The world economies are still not out of the doldrums they entered eight years ago. Yesterday’s shining stars no longer excite investors and many are asking where best to place one’s bets for the next decade or so.

Emerging markets were once considered as the best investment option. The BRIC countries were expected to outpace the older economies of Europe and the US that were perceived as rather sclerotic and unwilling or unable to undertake the necessary structural reforms.

But the collapse of the Chinese stock market in the last few weeks has shown that even the mighty juggernaut that is the Chinese economy is in need of an overhaul. The solution of the Chinese government was to intervene massively to stop the precipitous fall of stock prices. As the chief executive of BlackRock, the world’s largest fund manager, said: “If the Chinese authorities continue to prop up the equity market artificially, there are going to be fewer global participants when they open it.” Busts are an important brake on excessive exuberance in financial markets.

Europe is not faring much better. What is holding the eurozone together is the political determination not to let the EU dismantle as this would change the balance of power in the old world. The Greek crisis has shown how fundamentally flawed are the fundamentals that underpin the common currency. In a year’s time we will be talking about Greece again and perhaps some other bigger Mediterranean country. I am beginning to think that Grexit would not have been all that bad for Greece and Europe after all. It would have restored some faith in the sound belief that countries that overspend, under-produce and over-borrow will eventually wake up to the real world of bankruptcy.

Admittedly, with the fudged Greek crisis solution, the EU has prevented Russia from dreaming about expanding is hegemony in Europe. It may also have checked the progress of fringe political parties in Europe who have a good chance of holding the balance of power in many countries but then are unable to put their utopic social plans into action in a world where the harsh rules of good economic governance prevail. Financial markets in Europe may be recovering, but the structural weaknesses of the economic union are as evident as ever.

Countries that overspend, under-produce and over-borrow will eventually wake up to the real world of bankruptcy

So the brightest star in the constellation of world economies remains the US. The Fed chair Janet Yellen in her usual unassuming style dispelled the fears of US legislators that a rise inUS interest rates in the autumn is risky and expressed her confidence in the positive outlook for her country’s economy.

Yellen believes that the disappointing US economic performance in the first quarter of 2015 will not develop into a trend. Yes, there are risks on the way. The strong dollar is hurting US exporters as the greenback has once again become a safe haven for many world investors.

The secret of the US economic success is the ability of America to create jobs. With an unemployment rate of 5.3 per cent many European countries are asking how they can emulate this model to eradicate the plague of youth unemployment.

The more liberal US labour market makes it easier for employers to hire and fire. This is taboo for most European governments influenced by the strong lobby of labour unions. But what bothers many economists who have strong social concerns is the determination of most government to protect the vested rights of older workers while they ignore the sickening realities that millions of unemployed and often very qualified young people face.

Reducing the cost of employing people will encourage more entrepreneurs to employ younger people – a phenomenon that is becoming quite rare in the EU.

It is only fair to state that many of the jobs being created in the US are low-paying, low-skills jobs that are increasing the divide between the haves and the have-nots in American society. America like many other Western countries needs to improve labour productivity by higher investment in education and technology.

The relations between the Federal Reserve and politicians in the US is not at its best at the moment. The Republican-Democrat political divide is bound to become more fractious as the US presidential election gets nearer.

But Yellen is right to dispel the doom and gloom of some US politicians who predict that a gradual rise in interest rates in the US will do more harm than good.

johncassarwhite@yahoo.com