Where the growth is going to be
Not in the US, Europe or Japan, says economic analyst Ed Yardeni:
The “Old World” economies (the US, the UK, the Eurozone, and Japan) are likely to remain challenged by the unwinding of the financial excesses of recent years. They all seem to have lost their entrepreneurial spirit. They all have large government deficits and aging populations. The emerging “New World” economies, particularly in Asia and Latin America, seem to be more dynamic. They certainly have tremendous growth potential by simply catching up to the standard of living of the Old World. Standards of living may grow more slowly than in the past for the roughly one billion people in the Old World as a result of tougher credit conditions.
Meanwhile, 2-3 billion people in the New World are aspiring and perspiring to achieve what we have in the Old World. They were counting on doing so by selling goods to consumers in the Old World. That business model may no longer work for them as well as in the past. So they are likely to do more business with each other. China just became Brazil’s biggest trading partner. For the past 30 years, it was the US. Petrobras, Brazil’s national oil company, is investing $130 billion to purchase drilling equipment to develop its huge offshore oil fields. China has agreed to lend $10 billion to Petrobras. In return, Petrobras is to supply China’s state-owned Sinopec with up to 200,000 barrels a day for the next 10 years. The deal was among a host of agreements signed during Brazilian President Luiz Inacio Lula da Silva’s state visit to China this week.