How's the economy? Good? Bad? Average?

How about globally? What are the challenges facing us in this interlinked world?

Wharton has an excellent article called "What if Anything Will Sink the Global Economy"

Some tidbits:

Overall, the global economy today is strong," stated Frederic Neumann, adjunct professor in Southeast Asia Studies at The Johns Hopkins University School of Advanced International Studies. Worldwide economic growth is predicted to be 5% this year and 4.3% next year, he said, while in Asia, Japan is showing signs of revival and China is growing fast, perhaps too fast. Europe, too, is growing at a respectable rate with some countries in Eastern Europe, such as Poland and the Czech Republic, outstripping the rest of the continent. International trade is growing at a rate of 8% to 9% a year, well above historic averages.

Meanwhile, in China there is excess liquidity, and because government does most credit allocation, the result is a chronic misdirection of capital, said [Victoria Marklew, vice president and senior international economist at Northern Trust in Chicago]. "The outcome of all this is we have a booming economy in the U.S. and China. Here in the U.S., we have excessive levels of consumption, in China excessive levels of liquidity.

"Does the global economy have traction?" she asked. "No." The Chinese economy is overheating and may not be able to hold its currency stable against the dollar much longer. If China can slow its economic growth gradually from 11% to 7%, it would be "a minor miracle." An abrupt slowdown would shock global financial markets.

Sounds depressing right. Well here's something really interesting:

]Stephen A. Meyer, vice president and senior economic policy advisor at the Federal Reserve Bank of Philadelphia] stressed that demographics will play a large part in shaping the global economy long-term. In India, the sex ratio has been skewed to the point where there are significantly more men than women. In China, authorities are beginning to grow concerned that the one-child policy will result in a dearth of workers to support its older population.

The same issue is looming in the United States, he said. "The concern is not that the Social Security system is in trouble, but that we are going to have a lot of people who want to retire and continue consuming. The problem is, where will we get the workers and the capital to make the goods and services that older people want?"

Read it all. It's worth the time.

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