Where is the road to macro-economic revival?

With so many different scenarios – Asia’s growth cum raging inflation, US’ cautious optimism amidst continuing unemployment concerns and Europe’s debt worries and sovereign ratings – I won’t hazard any macroeconomic predictions in this post. Instead, I‘d like to spark a discussion about the most important themes which are currently playing.

Finacle and BAI jointly conducted a survey of American households last August which showed that compared to 6 months earlier, confidence in the economy had tanked by 14 percentage points. Obviously, macro-economic revival ranks at the top of every government’s priorities. In that context, it’s interesting to contrast the stimulus approach of North America with Europe’s conservative savings stance. Although no one knows which one will work better, the rest of the world is quite worried about the potential fallout of U.S.’ Quantitative Easing II as well as Europe’s attempt to rein in the debt malaise.

Savings is another important theme.  An improving personal savings rate in the U.S. is cause for muted cheer. At about 5.5% at the end of last year, it is up compared to the pre-crisis era, but still a long way off the ‘meaningful levels’ of over 35% enjoyed by Asian economies.

On the regulatory front, U.S.’ big move comes in the form of the monolithic Dodd Frank Act, which envisages sweeping change in banking supervision and structure, capital/risk management, consumer protection, shareholder activism and other issues. While the impact of this regulation and others like Basel III will only unfold over the next few years, the industry is working overtime in preparation. 

I’m also watching the ascension of emerging economies onto the world stage with keen interest. In its Seoul meeting in November, the G20 set norms for managing their capital inflows and correcting current account imbalances, and urged multilateral agencies like the IMF and World Bank to find solutions to the macro-economic issues plaguing the world.

Which of these are the farthest-reaching measures? Where do you think the economy is headed? Do tell.