Well we’re back. No more holidays for me.
It’s something of a relief to be finished with the past decade. It’s been a rather bleak decade - terrorism, global financial me Phew – good to say goodbye. So, we’re off on a new one. Compared to a year earlier the global economy looks better than most expected. And the news from the BRICSAM remains positive; and their economies continue their upward trend. So looking at recent IMF data that compares growth from the previous quarter – looking at 2nd quarter 2009 (the IMF has put out 3rd quarter but too few cells are filled) we see:
But the ‘clouds gather.’ And the focus will be increasingly on China. China’s failure to adjust its exchange rate policy looms larger and larger as a major impediment to global growth. And without China’s determination to change its exchange rate policy, countries increasingly will take a variety of protectionist measures – raising tariffs, subsidizing industries and devaluing their currencies as Vietnam recently did to compete against the Chinese export juggernaut. Paul Krugman of the New York Times and Princeton University has recently raised again the threat that China’s economic policy poses for the global economy “Chinese New Year”). As Krugman concludes:
The bottom line is that Chinese mercantilism is a growing problem, and the victims of that mercantilism have little to lose from a trade confrontation. So I’d urge China’s government to reconsider its stubbornness. Otherwise, the very mild protectionism it’s currently complaining about will be the start of something much bigger.
Time is short.