The global economy is humming right along
It's incredible that there are doomsayers in the world and in the ranks of JoeUser. Because according to US Treasury Secretary Hank Paulson, "This is far and away the strongest global economy I've seen in my business lifetime." The global economy is humming along with unprecedented speed and power. The BRIC nations (Brazil, Russia, India, and China) are financially healthy and strong -- global companies like GE and Microsoft expect international growth to outpace domestic by almost 2 to 1: 12% growth abroad to a still-impressive 6% within the US. Cross-border trade, commodity prices, and per capita GDP have all soared to historic levels, and nowhere have things been growing faster than in the emerging world.
While the current pace isn't quite a record - according to the IMF the world grew at a 5.4% average annual rate from 1970 to 1973, vs. a projected 4.9% from 2003 through 2007- there's really no contest. When our ties were fatter and we were thinner, total world GDP was $13 trillion in constant dollars. Today it's more than $36 trillion. Not to mention, as investor Jim Rogers notes, "there are three billion people in places like Eastern Europe, Russia, India, China, and all of Asia who weren't participating last time around but who now are." Back then, Germany and Japan led the charge. Now the emerging markets are running fastest, along with Europe, which has - for the first time in years - pulled ahead of the U.S. in GDP growth.
All is booming but as always there are dark clouds on the horizon -- that's why they call it a business cycle. With interest rates going up, heavily leveraged hedge funds and private-equity firms -- not to mention cash-short adjustable-mortgage holders and the bankers who've lent to all three groups -- have trillions of reasons to worry. And of course, the ever-present threat of conflict in the Middle East, an act of nuclear terrorism, and some other exogenous shocks to the system could bounce the whole boom. However, the potential threat of geopolitical turmoil is no reason to put away the champagne. It would take another 1914 or 1941-esque world war to significantly derail the train. Just prosper while the prosperin' is good. And keep the long view.