By Tim Weber
Business Editor, BBC News website, in Davos
So all is well then: inflation and interest rates are low, global economic growth is strong, corporate profits have recovered, and bosses around the world are as optimistic as they haven't been for a long time.
Participants at WEF voice their fears about the global economy
The economic crisis 2004, predicted by many, has not materialised.
Not so fast, say the economic experts at the World Economic Forum in Davos.
"The good news of 2004, the past performance is not indicative of future returns," quips Stephen Roach, chief economist at investment bank Morgan Stanley.
Fair enough, Mr Roach is a notorious "Davos bear", well-known for his economic pessimism.
Trouble is, many people here are happy to agree with him, even his old sparring partner, the perennial optimist Jacob Frenkel, vice-chairman of insurance giant AIG.
The list of potential problems is worryingly long:
- The US budget deficit is escalating to a record $427bn this year.
- American consumers are on a buying spree for foreign goods, have more or less stopped saving and instead plunder the piggy bank by re-mortgaging their homes.
- Every day foreigners stump up $5bn to finance US spending.
- Protectionism is growing as trade imbalances make free trade deals more difficult to sell to suspicious voters.
- And there is still a worldwide risk of deflation, or steadily falling prices, which would discourage investment and push large parts of the global economy into a deep freeze.
Will the 'weak link' break?
Even the stock markets still look suspiciously overpriced, says Robert Shiller, economics professor at Yale University and author of the book 'Irrational Exuberance' in which he correctly predicted the stock market slump of 2001.
The US budget deficit worries economists worldwide
So what will happen "when the music stops", as Mr Roach puts it.
Worryingly, the first session to be oversubscribed in Davos was entitled: "Spotting the next bubble before it bursts".
The first test will come this year, says Mr Roach, when the US central bank starts raising interest rates again.
"The overly-leveraged, savings-short US consumers will be the weak link in the chain, and we'll see how they take the stress," he warns.
AIG's Jacob Frenkel, meanwhile, argues that the basics need to be sorted out first: "We need to deal with the US budget deficit, the slow economic growth in Europe and the poor savings rate in the United States."
However politicians are unlikely to act, he says. The next meeting of the G7/G8 group of the world's richest countries "will be all about exchange rates, instead of policy measures to change the fundamentals".
No music or new music?
Mind you, these assessments are not meant to be as gloomy as they sound.
Laura Tyson says Europe's economies are showing signs of growth
In the worst-case scenario, the US economy is set to grow by at least 3% this year, and its liberal economic policies should ensure that investors will keep pumping money into the US.
Even Europe's ailing economies show both signs of economic growth and new-found flexibility, says Laura Tyson, Dean of the London Business School and a former economic adviser of the Clinton White House.
The global economic mood music "won't stop," argues Jacob Frenkel, "it will change as the economic centres of gravity change".
In plain English: India and especially China are emerging as the world's economic powerhouses.
The much-feared "hard landing" of China's economy, one of the most discussed topics at last year's World Economic Forum, has not materialised.
"China will keep growing fast at 9% this year," says Takatoshi Ito, economics professor at Tokyo University. "It reminds me of the Japanese economy in the 1950s and '60s, which grew at 10% for 20 years running."
The economic centre of gravity is shifting to China and India
And there is plenty of anecdotal evidence to support that.
James Owens, boss of construction equipment giant Caterpillar, tells me that he sees long-lasting and "very rapid" growth for his firm's operations in China.
David Abney, President of logistics firm UPS, says his firm has tripled its flights to China over the past couple of years.
Foreigners have a huge interest to invest in China, he adds. "Just look at this morning's session here on the Chinese economy, they had to turn away as many people as they could pack into the conference room."
"CEOs tell me that 'you've just got to be there', both for the market and as part of your supply chain," is the conclusion of Samuel DiPiazza, global chief executive of business advisers PricewaterhouseCoopers.
And the statistics are staggering. "China consumes 25% to 30% of most metals, 40% of the world demand for cement, they are essentially paving the whole country," says Morgan Stanley's Stephen Roach.
India's hidden potential
Add to that the potential of the sleeping giant India.
Famous for its IT services and outsourcing industries, India is nonetheless surpassed by China in both domestic growth and foreign direct investment.
This will change, Kapil Sibal, India's minister of science and technology, tells me.
India still has to develop its "hardware skills," he says, but predicts that "India will soon be a hub of manufacturing activity".
Economists in Davos agree. "India often gets overlooked," says Fred Bergsten, director of the Institute for International Economics. "But it has huge potential".
So far, "serial bubbles" have kept the global economy puttering along, says Martin Wolf, chief economics commentator at the Financial Times and moderator of the Davos debate on the economy.
"We've done wonderfully by not correcting any of our problems," he says.
So far so good.
But it leaves me to wonder: What happens to the global economy should a perfect economic storm engulf the US economy and lead both to higher interest rates and an economic slump?