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It's starting to look like the Summer of Love. Two reasons: The recovery is taking on a L-U-V shape globally, and it's going to require huge amounts of love and nurturing to keep growth alive.
L stands for Europe, where slowness to confront deep damage and write down the remaining $500 billion odd in bad bank debt, mean rebuilding will be protracted and painful.
The United States sports a U, bouncing along bottom right. But its financial giants swallowed harsh medicine early and the U.S. has the flexibility to stage an impressive rebound, if not undone by a fast-rising jobless rate at 9.5 percent and heavily indebted consumers.
V stands for Asia (ex Japan), the surprise region showing resiliency, thanks to its rapid Q4/Q1 inventory workdown and huge infrastructure spend by China.
Like the Summer of Love 41 years ago, it is a drug-fueled affair. G20 governments are peddling $820 billion in stimulus this year, equivalent to 2 percent of GDP. Central bankers are spending even more. The Fed has doubled its balance sheet to $2.04 trillion the past 12 months.
These actions might have cushioned a severe cyclical downturn but the structural adjustment to a world of costlier credit is only just beginning.
Will politicians and central bankers have the wisdom or the stomach to keep the drug supply going long enough to prevent L-U-V from turning into an ugly W?
In much the same way that analysts have been debating whether equities are in a bear market rally or a new bull market, economists now have to deal with the question of whether the global economy is just bottoming out or is now actually recovering. The two things are obviously linked as BlackRock equities chief Bob Doll indicated when he said this week that equity markets will require the economic backdrop to actually improve rather than simply grow less bad if rises are to be sustained.
The less-dreadful-than-feared syndrome has been around for some time. U.S. markets, for example, found themselves cheering the loss of 539,000 jobs in April simply because its was the smallest since October and looked to be an improvement.