Global Linkages 1. Role Switch among major economies of the

World• Pre -2008• Post – 2008• 2014 and Ahead - China rebalancing forces

World to rebalance

2. Euro Zone more likely to deflate 3. Japan – end is near

Pre 2008 Crash-Global LinkagesUS

Biggest Consumer1. Low Demographic

dividend2. Consumption driven by

ultra easy monetary policy

ChinaBiggest Export

1. High Demographic dividend

2. Massive financial repression in economy

Euro Zone – Export Driven, Internal

Imbalances1. Low Demographic

dividend2. Excessive Leverage

in Periphery

Japan– Export Driven1. Very weak

Demography2. Energy

Independence – nuclear energy

3. Deflation

Commodity Exporters fuelling Investment boom in ChinaAustralia, Latin America, and other emerging markets

ex-India

EU and China trade EU and Japan trade

Post 2008 – No market for Chinese Exports

US Sub Prime Crisis 1. Consumer demand

destroyed2. Demography weakened

further3. Crisis Exported to other

major economies

ChinaNo Market for Chinese Exports

1. Debt driven investments not yielding returns

2. Demographic Dividend

Euro Zone1. Crisis imported from

US2. Debt Crisis in EU3. Consumption

Destroyed

Japan1. Further economic

malaise2. Aged Economy3. Already weak

domestic demand weakened further

To whom will Commodity Exporters Export. Australia, Latin America, and other emerging markets

ex-India

Emerging Markets Crisis Emerging Markets Crisis

Need to Rebalance China Need to Rebalance China

ChinaBiggest Consumer

1. Demographic dividend2. Consumption driven by

high population base

USNet Exporter

1. Low Demographic dividend

2. Energy boom and Exports

Euro Zone – Net Exporter, Debt

deleveraging, Deflation1. Low Demographic

dividend2. German led Export

powerhouse

EU and US trade

2014 & ahead – Role Switch and World Rebalancing

In Long Run, Commodity Exporters will fuel Investment boom in United States, EU. (Australia, Latin America, and other emerging markets ex-India)

Japan–End is Near

Neither consumption

driven nor Export driven

growth possible

Can Euro Zone cannot achieve inflation Target

Euro Zone

1. ECB set 2% inflation goal2. May use negative rates, Us

styled QE to trigger inflation

3. Already running record high unemployment

ECB alone cannot counter deflation coming from two major economies.

Hence Rise in EURUSD inevitable

(conditionality – EU remains intact)

China Rebalancing will send deflationary shock around world.

CNY would fall against EUR

Japanese QE already exporting deflation to

Euro Zone. It is evident from sharp rise in

EURJPY pair.Potential Japanese crash

would add to deflationary forces

Japan – End is nearJapan’s economic malaise

Extremely weak demography High Debt to GDP ratio Monetary policy ineffective Energy Dependence

No Way Out

No scope for Consumption driven recovery

No scope for Export driven recovery

Neither a Tourism attraction