Skittish economies kept markets on their toes
There have been a lot of turn-ups this year.
In fashion, jeans with unprecedentedly long turn-ups have been seen all over the place. And in economics, it's been a year of turn-ups too.
There was an upturn in the world economy (with global growth rising from 3.9% in 2003 to about 5% in 2004); interest rates turned up (or more accurately, in Britain's case, carried on up); and oil prices rose significantly as well.
And there was an interesting turn-up for the books, when the housing market in the UK turned down. (We had been anticipating this event for several years, and it eventually seemed to arrive more or less precisely in the early afternoon of the August bank holiday).
One other important turn-up was that of the euro - rising against the dollar. But in truth, that is probably best described as the dollar depreciating, rather than the euro picking up.
You probably get the idea: 2004 was the year the global economy turned.
Now we have faithfully reported all the individual developments through the year, in growth, currencies, energy and housing.
But they were not isolated phenomena, dropping like meteors out of the sky, on an unsuspecting planet. No, they were all different parts of one simple story.
That story relates to the aftermath of the dot.com era, when interest rates were sent to new lows around the world, to stimulate spending and growth.
Those low rates worked, and 2004 can be best understood as the year their effects reached a peak. World growth was on a high, cheap borrowing kept houses in demand, so prices reached a peak, and all the activity stimulated around the world, kept oil in demand too, with a consequent $50 barrel.
In the US, the public - ably assisted by their Federal Reserve and their tax-cutting President - kept on spending. And the rest of the world - keen to sell - kept on lending them the money to do it.
But the world could not risk growing that fast indefinitely.
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So it was in 2004 that the authorities in several places decided they had done their bit, and moved towards restoring interest rates to normal levels. Even China began to apply the brakes.
And it was in 2004, as American spending and borrowing looked manifestly unsustainable, the rest of the world decided to be more careful about sending money in that direction, and the dollar consequently fell.
Downhill from here
That's the story of the year just finishing.
But what does the year just starting, 2005, hold for us all?
Clearly, the big issue is whether the fall from the 2004 peak will be akin to a gentle drift down a children's slide; or whether it will be like the accidental plunge off the top of a climbing frame on to a concrete playground.
Or, more specifically, on the international front, will we see the dollar collapse? And in the UK, will house prices do so? And in either case, would that have tumultuous effects on the real economy?
If you look at the forecasts in the table, you will see the economists think we are in for a soft landing, with growth slowing down, but to comfortable levels.
On recent form, these predictions seem safe. The world has been pretty stable, so forecasting more stability seems like a good bet. And with the oil price recently settling down close to $40 rather than $50, it seems that one of the big short term threats to the economy has diminished.
In addition, China, (which has been providing much of the world's growth of late), is expected to enjoy a relatively soft landing. If it re-values its currency, that would probably have the effect of stabilising the dollar against all other currencies.
China's thirst for oil has driven global growth
So there are grounds for believing 2005 will be calm. And that is I think the most likely outcome.
But likely outcomes are not the same as certain ones, and we do have to face the possibility that the world will face a more serious disruption: possibly, the dollar falling substantially to reduce US imports, with US inflation consequently picking up, interest rates soaring, and spending collapsing, with ripples occurring around everywhere.
Worth waiting for
Certainly, the scale of the adjustment to be made in the world is huge: the US trade deficit soaks up two per cent of everything the world outside the US produces. Getting that back in balance without a big shock or two would be an achievement indeed.
In addition to that global risk, we have a risk in the UK that house prices will tumble, and consumer spending will tumble with it.
These are very real risks for 2005 on both the international and domestic front. But at this stage at least, they remain possible rather than probable. We should know in a year's time!
So, at the end of a year of turn-ups, the New Year looks worth turning up for.