The world economy is currently a mixed picture. The US economy could have a growth rate as high as 4% during the fourth quarter; however, Europe is sliding into recession, reports economics advisory company David Hale Global Economics.
The big emerging market countries such as China, India and Brazil are also slowing down. This broad-based slowdown will restrain commodity prices for the time being. Monetary policy is highly accommodative in the US, Japan, the UK and Europe, which tends to support commodity prices, says company founding chairperson David Hale.
The big question centres on three issues: the severity of the Chinese slowdown, whether the Federal Reserve returns to quantitative easing to bolster the US economy and the ability of Europeans to maintain their monetary union.
So far it appears that the Chinese slowdown will be moderate and the Federal Reserve’s policy is open ended, he says.
Further, Hale avers that, if the economy loses momentum again, there will be more quan- titative easing, but if growth remains in the 2% to 3% range, the Federal Reserve will do nothing.
The European players, such as Germany and France are determined to maintain the monetary union, so it should endure; however, the weakness of the Greek, Portuguese, Spanish and Italian economies will leave investors nervous, he says.
Hale will highlight trends in the global economy at February’s Investing in African Mining Indaba, in Cape Town.
In September, the Chicago-based professional speaker said the US was unlikely to go into recession again and emerging markets would remain the world’s growth leaders.
He was addressing the Inter-national Institute for Strategic Studies (IISS), the leading author- ity on global security, on the US economy and the global order.
Hale told the IISS that the US economy remained vulnerable in terms of fiscal drag from the unwinding of President Barack Obama’s stimulus programme and that a loss of public con- fidence in the US economy could put growth at risk this year.
Hale suggested that the main economic story of the next few years would be one of high levels of growth in China, India and Brazil, contrasted with the relative weakness of Western economies.
At last year’s Mining Indaba, he mentioned that China’s central bank had started increasing the country’s gold reserves, with various officials proposing an increase to 10 000 t.
Hale said this would give China larger gold reserves than the US’s Fort Knox. It would also be a huge development for the gold market, with the global mining output of gold at 2 500 t/y in February 2011.
“China offers the prospect of a healthy gold demand and this could set the stage for further major gains in the gold price in the next couple of years.”
Hale serves as the global economic advisor to the Com-monwealth Bank of Australia. He formerly worked as the chief economist for Kemper Financial Services from 1977 to 1995 and at insurance-based financial services provider Zurich Financial Services, which he joined as chief economist when it bought Kemper in 1995.
He advised the group’s fund management and insurance operations on the economic outlook and a wide range of public policy issues until 2002 when he founded his own consultancy.
Hale also lectures worldwide to groups including the World Economic Forum, the Fortune Global CEO Conference and the National Association of Governors. He has frequently testified before Congressional committees on domestic and international economic policy issues, and has done briefings for senior officials in the executive branch, including former US President George W Bush.
His clients include asset management companies in North America, Europe, Asia and Africa.