Without wishing to be a spoilsport, it is worth reflecting, however, that it is when the economic horizon looks most clear that the global economy - and, in the end, our own security and living standards - is most vulnerable. Unless there is some specific shock, like the oil price surges of 1973 and 1979 which began with conflict in the Middle East, economic problems build slowly. You can never be sure where the threat will come from, but you can be sure it's there, ready to take an insidious grip on prosperity.
What has distinguished the current upswing in growth and output from previous ones is its global nature. Much of the buying power which has driven manufacturing and services in the US and other western economies has not come from trading among them, but from carrying out business and investing enthusiastically in the emerging markets.
The nations of east Asia, for instance, have been described as 'miracle economies' by the World Bank, with their apparent unshakeable work ethic and determination to make money and advance technologically. This has encouraged fund managers and banks to pour larger cash sums into emerging markets - an astonishing $244 billion last year. At times it has seemed as if there has been panic buying of assets in emerging markets.
But, almost without anyone noticing, conditions in emerging markets have started to go sour in recent months. The difficulties began in Thailand when a group of foreign exchange traders, including some of the world's largest investment banks and, according to some reports, billionaire trader George Soros, decided that the Thai currency - the baht - was overvalued.
It was not just the Thai currency, however, which had been driven up to levels unsustainable by the country's underlying economic performance: it was also its property values and its stock prices. When confidence is high, investors will put their money into any assets, and will almost certainly overdo it. Kick away the substructure of confidence, as those who have attacked the baht have done, and the whole edifice comes tumbling down.
In global markets, where there are no exchange controls or other barriers to protect domestic economies, cash can move out as quickly as it arrived. As confidence ebbs, there is a serious danger of contagion. This was seen at the end of 1994 when the US was forced to mount a major rescue operation for Mexico, to prevent the disease of overheating and unsustainable financial values spreading across Latin America.
The same fears of contagion are currently causing problems across the Far East. Nations that have come to be regarded as solid in the new global economy have found their currencies and economies under attack. The Malaysian government, which has a particularly aggressive attitude to foreign interlopers, accused the international speculators who had turned on the country's currency of 'villainous acts of sabotage.' But name-calling will not stop these difficulties.
Furthermore, the Taiwan dollar has been driven down to an eight- year low point, and there has been a rescue operation in the Philippines. Even Singapore, though invulnerable to such indignities, has seen its economic management under pressure.
Belief in the region that the large foreign exchange reserves built up in better times would be sufficient to protect them from the speculators also has been shattered. It was quickly discovered that Thailand's reserves were largely illusory, mortgaged several times over as a result of an IMF lifeboat - the IMF is putting together a $20 billion assistance package.
The Asian experience is instructive because it demonstrates that even in fast-growing economies confidence can turn rapidly; a consequence of Thailand's difficulties will be that fund managers in London and New York are likely to cut off investments and the IMF will demand deflationary action, to correct over-exuberance. The questions become how easily can the position be stabilised and what will be the effect on other markets if that does not prove possible?
There is already some evidence to suggest that the fears currently afflicting Asia are beginning to affect confidence as far afield as Brazil, which in recent years has seen large-scale inward investment. In globalised markets the mechanism for problems in emerging markets feeding back to the West is through the financial institutions, which tend to cut off new loans and investment in times of uncertainty. Eventually, they may be forced to write-down the value of their Asian and Brazilian loans. This has yet to happen but it is as well to be alert.
The best hope for the global economy is that the benefits of the upswing have not been shared. Thus when demand from the strong economies starts to slacken, economies performing less well can pick up the slack, aided by the decline in their economies.
When demand is strong it is easy to forget just how fragile commodity confidence is. A ratcheting down of confidence in the Pacific Basin - hailed for years as the market with the brightest prospects - could soon start to hit those buoyant company earnings projections around the world.
Alex Brummer
Source: Airline Business
