“Socio, Political and economic imbalances will create an unnatural sense of stability in this chaotic world”

I can only surmise how confusing the world might be looking to you, both from geo-politics and state of economy. We have moved into into an era of indecisiveness. When I make this statement, it pertains to both the political and economic landscape.

We just crossed 5 years from the time when Lehman Brothers collapsed but the state of Financial Markets has not changed. Regulators are still struggling to correct a weak governance that has the ability to self regulate. This is quite evident from from the nuances of the recent Henry Meritt “Hank” Paulson Jr. interview by Bloomberg and Businessweek. Paulson was the US Treasury Secretary at the time of the Lehman Brothers downfall.

The irony here is that there has been a lot of talk on fixing the system, which was reinforced with what happened in Europe. The challenges have come and gone with no real change. On the other hand, if you look at how stock markets have performed during the same period, it seems that the markets have ignored what Developed Markets are struggling against to keep their head afloat along with dampeners in the growth of China’s economy. All these seem to say that we sometimes get lost in the present and sometimes have to be reminded of the harsh reality through the shocks to the system. These shocks have now become more frequent with the emergence of global financial markets, which are highly integrated.

On the other hand, the fresh scent of exuberance as a result of democracy taking its early foot prints in the Middle East emerged in 2011.  This exuberance has the similar precision shown by developed markets to address regulation. The politicians in some of these developing countries have shown the same level of competence in leveraging the democratic movement. We have Egypt coming full circle but Syria in the thick of its own crisis.

Though it is easier to criticize the developments in recent history, it is also interesting to note that the world now realizes that there is a sense of balance and the likelihood of a financial or political collapse is not so imminent now. The world is so intertwined that this balanced condition can serve as a difficult navigation tool as well as a rigid system with the potential to create havoc.

This is somehow giving all of us a sense of comfort to go and take the next calculated risk despite the uncertainties. Recent volatility in currency markets, especially in India, Brazil and ASEAN countries has created a new balance where the world panicked but it quickly came back to an equilibrium. I believe this balance of sorts will be short-lived largely due to the ugly side of geo-politics but this will eventually settle down if history is a good guide.
Chaos is the new norm – more specifically organized chaos is notoriously predictable. Both the frequency and disruptive nature of the organized chaos is making both investors and societies that have a higher level of risk appetite to take on the storm in a more mature way.