Despite all the running
concerns and general economic malaise presently felt out there and
transmitted into our living rooms through the media, the global
economy over the next decade is now looking good to even super
bullish. The five year contraction of credit precipitated by the
2008 crisis has largely run its course and general credit growth is
now underway albeit at a somewhat prudent pace. This should
generally last a generation at least. This will be true even if
many obvious reforms are not enacted and other corrective measures
taken. As I stated in 2008, there was a fast and a hard way to
overcome the credit crisis. We have had to live the hard way and the
outright contraction of the USA middle class. As stated before, it
was all unnecessary, but it is now over.
There are still plenty of
problems to resolve, but that would be equally true in the midst of a
raging bull economy.
On the economic front two
drivers are now in place to fuel economic growth. Money itself is
cheap and will continue to be so until asset prices fully reflect
that reality. If you need to understand what that means, just go to
Canada to see the present pricing structures developing and in place
today. This will be the US in a few years and everywhere else that
is able to get its act together.
The other great driver in
place is a massive increase of global oil reserves at the plus $50
per barrel level that is sufficient to provide energy security for
doubling the size of the global economy. This oil reversal is also
putting the USA economy back on its feet. I am thrilled to see five
years of this, but it appears we will get much more because the
transition to new energy sources while developing apace is still just
that. It is a shift that is basically decadal and while still rapid,
you do not replace twenty year paper with ten year paper either.
The key point though is
that US oil consumption is poised to plummet with the real advent of
EVs and that will also be true for global consumption as massive
amounts of all that new oil becomes surplus. A wide range of
economic changes are also poised to transform the developed world and
they are all good news and have been tackled extensively in this
blog. The blowback will be against erstwhile monopolists who will
suddenly discover a need for nimbleness. Say goodby to the Arab Oil
Barons.
China and India are now
confronting their internal problems and because they are now richer
and are able to engage solutions. Still messy but that is always
true.
The rest of the world has
generally woken up to their options and the populations no longer
resist modernism and in fact welcome it. Even the Islamicists are
jumping on the horse and mostly trying to not be thrown off just as
the communists discovered.
Europe is sorting itself
out the only way it can by hanging the reckless out the window. What
must and will emerge is a true financial union that will be
inherently prudent. Sooner or later the unpleasantness will be over.
Cheap housing in Spain and the Mediterranean generally will always
be fantastically attractive.
What I am saying is that
the fundamentals of the global economy have actually never been
better and I would have not expected to write these words so soon
back in 2008. Governments need to merely pay attention to business
and voters need to remove those who do not. That has always been
true of course but never has the case been so good.
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