Where is global growth coming from?

Answer: it can only come from the US and/or the BRICs, as the advanced economies as a whole are below the median line

Where is global growth coming from?

Global industrial production fell off a cliff in the crisis of 2009, when it hit nearly 20 per cent off its 2001-2012 median line. It bounced back above the median in 2010 by over 10 per cent. Ever since, it has gone through a series of dead-cat bounces and is now just 3 per cent above the median. Where is the recovery in global growth going to come from?

Answer: it can only come from the US and/or the BRICs, as the advanced economies as a whole are below the median line. This is largely because the eurozone is just a zombie park created by the uncontrolled bureaucracy, a major drag on the world economy, and will remain so for many years to come.

The US economy has been slowly adding jobs, but its debt is escalating every day towards 100 per cent of GDP, as Captain Obama does bureaucracy but not economics. On 19 May, however, his Administration must once again confront reality, as the total debt level negotiations must come to resolution.

Guess what? You’re likely to him kicking the same old can down Pennsylvania Avenue, as the US economy fails to provide a real economic boost for the rest of us. Meanwhile Warren Buffet’s $28 billion bid to go tread tomatoes for the rest of his life is hardly the way forward for the economy as a whole, even if the M&A guys on Wall Street, the ones who haven’t lost their jobs yet, will be hoping that this is heralding a new takeover boom.

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In China, by far the most significant economy now for global recovery, there are some signs that a hard landing has been avoided, and that a recovery is beginning, particularly in the rise of exports, imports and bank lending. The indicators point to recovery at the moment, as China joins the West in the currency devaluation game, leaving Japan flailing around as the only G20 country not to devalue.

That is about to change, as new premier Shinzo Abe gets control of the BoJ in April and begins his own devaluation game. The eurozone economies are all in decline and will continue to stagnate for years to come, held down by bureaucracy, a lead weight on global growth.

This is a very brief overview of the available data, and the data are less than convincing. If there is a recovery really beginning, it is in only two major economies, both of which are weighed down with public and private debt.

And China’s seemingly absurd spat with Japan over some rocks and distant memories of the 1936 Manchurian Invasion and retracted apologies could get out of control and upset the Far Eastern apple-cart – something that nobody needs right now.

Nevertheless, global stock markets are up nicely in 2013, which usually heralds recovery, but no one can tell how much of this is down to QE seeping from the banks, via their customers and conduits, into the markets.

It’s still hold-your-breath time on a global recovery, as systemic and banking and geopolitical risks abound everywhere, in what is now a truly globally integrated economy. The possibility that the start of 2013 is just another dead-cat bounce is still with us.

Never before has the whole world’s economy been so dependent on so unlikely a recovery, and the rotten apple in the barrel is the wretched eurozone, which is going nowhere but down, smothered in its own self-induced slime-ball bureaucracy.

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