Some investors haven't quite given up the ghost of "decoupling," the notion that emerging markets can ignore recessions in developed economies. Yes, growth rates in China, India and Brazil likely will outpace those in the U.S., Europe and Japan this year. And emerging-market banks largely have avoided contagion by the West's toxic assets.
That's right -- countries that extract raw materials don't need to sell those materials to anybody who then develop then into products which are sold in the developed world. That's just a figment of my imagination.....
3 comments:
Lols. The U.S. is what, 25% of the world's market? And Europe another 10-15% or so? No, that won't affect those other economies at all, huh?
It is absurd to believe that China will forever produce hard goods in exchange for increasingly worthless US dollars. At some time, China will turn inward as China always has. The production will shift to goods for internal consumption. The worthless dollars are the price they paid to learn how to run a modern industrial economy. I have no doubt that they will stumble in this transition to an internal economy, but in the end they will have a vibrant industrial economy and we, having lost our industrial base and knowledge of how to run one, will be reduced to trying to sell agricultural products and raw materials, i.e. a third world economy. Our mighty financial sector is just a house of cards held up by taxation and printing press FED money. It will blow away.
Then who will be laughing out loud at the Chinese?
One of the benefits of the recession for capitalists in developing countries is big companies can survive, and their little competitors go under. In the end, the bigger companies increase market share and can dictate prices, rather than be price takers. When the economy turns, consumers may find out cheap imports will not be so cheap anymore.
Furthermore, as living standards continue to increase in China despite the recession, the market turns inward and looks to develop the domestic economy, and infrastructure spending continues, while in the US infrastructure is crumbling. Wind farms will be looked to to help the economy, but please note most turbines are imported. The deindustrialization of America has hurt our ability to produce goods for the real economy (but we make pretty good weapons).
Also, the developing world had it's toughest time over rising energy prices. The recession has caused oil prices to tumble from 150 to 35 and now 50. This has helped maintain profitability despite reduced production.
The outlook for the developing world is still bright, not so for the developed world, especially those who must import what they no longer produce.
And then there is the G-20 summit. Beware of talk to eliminate the USD as the global reserve currency and replace it with SDR's. China has expressed a willingness to buy bonds from the IMF with it's USD. This might not be so good for the dollar.
That 25% of the US for the worlds market might be 15% in a few years. Thats the point of globalization, to spread the wealth globally and equalize it by nation, if not by class.
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