Approaching the end of this year, it does feel that we are still not sure whether we are out of the recession. I think that if we are out, then we're probably still putting off the inevitable structural changes required in global economy (American deficit, Emerging Market growth, Yuan etc.) and any strong growth can only be another bubble.
The rise in share prices since March has been good, but mostly a yo-yo on the collapse from Sep to March, helped by low interest rates, and now hitting a ceiling. With high unemployment in the west, and a corporate stabilization based on cost cutting, it's now not clear where further growth comes from in 2010. Low interest rates have also helped the governments so far finance their debts, but if BRIC and co growth continues to drive forward and bring more inflationary pressure, the creditors of these governments may start demanding higher returns on their money.
The story of gold this year and indeed over the last 5 years, shows I think the depth of feeling behind a potential change in the global economic balance. It continues to race from peak to peak, and yet of itself is not a revenue generator nor a key commodity of the economy.
I think the most likely scenario from here is a 'L' shaped recession of steady but slow recovery in the west, giving them longer to recover their finances while China and others stabilize their own growth and strategy towards the future. I do not think the east is ready to fully take on the mantle of global growth, and really continue to need the American consumer. Any more sudden movements likely lead to instability in China and full blown depression in the US and then western Europe which is a very scary thought.
However, we know we are only decades away from new balances of power in reality. My belief is that the US and west must be prepared now to re-invent their own governments and economies to be fit to stay lighter. They are no longer going to win because they are the heavy weight. They will need to be lighter, faster and smarter. Unfortunately the current health care bill seems to be a great example of a slow death by legislation, even when the aim may be worthy.
The rise in share prices since March has been good, but mostly a yo-yo on the collapse from Sep to March, helped by low interest rates, and now hitting a ceiling. With high unemployment in the west, and a corporate stabilization based on cost cutting, it's now not clear where further growth comes from in 2010. Low interest rates have also helped the governments so far finance their debts, but if BRIC and co growth continues to drive forward and bring more inflationary pressure, the creditors of these governments may start demanding higher returns on their money.
The story of gold this year and indeed over the last 5 years, shows I think the depth of feeling behind a potential change in the global economic balance. It continues to race from peak to peak, and yet of itself is not a revenue generator nor a key commodity of the economy.
I think the most likely scenario from here is a 'L' shaped recession of steady but slow recovery in the west, giving them longer to recover their finances while China and others stabilize their own growth and strategy towards the future. I do not think the east is ready to fully take on the mantle of global growth, and really continue to need the American consumer. Any more sudden movements likely lead to instability in China and full blown depression in the US and then western Europe which is a very scary thought.
However, we know we are only decades away from new balances of power in reality. My belief is that the US and west must be prepared now to re-invent their own governments and economies to be fit to stay lighter. They are no longer going to win because they are the heavy weight. They will need to be lighter, faster and smarter. Unfortunately the current health care bill seems to be a great example of a slow death by legislation, even when the aim may be worthy.
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