Economic Report

By: EconomyWatch   Date: 29 June 2010

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We have just lived through one of the scariest 12 months of modern history.

 

The key question now is what is going to happen in 2010?

I'm sure you know that the economy right now is extremely fragile.

The 'recovery' could go either way. So which way will it go? And what will it mean in terms of growth, jobs, houses, stock markets and trade?

Would you like to have the inside track on what is coming?

Me too.

So I asked the analyst team at EconomyWatch.com to put their heads together and distill it down to the essentials. The have been beavering away looking at everything that is happening right now. They have also been drawing on the forecasts of the Financial Forecast Center to understand where it is all likely to go next year.

Since 1947 and the Marshall Plan, the world economy is built around the US and all countries either export to the US - or export to countries who export to the US

So what happens to the US economy is not just a domestic American issue, it is the single most important determinant of world economic health.

Put simply, Americans have to buy the products the rest of the world sells.

Now, unless you have been living under a rock for the last 10 years, you will also know that, as Bob Dylan sang, the times they are a-changin. There is a new game in town, and it is called China. China had been the largest economy in the world for most of the last 5,000 years, and it plans to regain its place at the top of the pecking global order - fast.

China is today the world's factory, and holder of more reserves (i.e. it has more dollars in its bank account) than any other country, while the US has the largest debts.

The US is the world's customer, and China the world's supplier, both of products and increasingly of financing.

So to understand the world economy, we need to understand what is happening in the US, the center of the current global economic/ financial/ political system, and what is happening in China, which is rapidly joining a new political-economic system with America that some call .

Since the Asian Financial Crisis in 1998, the Chinese have managed their economy with surprising deftness. The Americans, unfortunately, have not. Instead the with millions in campaign financing that generate billions in profits, while simultaneously securing bailouts to 'socialize' their losses.

The problems of debt in the US and inbalances in China have not been solved, merely postponed. Will the shoe drop in 2010, is this the quiet before an even bigger storm, or can the problems be un-knotted?

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