The year that’s gone & The year to come

2009 inherited from its predecessor one of the worst recessions in memory. And we haven’t seen the end of it: whilst most major economies (not Brown’s Britain) were technically out of recession by September there is bad news still to come as each little national weakness is probed.

2009 was expected to be Obama’s year and most people would say he disappointed, despite some clever diplomatic footwork getting him the Nobel Prize, the most surprising selection since Al Gore. Obama has grounds for optimism in 2010, however. His Health Bill will be passed, Afghanistan will look better, as will the economy, the jobless figure beginning to fall. His one black cloud is Iran. Here he will be expected to be tough. If he can get credible sanctions imposed and prevent Israel from bombing, he will have done well. If Israel does bomb Iran it will be with tacit American support. The world will then want to see a new order, which Obama must lead.

In the UK MPs’ expenses were one of the main topics of conversation through 2009, replacing house prices, but the new election will wipe that from memories, even if the new lot are just as corrupt as the old lot (but they won’t be).

In my opinion Gordon Brown would be wrong to leave the election too late – he should go in March before he has to present another budget. It is not beyond possibility that he will dither again however. Either way, the Tories will win , in my view more comfortably than people are saying. A majority of more than 35 seats.

I thought last year that the economic spotlight would fall on Europe and it hasn’t. But I believe it will in 2010. The deteriorating weaker economies Portugal, Italy, Greece, Spain and Ireland will put pressure on the euro, just as it was becoming to be seen as a possible reserve currency. Austria will join this unhappy group in 2010. Overall for Europe, low consumer demand in the major economies and the weakness of export markets in the Eastern Bloc and the Balkans will hold back recovery. Rigid labour markets are preventing innovation and efficiency. In 2009 the £ traded at 1.02 – 1.19 (it ends the year at 1.13). By the Spring, with a new leadership and lack of good news for Europe I believe we will see 1.25. Over the last year the euro has been $1.25-1.51 (currently 1.43). If there is trouble in the Middle East we will see 1.25 again.

Oil will bounce along at $75-85 and gold will put on a bit, but not above $1,250, particularly if some economies start raising interest rates

2010 will be the year remembered for a shift in power away from America – Europe – Japan to China and India and the peripheral countries of the Far East. The decade to come will see Brazil join the new axis and the first signs that India might overtake China.

But we still have to get over the Iran business.