for 2009 turned out to be pretty accurate.
Of course, most of them were fairly obvious – especially in
retrospect – but supposedly informed commentators were saying otherwise at the
Anyway, encouraged by our previous success, here are a few
more statements of the obvious – or, at least, of what we consider obvious.
Some of our leaders seem unaware of them.
1 The bond markets are going to flex their
muscles. There is already a big difference between some trading prices and
official credit ratings. The markets will force governments to confront their
debt problems, which means...
2 Spending cuts and tax rises – probably both
– will exceed expectations in most high-spending economies. Expect a
particularly savage Budget immediately after the British General Election –
irrespective of who wins.
3 Inflation will return. This in turn will
lead to higher interest rates – although inflation may actually be encouraged
by governments with high levels of public borrowing seeing it as a “cheap” way
out of their debts.
4 Be ready for mini-scares. There are many
“known unknowns” that could still trigger a panic – Dubai, Congressional
interference with the US Federal Reserve, populist attacks on banking, etc. The
relatively calm response, so far, to the bad news from Dubai may show a new
maturity in the markets – but they remain jittery, because there is a lot about
which they should be jittery.
5 For all that, the dominant global trend will
be slow recovery. Emphasis on both the “slow” and the “recovery”. Anyone
expecting a return to boom times will be disappointed, but it is worth noting
that the world as a whole is now once again getting slightly richer every
6 Business migration is ongoing. Business
will return but not in the places it did. Unless the USA, the UK, and Western
Europe abandon the lethal combination of high government borrowing and
hostility to bankers, they will drive the service sector – the most profitable part
of the modern economy and the most mobile – into Asia. The centre of gravity in
the world economy is already shifting to the East.