The Hopesters are at it again.
Europe marches toward the inevitable, China shows signs of implosion, and countries like Canada, Brazil, and England exhibit hints of contraction.
The question is asked: Who will lead the global economy out of what Christine Lagarde (IMF Managing Director) calls “quite gloomy?”
Several years ago, the hope was that a United States of Europe could transcend thousand of years of culture as well as religious and historical differences.
The creation of a United Europe with one currency and the advantage it brought with it looked very appealing in concept. However, concept is one thing, and reality is another. From the beginning, tricks were played, books altered, and rules bent, creating the inevitable ultimate destruction.
Thus, with the elimination of one potential world leader, attention was turned to the Orient, and China. Having the benefit of watching the rise and fall of another oriental superpower (Japan), China was not going to make the same mistakes.
Therefore, China started basing their economic models on the Keynesian approach embraced by the United States.
Hundreds of millions of potential consumers made China the darling of the western world’s corporate CEOs. Expansion was everywhere, including employment, housing, banking and trade.
Sadly, Keynesian economics has an end game that is unable to be avoided, even in China. As they watch their markets collapse, it appears they are very concerned about their own survival, let alone being the next engine of growth.
So, who is left? Canada, Brazil, the U.K? Not likely, since each have significant problems.
It would appear that by default, the leading roll will be turned over to the United States.
The Hopesters would have you believe that growth is being achieved in the U.S., albeit by “muddling through.”
They point to retails sales, employment, home prices, and foreclosures as exhibiting signs of upward momentum.
In short, a return to a position of world leadership is in order.
Regrettably, as I’ve said so often, hope is not a strategy, and in this case truth is not found in twisted government statistics.
The reality is that 2008 simply postponed the inevitable for all the countries which have embraced the Keynesian model.
Who will emerge as the world leader?
It’s anybody’s guess. However, one thing is for certain.
Until these countries undergo a cleansing process and confront the reality of the moment, no country will emerge as the growth engine.
As a result, we will continue to stumble along and “quite gloomy” could become even gloomier.