The two key issues facing the global economy

In today's mark-to-market world, when screens flash with a new piece of data, we tend to react first and ask questions later. However, according to economist Stephen Roach, we need to keep our eyes fixed on the bigger picture.

We're all data junkies. When a number comes out that supports our position, a rush of self-gratification courses through the veins. That's true of investors looking at earnings reports, as well as economists looking at economies. Never mind that the data, by definition, offer backward-looking insights into forward-looking views. Never mind the quality of the data either - an increasingly serious problem with today's information flow. In today's mark-to-market world, when the screens flash with a new piece of information, we react first and ask questions later. It's the reality TV of world financial markets.

This is less of a gripe and more of a plea to take a deep breath. Deciphering the incoming data flow is as much art as science. Yet, for those of us wedded to an analytical approach, only the data check can keep us honest. My own approach continues to stress two key issues in the global macro debate - America's post-housing bubble shakeout and China's lack of policy traction. On both counts, the latest data depict "growth friendly" outcomes. Yet in each of these cases, the analytics still provide considerable pause for thought. One way or another, I suspect these disconnects should be resolved in the year ahead.

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