Year 2011: Global Economic Forecast The Executive Summary

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Audra Shelton
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1 Year 2011: Global Economic Forecast The Executive Summary Ottawa London Abu Dhabi Copyrights Reserved 2010

3 A Turning Point At Year 2011 For the past three years the accuracy of our forecasts had never let us down. The accuracy of CBH Global Economy forecasting exceeded 90% in most cases. Last year we promised our clients Verbatim Forecasting which we accomplished. It is not just about luck. It is hard work, strategic critical thinking and impeccable analysis, and good reading of the events. Those who have read 2008, 2009, and 2010 forecasts know exactly what we mean. Our forecast promise for the year 2011 is the same. CBH forecast accuracy shall remain high. Our goal is to remain unbiased, objective, and honest in all what we write to stay right. We predicted social disruption in Europe, and it happened. We predicted currency turmoil, and it happened. We predicted commodity prices to jump, and it happened. We predicted food price escalation, and it happened. We do hope things get better. However, sometime we must say it will get worse before it improves. For the year 2011 and in the case of USA, it will be better. In the case of Europe, it will get worse. In China, there will not be much change. Most of the action will be in Wall Street. Enjoy it. President and CEO

Europe Under The Rock Hammer Europe is a turning point in its history. The Euro is under pressure and so is the social structure of the Euro-zone middle class.

It is clear now under the pressure of the global economic crisis that European governments can not manage their economics efficiently. The centralized command and planning system is in fiasco.

The natural result in the end will be a fragmented Europe rather a than united one. Germany was clear in its refusal to bail out Ireland.

4 Europe Under The Rock Hammer Europe is a turning point in its history. The Euro is under pressure and so is the social structure of the Euro-zone middle class. Central Governments in Europe proved their incompetence in feeding all the hungry mouths under one united flag. It is clear now under the pressure of the global economic crisis that European governments can not manage their economics efficiently. The centralized command and planning system is in fiasco. The system is too diverse, too slow and disunited. Therefore governments bypass that by delegating more autonomy to municipalities, regions, and smaller communities. The natural result in the end will be a fragmented Europe rather a than united one. Germany was clear in its refusal to bail out Ireland. It was clear and loud also in abstaining from taking larger responsibility for saving European spaghetti economies. The debt lines were so tangled and complex it takes centuries to resolve even with the help of super economists, mathematicians and the deep blue. The year 2011 will force leaders of Europe to take harsher measures towards their unity, after they did that to their nations. Austerity killed the state of welfare across Europe and created a state of misery and class divide. The rock solid appearance of united Europe had been hit by economic crisis. That effect is apparently has a worse effect than a rock hammer. Europe will fragment one piece at a time.

China Facing The Gunpoint China feel targeted as a result of its global economic success. At the same time it is not denying the need to play responsibly in the global economic arena.

Chinese financial logic and Western priorities do not necessarily meet in all aspects. It takes time to get to middle grounds and stick to the terms of agreement together.

5 China Facing The Gunpoint China feel targeted as a result of its global economic success. At the same time it is not denying the need to play responsibly in the global economic arena. China is willing to float its currency the Yuan and restructure the export system and allow more imports. However, it want this to happen slower then USA and Europe are demanding. Chinese financial logic and Western priorities do not necessarily meet in all aspects. It takes time to get to middle grounds and stick to the terms of agreement together. Even Japan eye China as a source of future risk in Asia. Playing the human rights card and negative publicity can make so little effect. With public protests in London and political chaos in Washington the Free-World public is less interested in Chinese civil rights. People now pay most attention to those who help them pay the bills and put a hot meal on the table. Marking 2011 it will be a turning point for China in terms of getting stronger amongst other global world economies. Whether it will sustain such precedence after that is debatable. Only time will tell. The giant global manufacturing production which makes more, better and less expensive still dominate world markets. With Japan facing political vision dead-end and Koreas at war no one else can compete. Betting on Vietnam and Philippines takes at least a decade to make them credibly competitive. Until then China will remain facing the gunpoint.

