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20 Dr Pippa Malmgren There have been several comments about the American economy being built on sand. To what extent do you think this is the case I am told by everyone that I speak to in all these different fields that I am the most optimistic economist at the moment. I am very upbeat about the US and the UK especially Im not so positive about emerging markets but even they will be ok. Is America importing too much Manufacturers are moving back to the US so fast and now so are other activities. Mining has shifted back to the US energy production is at the epicentre of the US agriculture too. I see huge signs of innovation. I dont mean technology. I mean people are reinventing themselves. Companies are reinventing their businesses. New industries are coming to life such as crowd source finance which is fast replacing the traditional bank lending system. By the way the US only depends on less than 10 of its GDP for exporting and importing. Its not like most countries which are a lot more dependent on importsexports. Lets look at what is happening in the emerging markets. What is going to be the impact of this on luxury spending We have to be very careful in assuming that China is going to be the biggest engine of growth because I actually dont think that it will be. This is a really controversial point so I want to spend a little time explaining what is happening in China and the emerging markets generally and why it is not proving to be the answer that the luxury goods industry had assumed. It has to do with the rise of inflation in the world economy. I think it is very clear that we have inflation in the emerging markets. Food and energy prices are up. In the last six months alone we have had a record all-time high for the price of beef pork and shrimp. These are the core proteins that emerging market workers depend upon. But not only that the staple foodstuffs are also rising. Some seemingly obscure but very relevant examples are the price of onions in India. Recently the Indian cabinet held an emergency meeting to discuss the price of onions. The price is up 163 in a single year but in certain parts of the country it has trebled in Dr Pippa Malmgren is a politics and policy expert. She used to be Special Assistant to the President of the United States for Economic Policy on the National Economic Council and was named Global Leader for Tomorrow by the World Economic Forum in 2000. Luxury Topping had the privilege of interviewing Pippa in the private members club Grace Belgravia. DR PIPPA MALMGREN ECONOMIC POLICY EXPERT FOUNDER OF DRPM Interview November 13th 2013