It's beginning to look like the economic game of 2016 will be a tug of war, defined by a simple question. Will the plodding but steady U.S. recovery be derailed by the weakness of so-called "emerging market" economies, led by China, Brazil and others? The betting (so far) is that the American recovery will survive, but it's hardly a sure thing. The outcome, needless to say, could decisively affect the presidential election.
The fact that the question is being asked at all constitutes a stunning reversal of conventional wisdom. After the 2008-09 financial crisis, the consensus was that the New World (China and other emerging-market countries) would rescue the Old (the United States, Europe and Japan). With rapidly expanding middle classes, the New World — China especially — would continue to import vast quantities of raw materials and sophisticated consumer and investment goods.
Events haven't gone according to script.
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