Emerging Economies Are Even Better Than Advertised: You've read about growth rates in these countries, but even more important are their prudent monetary policies

The budget deficit in the United States, for instance, has soared from a manageable 2% of the nation's gross domestic product (GDP) in 2007 to a threatening 10% in fiscal 2009. Administration projections suggest that deficits will continue to be large for years to come, and the outstanding government debt will soon rise from about 65% of GDP at present to more than 100%. Relative deficits in Japan and Europe are only slightly lower. Meanwhile, Japan's debt outstanding already exceeds its GDP by a factor of two, while in Europe, many governments have more debt outstanding relative to GDP than does the United States. In contrast, China's budget deficit, even with the huge financial stimulus program of the past 12 months, remains well contained. The deficit in China has risen, to be sure, from less than 1% of GDP to just under 3%, but that still compares well to America, Europe and Japan. India's budget deficit does as well, though at 6% it is larger than China's. Even Brazil, which has a huge interest burden from a legacy of past deficit financing, is running a budget surplus after considering interest expenses-and its outstanding debt burden, at just over 40% of GDP, is far less than comparables in the United States, Japan or Europe. Prospects in the emerging economies, however, have no need to rely on such hopes of policy change and, consequently, also carry less uncertainty. China's short-term rates, at a little over 5%, are firmly positive in real terms and far from too loose, if they are not especially tight. Brazil's short-term interest rates, at about 9%, are also firmly above that nation's inflation rate and far from overly loose. India has followed a more expansive monetary policy. Its short-term rates of 3% to 4% stand below its inflation rates of around 10%. In general, though, there is less need here than with the established developed economies to look for remedial action on this monetary front.