The bad news: the Madhatter’s Tea Party, alias US Congress, isn’t the only source of negative headlines today – more immediately worrying for us seems to be John Garnaut’s interview with Baosteel’s chairman pointing to a slide in China’s steel industry.

The good news: there are no doctrinaire poll-hugging Congressmen to get in the way of Beijing’s economic stimulation plans and “slide” is relative term – Baosteel is still increasing production by 9 per cent.

China has been battling for the past couple of years to slow it’s breakneck growth and restrain inflation. Having done that, with a little help from the US reducing export demand, it’s now reducing interest rates and reserve requirements, supporting share prices, dropping taxes on share purchases and generally ensuring that growth remains around the sustainable nine per cent mark.

Just on the stock market front – and the Chinese stock exchanges don’t reflect the Chinese economy or have a great deal to do with – Bloomberg reports they’re going to allow the margin lending and short selling of borrowed stock to increase the depth of the market. Compare and contrast with…

Without in anyway trying to downplay the serious of the liquidity crisis, there is much more to being “global” than the US and Europe. In some ways it was summed up by last week’s copy of the Economist – the cover featured an ominous whirlpool sucking down US institutions, but the special report on globalisation inside underlined what most people are still missing – there has been a healthy diversification of the globe.

For random examples: Since 2005 most of the world’s growth has come from “emerging” economies; five years ago 31 companies in the Fortune 500 were based in emerging nations, now there are 62 and an Accenture think tank reckons a third will be in 10 years; Goldman Sachs forecasts China’s GDP will match the USA’s on a PPP basis by 2030 ; the BRIC nations will invest US$22 trillion in today’s dollars in infrastructure over the next decade…..and so on.

More amazing than the USA’s implosion is what has not happened: despite declining American performance for two years, global growth remains not far away from 4 per cent trend.

The most myopic scribblers on the planet are those still trotting out the “if America sneezes the world catches a cold” cliché. America has a very serious influenza, but the rest of the world is only sneezing. That’s the amazing news.

Yes, the emerging markets are being impacted by the developed world’s slowdown, but they have developed a momentum of their own that will maintain growth.

Players with broader vision, such as BHP and the RBA, are banking on it. It has formed the core of RBA policy thinking for the past 18 months and was spelt out neatly in BHP’s annual results presentation last month.

The US and European crisis is serious and is hurting everyone, but the world is much more able to cope with it in the second half of this decade than at any previous time.

We are witnessing a chapter in a bigger volume about the relative demise of the US and rise of the BRICs – the diversification of the global economy. Incompetent US governance and government is hastening it.

P.S. Gee, I wonder what Sarah has been thinking about all this…looks like she’s been searching for a sign on the Yahoo Answers site, asking what the number 777 means…

Peter Fray

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