Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Emerging Markets Provide Blueprint for Sustained Growth

Economics / Emerging Markets Sep 30, 2011 - 07:10 AM GMT

By: Money_Morning

Economics

Best Financial Markets Analysis ArticleDavid Zeiler writes: The United States should look at emerging markets for clues on how to sustain economic growth, according to U.S. Federal Reserve Chairman Ben S. Bernanke.

While the advanced economies of the world have stagnated since 2008, countries like China, Brazil and parts of Southeast Asia have enjoyed growth rates in the 7% to 9% range. Although several have slowed this year, they're still faring better than the economies of the United States and Europe.


"Advanced economies like theUnited Stateswould do well to re-learn some of the lessons from the experiences of the emerging market economies,"Bernanke said in a speech delivered yesterday (Thursday) at a Cleveland, OH forum.

Specifically, Bernanke attributed growth in emerging markets to "disciplined fiscal policies, the benefits of open trade, [and] the need to encourage private capital formation while undertaking necessary public investments."

The so-called advanced economies certainly could benefit from more fiscal discipline. Decades of profligate government spending have created debt problems that are crippling those economies.

In the United States, which has the world's largest debt at $14.7 trillion, the issue triggered a political crisis over the debt ceiling this past summer that roiled stock markets. Although the United States is unlikely to default, the growing debt - 98% of the nation's gross domestic product (GDP) -- hangs over the economy, hindering growth.

In Europe, the situation is far worse. Greece has been teetering on the edge of default for more than a year. It's been sustained only by the flow of bailout money from stronger European Union countries like Germany.

Greece isn't alone, either. Countries like Italy, Ireland, Portugal and Spain also have dangerously high sovereign debts. The crisis has hobbled the economy of the entire European Union (EU), with no end in sight.

One of the main reasons many emerging economies have thrived is that they have avoided the rampant deficit spending that created the crippling debt in the advanced countries.

And because they haven't been struggling, most emerging market economies have much greater flexibility in their monetary policy - they have leeway to lower interest rates - to cope with the current global slowdown.

Bernanke noted that emerging markets account for more than half of total economic activity today, up from less than one-third in 1980.

Low Debt, High Growth
The most dramatic example of growth in an emerging market is China. That nation's GDP is forecast to be 8.9% this year and 7.8% next year.

How's this for fiscal discipline: China's debt as a percentage of GDP is a mere 7%. Not only that, but it holds more than $3 trillion in foreign reserves.

When the financial crisis of 2008 struck, China was able to invest billions in infrastructure to stimulate its economy. Meanwhile, the government has made a major effort to transition the Chinese economy away from its reliance on exports and towards stronger domestic consumption.

Another example is Brazil. In his speech Bernanke pointed out that better fiscal management helped Brazil get its hyperinflation of the 1986-94 period under control. That in turn helped lower Brazil's debt-to-GDP ratio to about 15%.

Since then Brazil has been an emerging market growth success story.

"Disciplined macroeconomic policies also have supported growth in emerging markets by fostering domestic savings, stimulating capital investment, including direct foreign investment, and reducing risk of financial instability," Bernanke said.

Some of the most promising emerging market growth is happening in Southeast Asia. In particular, Money Morning Global Investment Strategist Martin Hutchinson recommends Thailand, Indonesia, Malaysia and Singapore.

Each has a more-than manageable debt-to-GDP ratio: Thailand, 26%; Malaysia, 31%; Indonesia, 28% and Singapore, 10%.

Hutchinson likes Singapore in particular, with its growth projected at 5% for this year and 4.9% next year. Singapore keeps taxes and government spending down by routing health and pension costs through a Central Provident Fund, "so actuarial risks remain with the individuals."

Source : http://moneymorning.com/2011/09/30/emerging-markets-provide-blueprint-for-sustained-growth/

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in