Gain shall take the place of loss (part 5) All told about $7 trillion of shareholders wealth was lost last year

Disconnected musings from the world economy - looking for signs that we may be over the worst

• 10,000 of the 60,000 factories in China owned by Hong Kong interests have closed or will close in the coming months
• Factor in inflation and the decline in Chinese exports measured in their own currency y-o-y was 11.4% in November
• US retailers are delaying payments for Chinese goods from 35 days after shipment to 120 days
• All told about $7 trillion of shareholders' wealth - the gains of the last six years - was wiped out in 2008
• Diversification - the idea that you should spread your investments - was a bad call in 2008 - BRIC's fell between 55%-72%
• Emerging markets need to refinance $6,865 billion of debt in 2009 - at the same time the US will issue $2,000 billion of new debt and the EU close to another $1,000 billion
• Private sector debt coming due in India,China and Brazil in 2009 is $56 billion. In Russia Gazprom's debt alone is now $49.5 billion.
• In the UK there will be 6 million on benefits within a year of which 3 million will be classed as unemployed

Seems to me on the basis of what I read and hear from friends on Wall Street that there are 2 main ways this can play out in 2009:

The cutting interest rates strategy pursued by the US and the UK works. Demand picks up and governments have to start thinking of ways in which to chill down the impact of the fiscal stimulus that will be merrily working its way through the economy . The alternative is the rate cutting strategy doesn't work. After a brief respite the economy turns down again. Faced with the possibility of deflation the orthodox view quickly becomes - let's prevent deflation at any cost even if it means printing money.

Whatever the outcome I fear inflation is something we are going to hear a lot more about over the next couple of years.