At the end of the tunnel maybe it's not quite so dark anymore

Posted By David Rothkopf Thursday, February 12, 2009 - 7:00 PM Share

Talked today with a brilliant investor I know who runs many billions of dollars more than you. He has been relentlessly bearish on the global economy and especially on the emerging world for the past several years. He just returned from Asia.

While he expects China to grow at 6.5 percent or so, not the 8 percent the Chinese are shooting for (and telling their enterprises to hit), he feels this will not cause a meltdown, that while the world has a liquidity problem, it's mitigated for China given its reserves, and that we may be at a kind of rough plateau. It's not a real bottom since he expects that a second "dip" in the crisis may come later this year linked to problems in U.S. consumer finance (the chairman of Bank of America testified yesterday that a rule of thumb they use for estimating credit card losses is unemployment plus one percent, so in the year ahead you are talking about 10 percent or more of credit card accounts defaulting). But he feels that after the dip China and Asia will recover to this level and then begin their growth out, which may come more rapidly than the developed world. (Younger economies -- in the sense of "emerging" economies -- collapse faster and recover faster, like younger bodies vs. older ones.)

As China goes, so goes Asia. He also feels for this reason the commodity price dive is behind us and that might lead one to conclude that Latin America has, in fact, dodged the bullet thanks to better policies. Things are bad there now, but wholesale economic collapses may be avoided. It's not exactly like he was saying, "Hey, folks, we've hit a bottom and we're on the way up." But what he is saying is he expects the emerging world to recover in 2010 and that it will lead growth thereafter. In other words, maybe, maybe, here is one very credible observer who is glimpsing a little light at the end of the tunnel.

Since political leaders only got wise to the unfolding crisis when we were well into it -- responding to symptoms rather than to the first signs of the disease -- their reactions can only be seen as a lagging indicator. A conclusion one could draw from this is that when they say it's the end of the world, things may actually be starting to stabilize somewhere.

MIKE CLARKE/AFP/Getty Images