We admit that of late our writings have had a rather dark tone but the World, certainly has  a number of severe long-term problems that we must deal with, and they’re going to serve up a lot of economic pain.

Anyway today we want to look at some changes we are likely to see over the next few decades that can bring a bright future . As John Mauldin comments :

“Some time next year, we are going to see the three-billionth person get access to the telecosm (phones and internet, etc.). By 2015 it will be five billion people. Within ten years, most of the world will be able to access cheap (I mean really cheap) high-speed wireless broadband at connection rates that dwarf what we now have.”

“That is going to unleash a wave of creativity and new business that will be staggering. That heretofore hidden genius in Mumbai or Vladivostok or Kisangani will now have the ability to bring his ideas, talent, and energy to change the world in ways we can hardly imagine.”

And because of the internet, the advances of one person soon become known and built upon in a giant dance of collaboration. It is because of this giant dance, this unplanned group effort, that we will all figure out how to make advances in so many ways. (Of course, that is hugely disruptive to businesses that don’t adapt.)

New jobs will emerge from new Energies, Nanotech, Robotics, Artificial intelligence, Virtual reality, etc…

A pessimist never gets in the game. A wild-eyed optimist will suffer the slings and arrows of boom and inevitable bust. Cautious optimism is the correct and most rewarding path in these changing but amazing new times.

DUBAI is considering a delay in its debt payments, that would be the largest sovereign default since ARGENTINA 2001.It is shaking investor´s confidence across the Persian Gulf.The cost of protecting government notes from Abu Dhabi to Bahrain rose, extending the steepest increase since February as Dubai World, with $59 billion of liabilities, sought a “standstill” agreement from creditors.

Gulf region default swaps jumped, with contracts linked to Bahrain rising 32.5 basis points today to 227, the biggest increase since Feb. 18. Contracts linked to Abu Dhabi added the most since February yesterday, climbing 36 basis points to 136.5 and were another 27 basis point higher at 164 at 10:10 a.m. in London, according to London-based CMA. Qatar default swaps advanced 23 basis points to 115, adding to yesterday’s 11 basis- point increase.

Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. A basis point is 0.01 percentage point and is equivalent to $1,000 a year on a contract protecting $10 million of debt.

What if … As Albert Edwards, Societe Generale’s global strategist, sees the risks running quite the opposite of the consensus, which has a global recovery on track with a steadily falling dollar. Instead, he looks for a double-dip back into recession leading to a surging greenback, with a collapse of “the China economic bubble” resulting in a double whammy for commodity prices.

He points to signs of doubts about the U.S. economic recovery, from the labor market remaining “very sick” with the uptick in unemployment rate over 10% plus the Conference Board’s consumer finding showing jobs getting still harder to get. Meanwhile, the ECRI Leading Indicator, which trumpeted recovery earlier in the year, has fallen for five straight weeks.

What if… China no longer will be accumulating currency reserves at nearly the same pace, leaving less to recycle into U.S. Treasuries. The reduced capital inflow would also slow China’s domestic monetary growth and real output, which track each other. Meanwhile, capital outflows from Japan, another source of global liquidity, could be hampered were there a sharp rise in its government bond yields.

What if… A synchronized end to the Chinese and U.S. economic recoveries could play out in increased protectionist pressures, including competitive devaluations.The sort of deflationary crisis, resulting in competitive devaluations, protectionism and contracting world trade that  recalls what happened in the 1930s more than what happened in the 1970s.

As Stephen Roach explained in his book ” The Next Asia” and Bill Gross declared yesterday in Bloomberg, China is facing a bubble of their own to confront.

Gross : ” “It’s gearing up for export that doesn’t find an end consumer, that’s the real problem in China.”

The “systemic risk” of new asset bubbles in global economies and markets is rising with the Federal Reserve keeping interest rates at record lows…

The Shanghai Composite Index of shares returned 84 percent this year. The index is valued at 35 times reported earnings, more than doubling in a year.

Under what Pimco has termed the “new normal,” investors should be prepared for lower-than-average historical returns with heightened government regulation, lower consumption, slower growth and a shrinking global role for the U.S. economy.

In an interview with the Financial Times, Miguel Fernández Ordóñez, governor of the Bank of Spain, outlined plans for a series of mergers within months among the “cajas de ahorros”, regional savings and loans institutions.

“I think there are at least 15 institutions that should merge with others,” he said. “I hope  next spring we have restructured all these institutions, that’s my idea. We now have many, many mergers that we are discussing.”

Spain’s listed commercial banks, some of which were involved in previous domestic banking crises, have so far survived the global financial crisis in better shape than many of their international rivals.

But the unlisted “cajas” , many of them politicised, linked to regional governments and with an opaque ownership structure ,seized market share from the banks at the peak of the recent housing boom and now account for about half of outstanding loans in Spain. Several are heavily exposed to bankrupt property developers and homeowners unable to meet mortgage payments.

What if … David Rosenberg sees 1992-1993 al over again :” This is 1992-1993 all over again when the commercial banks used the steep curve as an opportunity to reliquify their balance sheets and the flip side of that process was a listless and jobless recovery.”

What if… John William, proprietor of Shadow Government Statistics notes that every recession in the last four decades has had at least one positive quarter-to-quarter GDP reading, only to be followed by a renewed downturn.

What if … Next economic quarter disappoints.

Well, very soon the answers…