US Side Effects

[william the wie]

Since emerging markets are already burning to some degree and this is likely to get at least somewhat worse heading into the mid-terms and the GOP plan is to blame everything on obamacare how badly will this screw up the response to hard landings overseas? Turkey, Brazil, Thailand, Poland, South Africa and the Ukraine are the big problems so far with China, Russia and India in the wings awaiting their own entry and pratfall, this could get serious. If the wrong problem is "solved" it will get worse.

So what result can be expected in the run up to the mid-terms?

 

[Moonglow]

I believe it two peas in a pod...

 

[oldfart]

Since emerging markets are already burning to some degree and this is likely to get at least somewhat worse heading into the mid-terms and the GOP plan is to blame everything on obamacare how badly will this screw up the response to hard landings overseas? Turkey, Brazil, Thailand, Poland, South Africa and the Ukraine are the big problems so far with China, Russia and India in the wings awaiting their own entry and pratfall, this could get serious. If the wrong problem is "solved" it will get worse.

So what result can be expected in the run up to the mid-terms?

Well, we have about eight months until the election and the time lag on economic policy is at least three months, so most of the effect that will show up is already "baked in". Since US voters generally don't know anything about other countries and don't give a rat's ass about them, the only thing the world economy could do to influence the 2014 elections would be to collapse. So the question really is, "What is the probability of a major world economic crisis in the next few months?"

I'd give it about 10%--15%. I just don't see anything catastrophic in the works. Europe is sliding into another major recession, many emerging economies are in trouble (as you note), and not very many people have a clear idea of what is happening in China. We are not looking at robust growth anywhere.

My short list for pleasant surprises is China, Japan, Spain, and Canada.

My short list for potential nasty surprises is Russia, the UK, Thailand, and Germany.

Yes, Germany.

 

[william the wie]

That grand coalition Merkel made is the marriage from hell. I disagree with you on China but only because Portugal has a buy a house and get a permanent residency card program that the Chinese are pouring into. China is on the verge of making Portugal's bubble reinflate on a cash basis.

 

[oldfart]

That grand coalition Merkel made is the marriage from hell. I disagree with you on China but only because Portugal has a buy a house and get a permanent residency card program that the Chinese are pouring into. China is on the verge of making Portugal's bubble reinflate on a cash basis.

Chinese economic policy is about as opaque as you can get. We are really not sure who is even making it. The one thing I know for sure is that the Chinese are playing a very very long game and using 2600 year old strategy (Confucian and Sun Tzu). They are developing strong relationships in Africa and Latin America to secure long term access to agricultural land and natural resources. They have recognized that dependence on coal as an energy source can make their cities unlivable and hurt economic growth. The dangers of counterfeit goods both in export trade and domestic consumption are becoming apparent. They know that an export driven economy cannot be the basis for growth forever. And they understand that social and political stability as well as economic stability rests on a social compact about what the government can and cannot do with respect to the people of China.

We continue to look at the warts on Chinese policy and predict doom, while the Chinese continue to outperform the rest of the world by a substantial margin.

 

[william the wie]

I wouldn't say doom but the current "dynasty" has lasted about as long as the average dynasty but dynasties based on the Legalist school of philosophy tend to be short lived. If anything Marx borrowed more from the Legalists than any other source.