Developing Economies Face Reckoning

Interesting chart. The small population ( Brazil Russia S. Africa ) have all the ‘stuff’. Chindia has the population and infrastructure needs. What is missing is the enabler, the good old USA AKA Uncle Shylock.

Having lived in Russia I can assure you that they do not trust the West. They may play the game because it is the only one in town but when their interests are threatened, look out.

I lust for Norilsk Nickel!!!

Hoard Palladium………Just talking my book here.

Mike, why one or the other and who chooses the options? Could be both, maybe neither?

Economics is not black and white as you can read for yourself in this discussions sponsored by TBP.

Interesting, Brazil has a larger economy than Russia’s but is growing much more slowly. Why was the Soviet Union ever considered an economic threat?

So much for the de-coupling theory. We knew that was a bunch of C**P when it was floated out there. Also, alot of what’s going on in China is in preparation for the Olympic games. Once that’s over, where is their demand going to come from?

Whatever you may think the decoupling theory may not be as dead as you think. For now these countries are coupled by both what the US stock markets do and maybe the US economy. The latest emerging declines only prove that they are coupled to are stock markets for now.

India is the most self contained economic country in the emerging and China’s economy is not as dependant on the US as you might think.

All’s I am saying is don’t dismiss the decoupling theory just yet. They will decouple just not sure if it’s in 3 weeks or 3 years but it’s gonna happen.

Is Mexico smaller than South Africa or is it not considered an emerging-market economy?

I used to be a Rouge trader, but I was pegged by the international make-up regulators…

so now I’m on the straight and narrow and stick to mostly eye-liner futures.

Here in Brazil we have a high intrest than Russia that is why our GDP grow is slower. Our CB is a inflation hawk. For a country that have such long history with inflation this is good. Unlike Russia, i.e. we dont need to control food prices…

If you are american, you believe the US
economy is the mightiest, therefore,
no decoupling theory.

We are still the greatest exporter of US debt

@ Don | Jan 25, 2008 7:39:54 PM

Don,

I think most of it has to do with the incentive people are given to work along with some cultural differences as well. Many Russians are free to build businesses for the first time and they are taking advantage of that. In Japan they are a more conservative society and thus are more concerned with capital preservation.

Their government also does not know how to give the proper incentive for people to go out and be aggressive with their dollars. They also, with the extremely low interest rate, force many savers into the carry trade and thus force many potential investment dollars out of the country in search of higher risk reward.

If the Japanese government would learn how to manage its books they could afford to give businesses more incentive to invest in their own nation. Unfortunately Japan is a nation that has swallowed the ‘export your way into prosperity’ hallucinogen with gusto and thus they are more interested in protecting their businesses via exports than giving them the incentive to grow.

Don’t get me wrong, I’m not saying exporting is not a good thing but taken to it’s extremes it can’t be the front line solution for stagnating business problems. That is because it is impossible for every nation to become a net exporter for obvious reasons.

That is why governments need to be more focused on growing their consumer class via proper incentives for businesses and consumers to both save and invest in their own economies. The ones that do that should have better and stronger economies *over the long run* than the export focused nations. Russia, for all its regulatory and legal faults is currently doing that better than Japan for now in my opinion

If I were the Japanese government the first thing I would do is to make a balanced budget and then focus on paying off their accumulating debt. Over the longer term that will allow them to cut taxes through savings on interest expense instead of having to raise taxes to pay for the interest they are accumulating via their yearly deficits.

That is the kind of difference you are seeing between the Canadian and US economies and if the two economies continue down the same path they each are on the differences should begin to widen. It really is the only formula that will work over the long term. When a government is underspending they can afford to make a lot more mistakes than one that is overspending. It works the same way for government as it does for corporations as it does for persons. The only difference is the scale

Maybe USSR was a economic threat, not Russia, which is alot smaller now.

Decoupling is kinda real, it might become more real if stocks slump in the US and foreigners take most of their money out of the emerging countries. This way they would have less means to speculate and stocks would respond more to local data.

Today in Brazil you can find reasons for rallies and routs in local news, but it’s obvious that stocks are responding to US data not local news.

Examples:

thursday rally: low unemployment rate in Brazil, government decline on Vale’s bid for Xstrata and Petrobrás discovery of a new natural gas field.

but it was all a response to the insurers bailout and the US futures going up that day, I guess.