How emerging markets are shaping the world
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How emerging markets are shaping the worldA brief analysisJohn Birchall
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As the US fades other are growing
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What is driving this? The collapsing price of technology
The political openness generated by, first, the adoption of outward looking policies by the Chinese under Deng Xiaoping in the early 1980s and, second, by the fall of the Berlin Wall in 1989
These are massive shocks that have rocked the competitive equilibrium of the world economy through both labour and capital flows
The fall in real communications prices
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Ocean Freight AirTransatlantic phone Satellite
Cost of transport and communications
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The history of China’s economy
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Now it’s edging into the lead
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Per capita GDP % of World Av erage (LHS)Share of World Ex ports % (RHS)
China's Geopolitical standing, 1820-2003
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The US would have fallen faster if the merging markets had not been hungry for US goods
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Who drives US export growth?
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The Eurozone is increasingly influenced by China and Eastern Europe
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Japan id also increasing its dependence on emerging markets
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The emerging markets influence on capital markets
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This is driving demand for asset back securities
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But personal debt is also increasing
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Non-financial corporate business Households
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Might loose monetary discipline in emerging markets be partly responsible for commodity price increases?
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Economist food prices (LHS)Economist metal prices (LHS)Brent oil prices (RHS)
USD/BBLIndex 2000 = 100
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Have US consumers finally run out of steam?
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And their spending on capital items is slowing
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Will China have to re-value?
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Consumer price inflation CNY v s USD (RHS)
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Could Brazil (BRIC country) be the new leader?
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The food price problem
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It’s across all markets
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Stocks are low
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Wheat also
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Problems of the developing world
Food and energy price uncertainty makes inflation targeting more difficult…
…and requires tough decisions on interest rates…
…when the rise in global inflationary pressures is someone else’s fault