The dynamic of China’s trade balance surplus shows a much higher volatility than the dynamics of the US trade balance deficit
The permanent growth of the US trade balance deficit since June 2009 alone (chart 1) shows not much volatility in its continuous negative trend. In an experimental projection this negative trend is reflected by the US inflation rate (chart 2) declining from almost 6% in July 2008 to around 2% in July 2010 (chart 3). Signs of a deflationary trend are backed by current data provided by Moody’s describing recessional trends in various cities and areas of the US (chart 4).
To the opposite in China the trade surplus shows a high level of volatility since end of 2008 including a very short phase of negative figures in April 2010 (chart 5). In the same time inflation rose from a deflationary – 2% in August 2009 to almost 4% in July 2010 indicating a rapid non-volatile upwards trend with 6% increase of inflation within 11 months (chart 6).
The comparison of these reciprocal trends of the economies in the US and China signal asymmetric risks that might have a mutually balancing effect but could also spiral into a downwards trend of both economies.
Emerging economies in Africa are less affected by market volatility but even more by price rallies of commodities and agricultural goods
There is usually not much you can read about the effects of marekt volatility, currency volatilities and rapid changes in commodity prices in regard to African economies. But all of these volatile parameters affect the emerging African economies strongly. Rising copper prices for example and the overall rally of resources have a paradox effect on African economies: still widely unintegrated in the world financial system there is an inflationary effect on prices for food and goods on the ground. In the same time state income is increased by rising incomes from the export of resources. But much of that is needed to subsidise rising food prices. We need urgently the professional development of an African financial system to make investments work in this continent also for local investors.
Volatility has an ambiguous effect on public trust in the financial system
The lack of volatility at the stock markets since more than four months is seen as a negative effect of an unusually uncertain economic outlook according to a survey carried out by Volatility Managers among small investors in Europe. Accordingly the increased volatility of the commodities market, especially gold, is perceived as a sign of uncertainty, too. This heterogeneous perception of volatility might reflect cultural and historical values as the volatility of currencies affects heavily social and political spheres comparable only to food prices and energy. Given the ongoing volatility in these segments it might become more common among small investors to join speculative activity in this field having a significant impact on market culture and perception in long term. A paradox change of values could follow at least temporarily turning back the attention to the „conservative “stock markets.