRICS countries to continue powering ahead. China has raised its rates in an attempt to control the hot money pouring into its economy. Indonesia, Vietnam, Singapore, are all growing strongly.

Everyone is talking about the power shift between the West to the East. The reality is that the world is shifting again to its equilibrium, and for those of you who have read the excellent work from Angus Maddison, Contours of the World Economy, Asia is basically claiming back its once 50% owned market share of world GDP. We are seeing a reverse to the mean.

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