Forensic science is hip at the moment. CSI Miami, with its distinctive brand of laboratory chic, is still top of the TV ratings. It has long since elbowed out traditional whodunnit-style detectives. People want other explanations, new scientific and technological possibilities. Old-school programmes built on plots, detective work, motives and grassing gangsters are out; forensics are in.

The same trend can be seen in financial analysis. I have been noticing this in recent weeks at a variety of financial conferences around the country. Investors are confused, as are their brokers and some chief financial officers. It is increasingly apparent that the traditional tools of economic analysis used by banks, financial institutions, think-tanks and brokers are not giving us an accurate reflection of what is going on in the world.

The traditional pillars of political wisdom, number crunching and company data are not telling us enough. If they were, we would not be subject to all these unforeseen shocks.

For example, when the Middle East is supposed to be pacified, why is Iran making a fool of America? Why, when we were told to expect lower oil and energy prices, are gas prices increasing by 40 per cent?

Why are the financial markets continuing to rise as interest rates head upwards? Why is Latin America turning left faster than at any time since the early 1970s?

In Europe, why are countries such as Italy and France apparently ungovernable?

Why – after almost 20 years of transition – have the eastern European nations been so (relatively) slow to grow? And why has the Irish property market surged this year when almost everyone predicted that prices would plateau out?

It seems that we need to broaden our framework of analysis and include geopolitical events, religious and cultural differences and of course, demographics in the mix. Even with these culprits rounded up, the world is still a confusing place.

There are three enormous imponderables on the global horizon that have both political and economic ramifications.

The first is resources, and the issue of whether the prices of commodities can continue to rise as they have done over the past three years. Last week, we were told that our gas bills will increase by 40 per cent next year. The implication is more inflation for us � last week�s figures show the annual rate has already climbed to 3.8 per cent � and more of our earnings going to those who produce commodities.

Unfortunately, with a few notable exceptions, those who own oil and gas are an unsavoury lot. There is a good argument to suggest that this is not coincidental and that the countries that own oil and gas are corrupt because of their mineral deposits – but let�s leave that for another day.

As a result of this, the foreign policy of every major country in the world is now driven by a desire to protect its supply of commodities.

This has weakened the US and emboldened its enemies. Washington is now on a collision course not just with Iran and Venezuela, but Russia as well (as signalled by Dick Cheney last week). The big problem for the Americans is that, post-Iraq, no one is afraid of them any more. This is not good news for us financially, as we are the most US-dependent country in Europe.

The second issue concerns interest rates. Although, judging by Irish borrowing figures, you would not think it, the great global era of low interest rates is over.

Up to now, cheap credit has offset the inflationary impact of more expensive petrol, and has allowed us to shrug off the 200 per cent increase in oil prices we have seen since Baghdad fell.

Had you suggested three years ago that oil prices would be above $70 a barrel, every economist in the world would have predicted a global recession. Today, oil prices are surging past $73 a barrel and the world economy is growing at 4 per cent.

Why? Because cheap money has allowed us to borrow to consume, making us feel richer (but more indebted), and China continues to pump out cheap consumer goods, meaning we can buy more stuff with our euros than before. Both of these factors have masked the debilitating impact of dearer oil, but for how long can they continue to do so?

Which brings us to the third imponderable.

What will the Chinese do next? Up to now, the story has been quite straightforward.

Most of the developed world understands that the phenomenal development of the Chinese economy over the last generation, particularly in the last few years, has made it impossible to maintain low-income manufacturing jobs in developed economies (and even in developing economies, as Mexico and others have discovered).

The rise of China has wiped out entire industries all across Europe, and has tipped the Irish economy away from manufacturing forever.

The idea of an unimaginably vast Chinese juggernaut sucking an additional 10-20 million peasants into its labour force every year is now understood and accepted by almost everyone, from government to business to the trade unions.

It took time for people to grasp the enormity of the threat, but now it is conventional wisdom. But, as the late JK Galbraith pointed out, this is exactly the point at which the obvious becomes obsolete and conventional wisdom loses its validity.

The latest news – unheeded, remarkably, by most commentators – is that China�s leadership is altering course: the headlong rush to economic development is to be reassessed. This does not mean that reform is dead, or even in danger of being reversed; at most, some new reforms may be delayed or watered down, but the reformists are still in firm control. They also intend to stay in control and are aware that this requires them to take heed of two growing areas of discontent.

The first and least important is the way the rest of the world, led by the US and EU, is pressing China to change its policies away from export-led growth and an artificially cheap exchange rate, towards more rapid development of the domestic economy.

The second and main source of discontent is based in the Chinese countryside, where a large and rapidly widening gap has emerged between it and the cities.

There are many indicators of this gap and the tension it causes, but the tens of thousands (no, that�s not a misprint) of riots that took place last year are by far the most persuasive evidence from the point of view of the Communist Party leadership in Beijing.

Economic policy is, therefore, changing direction: more investment are to be directed to the rural areas, while the unsustainable use of resources – energy, water and especially agricultural land near big cities – is to be severely curtailed.

The environment and its ongoing degradation is no longer something to be ignored or tolerated. Banks will no longer throw cheap money at projects that will add still further to huge overcapacity – and so on. In short, the Chinese juggernaut is changing its orientation and hence its impact on the world economy.

This will take time to have an effect, but the implications are immense. For instance, China will stop exporting desperately cheap stuff, so the prices of manufactured goods, from shoes to MP3 players, will end their apparently relentless downward spiral.

All this will mean that the positive tide of cheap energy, cheap credit and cheap goods might be about to ebb. Over the past few years, these three positive factors have soothed our anxiety and deadened the pain of economic change. Not any more.

As Warren Buffett famously said about bull markets: ��It�s only when the tide goes out that you see who was swimming in the nude.�� No wonder investors are confused.

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