who will dance on the floor in the round

Currently Reading: The Curious Incident of the Dog in the Night-Time

attended interesting talk by a couple of imf economists today. they painted a fairly pessimistic view for the world economy, with a 25% (iirc) chance that there will be a global recession. america is probably already in one, and europe to follow, but emerging economies will diverge (though not decouple) - currently forecasting that momentum will carry us through.

i'd like to focus on the last one, that emerging economies are likely to go through based on momentum - we will only be derailed by a prolonged recession. (although they did highlighted that the risks are on the downside).

while tail risks in the financial sector have been averted with the flood of liquidity into the system, i believe that the forecast does not account for tail risks on the socio-political front, especially with inflation taking centrestage.

asians in general are a pretty stoic lot, willing to work long hours for low wages. however the breaking point comes when the rice (yes, rice) bowl is affected, as is the case now. inflation may lead to irrational policy decisions (like food price controls) or worse, rioting among the populace, which could knock on to political instability (see Tiananmen Square 1989). the effects of these fallouts would be exponential rather than linear. growth aside, this could possibly cause further adverse effects on commodity prices, or even on manufactured goods prices.

bearish, huh?

[next change: is bernanke's belief that liquidity would help (just like it should have in the great depression) tenable?]

well three weeks of discipline went down the chute today. hopefully we'll be able to pick it up and polish it up again. before this, slipped a couple of times, but the incidents were minor enough that you could shrug it off. this one's different though. a wave, five minutes walking to the destination, three in an enclosed area and that insidious magic was worked. why do you think i have been studiously and rigorously avoiding even the teetchiest bit of contact? this fragile edifice will take a little while to duct tape back together again.