There are times SA is favoured by global good fortune, whether strong global growth fuelling our export volumes, or events boosting our export commodity prices, or events favouring us with large capital inflows (in our case in modern times mostly portfolio based rather than being direct foreign investment). Or all three windfalls occurring together.

The consequences of such fortuitous flow of events are usually a strong Rand (to the point of overvaluation) and repressed inflation (especially if global inflation is already low, further reinforced by the strong Rand). This usually also allows low interest rates.

Our GDP growth may be undermined by Rand firmness due to strained trade competitiveness, but growth may benefit from the real improvement in household finances due to strong real income gains, the repressed inflation and the low interest rates encouraging higher debt leveraging, further boosting domestic spending and business fixed investment.

This is usually a time of reduced national constraints, giving up on exports as growth engine (relatively speaking) as trade competitiveness suffers, but this being compensated by greater domestic demand vigour.

This describes well the past decade, except for the late 2008 intrusion of global recession and then more ominously the domestic stirrings these past 18 months resulting in output disruption, doubling of the balance of payments current account deficit and investor confidence loss, all of it registered in a weaker Rand.

That last bit, though, is disturbing a bigger picture that should have our close attention.

For coinciding with the domestic disruption of the past 18 months we can observe the global picture changing, with growth slowing in China, thereby tempering the global commodity boom while progressive crisis repair and recuperation in the US is changing its policy outlook and therefore the Dollar outlook.

After a decade of Dollar weakening, the US tide is turning. And though the expectation so far is only of a cyclical nature (there is as yet insufficient evidence of notable structural change), US cycles have a way of running for very long if they start low and slow.

And there is really nothing lower and slower as the start to this new US cyclical upswing.

It traces its start to 2009, but because the post-crisis trauma took so long clearing, policy has remained supportive for very long.

In recent months, however, the US recuperation has progressed to a point where the cost of exceptionally generous monetary support needs to be weighed against the benefits. Increasingly, the costs of very low interest rates for very long and the risks inherent in Fed balance sheet expansion are inviting a policy rethink, especially as the US economy shows signs of regaining more of its old intrinsic vigour.

As this debate progresses and markets see glimpses of the future shining through, asset prices are being adjusted to reflect these changing risk-and-reward profiles.

Thus, in anticipation of a future shift in Fed policy getting underway, US Treasury bonds are being seen as overvalued, equities are regaining traction, and the Dollar is starting a comeback from suppressed levels.

We may so far have only seen the start of slowly improving US economic fortune in its Great Crisis aftermath, an impending start to a major shift in Fed policy emphasis, and the start of a reinvigoration of the Dollar.

And everything here suggests things are low, slow and long in duration.

The US has much ground to catch up (a still large output gap narrowing only slowly). The Fed will likely spread its regime change over a number of years, starting with a slowing in easing (tapering) from later this year to middle 2014, then a prolonged pause (if previous cycles are anything to go by) to mid-2015 and then a start with gradual policy tightening (rate increases) through 2018.

That suggests more Dollar strength ahead, while the same underlying forces are inviting safe haven capitulation (and downward pressure for key SA export commodities).

US cyclical revival may eventually be matched with revival elsewhere, except that the Chinese growth story may be undergoing a structural slowing, limiting its upside. Many of SA commodity export prices may therefore also not experience a quick or early revival.

With American fortunes improving, and central bank liquidity generosity to wane gradually, the capital flows favouring SA this past decade may also experience a step change as the present decade unfolds, even while Japan is still on full monetary support.

This suggests tighter SA balance of payments funding, a cyclically weaker Rand, less repressed inflation and eventually a tightening in SA interest rates.

The weaker Rand should improve trade competitiveness and growth, but the inflation revival and higher interest rates should constrain household consumption and domestic growth impulses.

This suggests rotation in our domestic growth drivers.

Yet if wage demands and price increases erode away the competitive Rand advantage, we will end up without the trade boosts to growth.

Just as the US pendulum seems to be finally starting to reverse, so it coincides with ending the gratuitous supports underneath our external condition this past decade. This should set in motion corrections that may promise greater hardship domestically without us having the national consensus to maintain any external advantages coming our way (such as improved trade competitiveness).

These are momentous shifts.

The global-cum-American shift is already some months underway, at a time that domestically we apparently started to progressively lose the plot in the labour field, coming on top as it did on other long-running supply constraints.

It is a double-whammy start to eroding away a decade of super-cycle commodity and capital inflow windfalls on the outside. In the process, we are starting to re-jig our domestic growth dynamic away from household consumption.

Who will tell the labour force and the indigent dependent on social grants, 11 months ahead of the 2014 general election and three years away from mid-2016 municipal elections?

Instead of overflowing, as it has for a decade, the cup is starting to run bare, and progressively so in coming years as the US repositioning progresses and China performs more moderately, all of it headwinds reinforcing our own homemade brew.

We could prevent too much of an undoing by being less self-destructive, but that would require insight and consensus. These are apparently difficult achievements in a society battling with too many ideological "isms" fighting for its soul.

Source: Cees Bruggemans