The September 20th issue of The Economist had an interesting survey of the world economy. In a nutshell, it's a mess and at huge risk and no one is doing anything about it. The key points were:
- It relies completely on the single-engine economy of America
- America's recent policies have left it with a huge and growing deficit it can't afford
- Protectionist trends in America are growing especially against China
- China and the rest of Asia keep their currencies valued too low
- Japan and Germany still require structural adjustments before they can step in and play a stronger role in keeping the world economy stable
So the big danger is a US dollar crash and the US taking protectionist measures tipping off a world recession. It can be averted by more prudent US domestic policies (unlikely with elections around the corner). China needs to lead the way to raise the value of Asian currencies and appropriate policies need to be adopted in Germany and Japan to stimulate their economies.
Looks like it's time to pay attention to what currencies your investments are held in.