6 USA: The Bull is Back To Wall Street Guess where all the action will be in the second quarter of 2011 and onwards? Wall Street seems to be in the center of attention, and yes, the bull will be back to the stock markets. After all that may be the only place left now to make a good quick buck if you make a good pick and stick to good choices. Why stocks on the street will be better? Simply because there are no other good options out there. There will be slow but firm recovery in the US markets. There will be better job opportunities but not necessarily more jobs in the employment markets. Hard-hit families, by the 2008 economic crisis, will be able to regain partial prosperity in Home-based investors who used to make small money gains in the FOREX market will flee to the stock market. Large capital from around the world, fearing slow growth and loss of wealth, will move to wall street also. Other good opportunities, for fast and large growth of capital, will exist elsewhere in USA and niche business sectors in Europe. At times where banks fail, countries default on debt and black holes appear in cooked books, it is tough to re-establish investors confidence. Lessons learnt from the recent 2008 global economic crisis revealed it is different and severe. US economy which was structurally changed by the crisis is never the same again. Investors going into such market must learn the lesson and act accordingly.

7 Middle East, Africa And Development Real growth in the Middle East and Africa will be where is wealth and population together. Wealth alone or population alone is not enough to make significant growth on the ground or reflect on the lives of people. Few governments in the Middle East acted like Enron and Lehman in showing growth that never existed. Some others crunched number and massaged budgets to show prosperity while poverty and social distress prevailed in the streets. Can such governments continue to maintain trust and faith in the public administration when all what is told does not reflect reality? The streets of some cities in the Middle East will witness riots and trouble. Such trouble is not linked to promised freedoms or democracy as much as it is related to hunger and poverty. The young population of the MENA region is in need of food, education and employment. Therefore governments should deploy to accelerate pace of growth in a slow growth global market. The MENA region is not short of good ideas as much it is in need of implementing such ideas. Young and dynamic generation looks for opportunities to turn their dreams into reality. Often faced with old guard and skepticism, the growing young masses needs to accomplish more in shorter time. Depending on the country they reside in, the younger population can be viewed as power supply source or a time bomb within their societies. For example, a young person living in Egypt has lesser opportunities than his peer in UAE.

Commodities: More Loss Than Profit The prices for commodities are on the brink of a surge then a drop. There is no reason why gold should continue to go up endlessly.

8 Commodities: More Loss Than Profit The prices for commodities are on the brink of a surge then a drop. There is no reason why gold should continue to go up endlessly. And there is no reason for a barrel of oil priced at $100 US. Not a political one at least, since the market demand do not support such high levels. There is over-reaction and exaggerated sensitivity over the market supply-demand ratios. There is a manipulation of commodity prices also that favors certain market players over others. The rules of the game of fair-pricing are not fair. Hence, and as the growth in China cools down the commodity prices will chill. Wheat, corn, and anything that make basic food is in danger of scarcity due to fluctuation of production capacity. Such fluctuation is caused by weather conditions that scientists attribute to global warming. If we have to make the choice, basic food is worth saving more than crocodiles. For investors who wish to join the chorus of commodity trading, they should be careful of loss after profit. It will be a messy market starting June 2011 and beyond. For those who seek safe haven investment, they should focus more on better opportunities of their choice. Good investment opportunities are always available.

9 World Currencies: More of The Exchange Turmoil The heat of debate over international currency valuations have not cooled off yet. China, USA, and major global trade players want a bigger piece of the pie for faster economic recovery and growth. Currency rates are key in achieving such goal. With more and more pressure exercised over China which is believed to be deliberately keeping the value of the Yuan low, other nations fear of same fate. Brazil was nervous and fearful of similar pressures by the international community. Economists in that South American country believe that this is the toll of its fast and big success in international business. The problem is not just underlying there. It is inherent in the very structure of adopting gold as reserve for currency and Bretton-Woods terms of agreement. World Bank complained about it as well as most thoughtful and updated economists. With so much change underway, the old FOREX system is about to be uprooted and replaced. It is only normal to witness violent fluctuations in the currency exchange markets. Such fluctuations are dangerous for smaller players and will lead them to loss instead of gain. Regrettably, weaker currencies will be doomed to vanish or worth nothing. Disputed currencies such as the Euro may also become victim of Euroland inability to agree on a rescue plan.

