Comments on Alan Kohler “Going for broke”, 30/10/2009, http://www.businessspectator.com.au/bs.nsf/Article/GDP-US-economy-government-debt-pd20091030-XARNZ?OpenDocument&src=sph
Alan, while I partly agree with you that "the worst is over and this is not a secular bear market", I think the world stock markets is very likely to be decoupled as the real world economies do.
By that I mean the US market is likely to be in an extended period of stagnation while some other markets most notably those in Asia, are likely to be showing a strong upward trend.
Australia's stock market may ride the booming trains in Asia.
Europe may be somewhere in between the US and Asia's.
Part of the reason why the US market will be stagnant is the adjustments that the US economy has to have over the next decade or longer, including its government debts and private savings.
As you said, the US government is broke! It needs life transfusion.
Showing posts with label decoupling. Show all posts
Showing posts with label decoupling. Show all posts
2009-05-26
Decoupling of world economies
Comments on Adam Carr “SCOREBOARD: Decoupling revisited”, 26/05/2009, http://www.businessspectator.com.au/bs.nsf/Article/SCOREBOARD-Decoupling-revisited-pd20090526-SDTAF?OpenDocument&src=sph
In my view, decoupling is happening and will be more pronounced in the coming years. There are a number of reasons for this decoupling. Firstly, the world economy may have come to the point that the capacity of the more advanced economies, especially the US, to continue to absorb the continuous and rapid expansion of the developing economies through imports may have reached a reflection point. The implication is that developing economies, especially the large and rapidly growing ones, will have to find other ways than relying on simply exporting their growing outputs.
Secondly, the current financial and economic crisis has made it clear that the US cannot continue to consume beyond its means, both privately and publicly. They must increase their savings from now on, or at least following the recovery. In so doing, its growth is expected to be slower, so its current account deficits will be reduced. This will add to the need for developing economies to rely more on themselves to maintain rapid growth.
Thirdly, some large developing economies have probably accumulated a critical mass to accelerate the so called South-South trade, that is, collectively act as a group to assist the growth of each other.
As Adam Carr, I don't have Nobel Prize either. But I would not be surprised at all that the more dynamic developing economies will recover much earlier than their more advanced counterparts from this world great recession. Further, I will not be surprised that they will maintain their rapid growth irrespective whether the US will or will not visit Japan’s 1990s experience following its bubble burst.
The rapid industrialisation of many developing economies simultaneously, especially the main large ones, is likely to see a change in the patterns of growth in the world economy. Decoupling will be a natural product out of that process.
In my view, decoupling is happening and will be more pronounced in the coming years. There are a number of reasons for this decoupling. Firstly, the world economy may have come to the point that the capacity of the more advanced economies, especially the US, to continue to absorb the continuous and rapid expansion of the developing economies through imports may have reached a reflection point. The implication is that developing economies, especially the large and rapidly growing ones, will have to find other ways than relying on simply exporting their growing outputs.
Secondly, the current financial and economic crisis has made it clear that the US cannot continue to consume beyond its means, both privately and publicly. They must increase their savings from now on, or at least following the recovery. In so doing, its growth is expected to be slower, so its current account deficits will be reduced. This will add to the need for developing economies to rely more on themselves to maintain rapid growth.
Thirdly, some large developing economies have probably accumulated a critical mass to accelerate the so called South-South trade, that is, collectively act as a group to assist the growth of each other.
As Adam Carr, I don't have Nobel Prize either. But I would not be surprised at all that the more dynamic developing economies will recover much earlier than their more advanced counterparts from this world great recession. Further, I will not be surprised that they will maintain their rapid growth irrespective whether the US will or will not visit Japan’s 1990s experience following its bubble burst.
The rapid industrialisation of many developing economies simultaneously, especially the main large ones, is likely to see a change in the patterns of growth in the world economy. Decoupling will be a natural product out of that process.
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