Sometimes a picture really is worth a thousand words, and several thousand words a day are wasted on trying to deconstruct incoming bullish data to fit the popular thesis that we are going to relapse into recession or at least stagnation later in 2010. Economists and investors are often like generals fighting the last war, and their outlook is coloured by their most recent searing experience. Right now, they're bogged down in trench warfare and ignoring the rumble of inflationary tanks on the horizon.  The fact is that the vast scale of global stimulus last year could not have failed to generate a decent cyclical recovery, and it is being supported in the US by strong corporate balance sheets and underinvestment in inventory and productivity enhancing and another $450bn in stimulus spending. We'll get something like a 4% real GDP year in the US, on which basis current monetary policy is unsustainable, despite Wall Street's wishful thinking to the contrary. The ’double dippers’, most of whom completely missed the warning signs in 2008, now spend their days unpicking every positive number to make it fit their thesis of sustained low interest rates and sluggish global growth at best. Meanwhile, a brutal reversal of the dollar carry trade, with an 11% move versus the Euro since early December, is sucking more liquidity away from the leveraged momentum trade in risk assets.

The reality is that central banks, particularly in the emerging markets, are falling behind the growth curve as the unprecedented scale of monetary and fiscal stimulus applied in 2009 finds traction in the real economy. Emerging Asia will be the first region to see policy normalization, and it’s beginning in China and India. Chinese lending data confirms a sharp slowdown in recent weeks; 90% of January's lending was made in the first two weeks before banks slammed on the brakes after a midnight phone call from Beijing while M1 money supply is now declining for the first time since late 2008. However, momentum is so strong that an 11-12% Q1 GDP number is likely, although that will mark the peak.