My hunch for the surprise of 2011 is that the US will positively shake people up. For many of the past few years, including preceding the global credit crisis, I shared the worry of many others about the sustainability of the US economy due to the low savings rate, excessive reliance on over-levered consumers and the dependency on foreign capital. However, I have differed from many about the consequences of the crisis in two key respects.

First, due to the power of the so-called Bric economies (Brazil, Russia, India and China) and the other key "growth economies" (Indonesia, South Korea, Mexico and Turkey), I believed that the world economy would recover much more easily than many considered possible. That was last year's surprise. Second, I believed that in spite of the considerable challenges for the consumer, the US economy would not fall into a Japan-style abyss of a lost decade or two. The evidence that the US will not go down this route will, I suspect, be this year's surprise.

On one level, hindsight might even suggest that the global credit crisis wasn't entirely bad for the US, although it is tough for virtually anyone, especially those unemployed, to see that now. But observed from 40,000 feet and a pure macro perspective, the biggest problem the US has had was its low personal savings rate, which prior to the credit crisis was close to zero. The over-leverage of the consumer, the more questionable financial instruments and the large external deficit were all consequences of the low personal savings rate. An economy cannot live off borrowed money forever, especially when it is that of overseas investors.

David Fuller's view Not wanting to sanitize history, I think arrogant distain and an ethical lapse during which people were happy to game the system from the top, not least in banks, contributed enormously to the USA's economic problems.

Nevertheless, that does not invalidate Jim O'Neill's current views. I am in general agreement. Having repeatedly described the USA as the epicentre of global economic risk from 2007 throughout the 2008 collapse, Fullermoney was also optimistic that Asian-led growth, in tandem with resources economies, would lead to an economic rebound in 2009-2010. We also felt that this would cushion the US economy, enabling it to avoid the feared double-dip recession. (Incidentally, anyone visiting this site can review these and many other forecasts in the Archive immediately above, plus the Subscriber's Audio, see link upper left, and via a key word Search, link also upper left.)

Multinational businesses leveraged to the Asian-led global economy remain America's strongest economic card and many continue to prosper. However I would be more cautious about unemployment. It not only makes economic sense for successful US multinationals to manufacture in the progressing economies where they wish to sell; it can also be the price of entry to those markets. Meanwhile, workers in the USA have higher wages but not necessarily higher education or better training than their counterparts in the growth economies.

What might any of this mean for the markets?

A gradually improving performance by the world's largest economy can only reduce uncertainty concerning a double-dip recession and / or a Japanese-style deflation. Fullermoney pointed out Wall Street's Nasdaq-led improving relative strength against other stock markets last month. Given the important influence of Wall Street's leash effect, this can only be bullish for equities while the S&P 500 Index remains firm.

That can lead to a temporary flow of funds away from emerging (progressing) markets and back to US equities at a time when domestic inflationary concerns are dominating Asian headlines, as we currently see in China, ASEAN countries such as Indonesia, and India. However, once those local inflationary pressures subside, I think the growth markets will resume their relative outperformance, more often than not.

The biggest known risk for equities in 2011, I maintain, is further commodity price inflation. The key and largely unanswerable questions concern whether this occurs sooner rather than later, rapidly or gradually. The pride charts will show us.