During the Great Moderation' the 20-year period before the financial crisis, when interest rates were low and growth was pretty consistent people thought politics didn't matter. As long as governments kept out of the way, free' markets would prevail, economies would keep expanding, and life would just get better.
Now politics seems to be the only thing that matters. You've got the middle classes in Brazil and Turkey protesting over grievances from rising bus fares to unsympathetic building projects. There's a crisis in Egypt. You've got cabinet ministers resigning in Portugal amid growing unrest over austerity, catapulting the eurozone crisis back into the headlines. Meanwhile, parties of protest, such as Ukip, are gaining ground across developed nations.
What's changed? Each country has its own individual problems. But broadly speaking, the key issue is that growth is getting a lot harder to come by. Commodity-dependent economies have been hit by falling demand from China. China in turn has been hit by falling demand for its exports from its developed-world customers in Europe, Britain and America, which it tried to offset with an infrastructure splurge that is now ending.
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The root problem in the West is that our growth and along with it the demand that drove much of the growth in the developing world was based on a massive credit bubble, which has burst. All we have to show for it still is a huge debt burden that we don't know how to deal with. The net result is that a global population that has been used to a steadily improving standard of living is realising that its future may not be as bright as it had hoped. That's a recipe for trouble.
So what does it mean for investors? Emerging markets are heading for tougher times, certainly. But my colleague James McKeigue looked at some Latin America nations that have promising reform programmes, and the sorts of healthy balance sheets that should give them the flexibility to ride out global problems and come out stronger.
As for the West, as Dr Peter Warburton notes, the threatened withdrawal of quantitative easing by the US Federal Reserve has markets flitting manically between fear of inflation on the one hand, and deflation on the other. But as Europe shows quite clearly, deflating your way back to economic health isn't politically acceptable it's too hard.
That leaves an attempt at controlled inflation as the only way out if you can't get real growth, fake will have to do. On that note, one of Britain's most powerful political figures just took office this week Mark Carney, the new head of the Bank of England. Why did he get the job? Clearly because the chancellor, George Osborne, thinks he's the best man to help him win the next election. So whatever else Carney says, inflation is his goal. Plan accordingly.
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