Spot a trend. China&rsquo;s inflation is down, to 4.1 per cent in December from a peak of 6.5 per cent in July. India&rsquo;s inflation to 7.5 per cent in December from 9.1 per cent in November. Euro zone inflation to 2.7 per cent from three per cent and UK inflation to 4.2 per cent from 4.8 per cent.

Slowing and balancing

Business Standard

Japan's first annual trade deficit for 31 years reflects an astonishing combination of misfortunes. But some of them will not go away quickly. With its huge debt and continuing deflationary pressure, Japan is poorly placed to deal with a strong yen in a weak world.

More than unfortunate

According to a popular, though probably erroneous, reading of an ancient Mayan calendar, the end of the world is scheduled for December 21, 2012. A look at the Baltic Dry Index (BDI), which reflects commodity shipping rates, might suggest the Mayan doomsday is indeed at hand. The measure of bulk shipping costs plunged in 2008, warning of the 2009 global recession.

Baltic Mayans

How cruel. Moody&rsquo;s is threatening to dump the UK&rsquo;s triple-A rating. Its justification &mdash;&ldquo;materially weaker growth prospects&rdquo; &ndash; has been seized by the government&rsquo;s opponents to attack spending cuts. But Moody&rsquo;s warning is in reality a Valentine to austerity. George Osborne, the UK Chancellor, really does need to continue his policy of tough love.

Tough love

Global wealth is shifting south and east and the world&rsquo;s best soccer players appear to be following. Nicolas Anelka is on his way from Chelsea, the top-flight London club, to Shanghai. Samuel Eto&rsquo;o, meanwhile, is heading to the Russian North Caucasus region, having starred for Internazionale of Milan and a Barcelona side which is one of the finest to grace the stadiums of western Europe.

Champions' league

The much-anticipated inflationary danger posed by quantitative easing is creeping up on us. Without large scale money printing the entire western financial system might have collapsed. We would have certainly had a still-worse credit crunch and decline in global trade. The US Federal Reserve deserves special praise for intervening decisively to prevent that. But now the picture is changing. There is a global recovery, even though the euro periphery remains dire and Europe as a whole soft. But it is time to take the inflationary dangers of QE seriously.

Overdone medicine

As Germany calls for euro zone austerity, its government is easing up on it. A 6.3 per cent wage increase for public sector workers over two years is likely to be followed by even more generous deals in the private sector. And, why not? A low-deficit Germany can afford it. A stimulated euro-powerhouse is what many economists have called for. The risk is that the zone&rsquo;s economic divides get worse.

German pay back

Suddenly markets are shifting. The dollar is at an 11-month high against the Japanese yen. Gold has fallen by eight per cent since February 28 and yields on UK gilts, German bunds and US Treasuries have risen sharply as expensive safe havens wobble. Global equities are up, but pensive.

Earthquake of normality

Gold, it seems, can have it both ways. Its latest charge to a three-month high is ascribed both to relief at a Greek bailout and to fear it won&rsquo;t work. The bubbling precious metal has become simultaneously a speculative, risk-on play and a safe haven. That duality should keep the gold bull alive for a little while yet.

Ranging bull

The euro zone&rsquo;s fourth-quarter numbers conjure images of an arduous pan-European cycling race. France and Germany are pulling away from the pack, while the countries of the periphery are bunched together, wobbling and falling further behind. Fiscal cuts are sapping the periphery&rsquo;s speed. The question is whether their competitiveness is improving. Labour cost and trade figures don&rsquo;t suggest it is &ndash; at least not yet.

Left behind

It&rsquo;s euro strength rather than weakness, that is remarkable. But a swift slide in its value is now probable. A possible Greek exit from the zone in the coming months is the big near-term risk. But there is also a broader threat. As the crisis persists, France and Germany are growing further apart. More growth? Less austerity? A zone torn by discordant voices is vulnerable to a split and the euro to a slide.

Split and slide

Euro devaluation won&rsquo;t save the zone. It will help growth, especially if the euro drops a lot more, but it will be the already thriving Germany that would benefit the most, not the beleaguered periphery.

To him (Germany) that hath

This sounds ominous. World manufacturing has just had its worst month in three years. But there are still reasons to be cautiously optimistic about the global economy. One of them is that Europe has done something to defuse its ticking time bomb, even if the Euro zone crisis is far from over.

Reasons not to retreat

There are two interpretations of the UK&rsquo;s shock contraction in the second quarter. Either the 0.7 per cent fall in GDP was the result of a foolish tightening of fiscal policy. Or it was a blip caused by the Royal Jubilee, the rain and another flare up of the Euro zone crisis. The lame-sounding British excuses are partly valid. But the government will come under heavy fire nonetheless &mdash; and may respond with some fiscal stimulus.

It looks bad

Markets are disappointed. Investors had been hoping that Mario Draghi&rsquo;s July 26 commitment to do &lsquo;whatever it takes&rsquo; meant he would fire on Thursday. He didn&rsquo;t. But, as Draghi suggested, Europe&rsquo;s policy-makers do have unused weapons. The euro zone, for all its profound problems, is more resilient than it might seem. The global economy may be, too.

Whatever it takes, sometime

Switzerland 1st, Greece 96th. Those are the starkly troubling rankings on the World Economic Forum&rsquo;s 2012-13 competitiveness league table. North European economies do well, the euro zone periphery doesn&rsquo;t. It might suggest the combination of Germany and Greece in the same currency is like putting Chelsea and Hereford United in the same football league. The result is years of slaughter.

Chelsea vs Hereford United

All the talk is of negative interest rates and the high risk of crisis they reflect. But Europe&rsquo;s new policy flexibility makes imminent crisis less likely. Investors are already responding, with super-expensive safe haven bonds weakening. Global risk assets such as stocks and commodities, on the other hand, have rallied - and may go further.

Ian Campbell