Let’s hope the navigators are good…

Those who know me know that I am no expert on matters economic. Sure I can wheel through the various theories, but the complexity of day to day markets is a struggle.

Still, I’ve been curious, with Britain and Australia hiking interest rates, and the US under the same pressure, what about the rest?

Here it gets complex, because I’m assured that the World Economy Is Booming, and the means good news and bad news. Interest rates are a bit like a gear shift, of course, and used to regulate the drive of the markets, as is employment and other integral parts of the machine.

The big imperative at the moment, it seems, is to slow markets down, slow down borrowing and other pressures which throw the system out of sync.

Well, there is nothing like a rate hike to do that, it’s like throwing on the emergency brake instead of easing the clutch. The people at the bottom are going to be hit hard all around, marginal mortgage holders are already making their mark with growing foreclosures.

Business, pressed to find savings to pay higher interest rates will trim jobs, it has ever been thus. But they won’t trim a couple at the top it will be hundreds at the bottom.

So where are the rest of the big economies? Canada, I noted earlier is sort of cruising, no great drama in any direction.

But Germany and France are experiencing the worst of all worlds: high unemployment, slow economic growth and record budget deficits. It really is an uneven pattern, but obviously affecting the big economies one way or another.

The interesting bit I came across was the developing economies; horror of horrors, they are growing!

When poor countries grow faster than rich ones, the result is convergence, a narrowing of worldwide economic inequality. Economists have long predicted convergence, which should be caused by technology transfer, international trade and capital flows, and (to a small extent) foreign aid and migration. There have been intermittent signs of it. But real, unmistakable convergence has never seemed to materialize. Until now?

What I can’t see is any predictions of how all this will play out. Politically it is exciting because we get to test that principle that three quarters of negative growth on the key indicators should doom any incumbent party at the polls. That adds to the conflicting pressures on the designated drivers of the economy, generally central banks.

Event with new factors added, like convergence, muddying the waters the old self interest groups will be clamoring. Governments will want to skip hikes for the moment and drive employment, just long enough to get re-elected. Institutional investors will be looking for tight controls, but then they can move their funds easily and to the greatest advantage. Manufacturers and exports will be more than happy if higher rates are offset by a lower dollar, holding or increasing competitiveness.

I guess that’s why the designated driver is supposed to be independent, but the noise in their ears must be deafening.