The Great Debate UK
Come back Mr Fukuyama, all is forgiven.
In his 1992 book "The End of History and the Last Man", American political scientist Francis Fukuyama famously argued that all states were moving inexorably towards liberal democracy. His thesis that democracy is the pinnacle of political evolution has since been challenged by the violent eruption of radical Islam as well as the economic success of authoritarian countries such as China and Russia.
Now a study by Russian investment bank Renaissance Capital into the link between economic wealth and democracy seems to back Fukuyama.
Looking at 150 countries and over 60 years of history, RenCap found that countries are likely to become more democratic as they enjoyed rising levels of income with democracy virtually 'immortal' in countries with a GDP per capita above $10,000.
" Only five democracies above the $6,000 income level have died. Even democracies above the $6,000 level have a 99 percent chance of sustaining their political system each year. The only exceptions were the military coups in Greece in 1967 ($9,800), Argentina in 1976 ($8,180) and Thailand in 2006 ($7,440), and the events in Venezuela in 2009 ($9,115), as well as Iran in 2004 ($8,475)," RenCap global chief economist Charles Robertson writes.
from Global Investing:
No question that investors are in the throes of passion over emerging markets. The latest Reuters asset allocation polls show investors pouring money into Asian and Latin American stocks in October to the detriment of U.S. and euro zone equities. Exposure to equities in emerging Europe, Asia ex-Japan, Latin America and Africa/Middle East rose to 15.6 percent of a typical stock portfolio from 14.3 percent a month earlier.
from Summit Notebook:
A surge in portfolio inflows is flooding into emerging central Europe, although yield-hungry investors are picking solid policy and higher growth over countries still struggling to put the crisis behind them.
After deep contractions across the region, a two-speed recovery is underway, with countries boasting better debt fundamentals like Poland and the Czech Republic for the moment ahead of those who depend on foreign lending.
from Global Investing:
Bank of America-Merrill Lynch's monthly poll of around 200 fund managers had a few nuggets in the June version, aside from the usual mood-taking.
Gold is too expensive. A net 27 percent of respondent thought it overvalued, up from 13 percent in May. Then again, the respondents to this poll have reckoned gold is too pricey since September 2009.
– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –
Fears of a hung parliament following the UK’s general election may be overstated. With Nick Clegg, leader of the Liberal Democrats, Britain’s third largest party, performing well in the first prime ministerial debate, sterling has received a mild knock. Investors do not like the uncertainty that goes with a hung parliament. While many European countries are used to coalition government, the UK is traditionally a two-party system – with government swinging between Labour and the Conservatives.
There is a divisive election ahead for Britain, the threat of a ratings downgrade on its sovereign debt and a deficit that has ballooned into the largest by percentage of any major economy. UK stocks, bonds and sterling, however, are trundling along as if all were well. What gives?
For a fuller discussion on the issue click here, but the gist is that all three asset classes are being support by factors that may be masking the danger of a broad reversal. UK equities have been driven higher by the improving global economy, bonds held up by the Bank of England's huge buying programme and sterling by valuation and the distress of others.
Hard to imagine with financial markets still buoyant and newspapers full of tales of bonus greed, but there is still the possibility that captialism will end. At least there is according to prestigious investment consultants Watson Wyatt in their latest study called "Extreme Risks".
The firm listed the demise of the system of private ownership as one of 15 threats to investors and the global economy that probably won't happen but which it reckons are worth worrying about anyway. The idea behind the report is that such things as climate change, the break up of the euro zone and war are always worth being included in an investment risk management process.
The economic crisis that has prevailed over the global markets in the last 12 months has undoubtedly rattled investors worldwide, but rather than leaving their heads in the sand, seasoned investors have continued to search for opportunities amidst the instability.
By Lynnley Browning
(Lynnley Browning is a guest columnist. The views expressed are her own. She is a frequent contributor to the business pages of The New York Times and is a former Moscow-based correspondent for Reuters, where she covered energy and commodities.)
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One of the challenges for bond investors over the coming years is how to deal with the enormous ballooning of government debt that is happening as a result of the credit crisis.