To put it simply, the world economy is in a very confused state. No matter where you are in the world, the way things will play out in your country are uncertain. Governments around the world (and their respective Central bankers) are pursuing very different poilicies – depending on if you are a developed or developing nation, you are either trying to stimulate your economy by printing money (as unemployment still remains a concern) or are trying to reign in inflation or currency appreciation by curbing foreign capital inflows (case in point – Brazil).
In the developed world, if you are an older person close to or in retirement – your savings (value of assets) have been annhiliated by the ‘Financial Crisis‘. You are now either back in the workforce or have cut back on your retirement spending plans. If you are a young professional, your job is on the line or you don’t have one. Further, the employment picture is bleak, with no clear signs of a turnaround. If you just graduated, chances are you are considering going back to grad school and taking on further debt in the form of education loans. Within the G7, Japan is (and has been) in a deflationary spiral (the ‘Lost Decade‘), the US is fighting hard to avoid the same fate as Japan, France is busy with the ban on head scarves, Italy is one of the PIIGS (or just a Lazy Cat) , the UK is taxing the life out of bankers, Germany is plugging holes in the Eurozone, Canada is preying on the financial carcasses of its G7 brethren.
The story is quite the opposite in the emerging economies. These economies are on fire, their currencies are appreciating, their employment figures are strong and their standard of living is improving. Of the developing nations, it’s only fitting to give attention the BRIC countries. Within the BRIC, I am in the camp of those that think India will lead the way in GDP growth. Demographics (young population), democracy, language (English-speaking) and capitalism are some of the factors that qualify my thinking. I can speak to the growth of India, however, there may be a bias as it is the only BRIC country that I have visited (…and I am of Indian origin). Regardless, one thing in common is that these economies have similar dynamics (although this can be argued) and will witness steady growth for a while.
Another thing in common between the developed and developing nations is the demand for precious metals. Supplementing an increase in the demand for treasuries is a demand for Gold as investors lose faith in fiat currencies. In these uncertain times, Gold is the only thing shining (no pun intended).
Putting all this together, the major question arises – what will the future look like? Financial gurus have offered their outlook and have coined terms for how the situation will play out. Bill Gross calls it the ‘New Normal’, Nouriel Roubini (depending on the day of the week ;)) calls for a W(double-dip scenario)/U/L-shaped recovery, Paul Krugman calls for the Third Depression, Eric Sprott calls it a ‘Busted Formula’. Call it what you want – “As for me”, in the words of Socrates, “all I know is that I know nothing”.