Bretton-Woods System Change: Oil vs. Gold It may thick, black, sticky, and smelly but it is a much accurate indicator of human economic activity than the glittering gold.

And according to Robert Zoellic of the World Bank, it is time to reconsider gold as reserve for world currencies and replace the whole system. The Bretton-Woods system should die.

10 Bretton-Woods System Change: Oil vs. Gold It may thick, black, sticky, and smelly but it is a much accurate indicator of human economic activity than the glittering gold. It is the Crude Oil, or as the ancient Romans once named it: Petroleum. And according to Robert Zoellic of the World Bank, it is time to reconsider gold as reserve for world currencies and replace the whole system. The Bretton-Woods system should die. It is outdated, inefficient and wrong to keep. The objective is to have more precise and accurate measure of the value of a currency based on economic activity. After all the wealth of a nation should be measured against it s activity and added value rather than how much the treasured gold it has. Consumed and not treasured commodities such as crude oil will reflect the economic prosperity of a nation. Not even the production of oil is a measure nor an indication of such prosperity and vitality of a given economy. Oil, for the last hundred years, played a developmental role in the lives of great people in the modern era. The quantities of reserves, production and consumption are well-known and are transparent to a large extent all over the world. We can rely on these figures to a greater extent more than gold. Also, consumption data of petroleum products is an accurate index of economic activity in countries The Crude oil distillates consumption, such as gasoline and kerosene reveal the economic strength or weakness of any given world economy and business activity in such economy.

Social And Economic Divide One year ago it was less imaginable that students will invade the streets of London and attack the car of the Crown Prince. It did happen.

The social class divide and economic discrimination will continue in Europe. The state of welfare may have vanished under global economic pressures.

11 Social And Economic Divide One year ago it was less imaginable that students will invade the streets of London and attack the car of the Crown Prince. It did happen. It is notable also that public riots in Europe have not been witnessed in US streets. Was ait a better luck for America or better public administration? There is one thing for certain. The social class divide and economic discrimination will continue in Europe. The state of welfare may have vanished under global economic pressures. After all David Cameron the British Prime Minister have dismantled the social security system that had matured for fifty years before him. Copyrights Reserved 2010 People has to work more for less. They will work longer years and get less benefits. Retirement age is heading towards the age of seventy. Pension cut will be more if the public deficit grows more. At the same time the cost of living is not less expensive. On the contrary it is going higher. Simple logic tells us that such conditions will lead to poorer communities, and richer elite. It is a rebirth of the 19th century class system again in a 21st century style. Such economic divide will be more visible between countries and nations all around the world. The haves and have-nots will be torn apart by knowhow, capital and accessibility to resources. For all those who search for the roots of French revolution, please look no further. Europe will soon be revolting again.

Grim or Good 2012 Unlike the grim future-looking story of the movie 2012, that year will be a continuation in many aspects to the year

There are many assumptions out there and many people view the world from their own perspective.

The wider view and more objective analysis you have, the more precise and accurate your results shall be.

12 Grim or Good 2012 Unlike the grim future-looking story of the movie 2012, that year will be a continuation in many aspects to the year In fact 2011 is the turning point for the global economy and irreversible new economic system. There are many assumptions out there and many people view the world from their own perspective. Your view is affected by the angle of your standing point. The wider view and more objective analysis you have, the more precise and accurate your results shall be. Bias and self centered opinions will lead the best and brightest to false conclusions. In the world of business this can not be tolerated. Not so grim and not so good. This may surprise a few but the year 2012 will be almost boring. I will not spoil the surprise for you. Therefore, please wait for our forecast by the end of 2011.

13 We See The World Further Sharper Deeper We See Reality Right Views For Winning Business

14 Copyrights Reserved 2010

4 Rebuilding a World Economy: The Post-war Era

4 Rebuilding a World Economy: The Post-war Era The Second World War broke out a mere two decades after the end of the First World War. It was fought between the Axis powers (mainly Nazi Germany, Japan