The economic data shows a gathering recovery around the world. My instinct is that this recovery is what the crude London traders would call a ?dead cat bounce?. The optimists are mistaking bumping along the bottom for a recovery. My thinking is based around the idea that asset prices have fallen by between 30% and 50% and as much of the previous consumption was based on previously inflated asset levels, this asset deflation will surely keep consumption restrained. The surprising speed, breadth and depth of the recession must also have reined in risk appetite and emboldened savings attitudes. Moreover, the transformation of the Chinese and South-East Asian economies from export-driven to a more domestic consumption focus must surely take time, however, omnipotent the Chinese planners are and I tend to feel they are less omnipotent than others think they are.

But, one of the things you learn from being a survivor on the dealing floor is to (a) never stick your heels into a forecast and (b) beware of your natural biases. I am an economist. We hate unbridled optimism and boom. These are not environments that people turn to economists. We far prefer doubt and worry. And what did the man say? Seven years of feast were to be followed by seven years of famine. I say all that because the data is consistent not only with the ?bumping along the bottom? school of kill-joy economists, but also those of a more optimistic bent. According to the OECD leading indicators, those countries that suffered the sharpest contractions are experiencing the sharpest recoveries. China and Germany appear to be rebounding swiftly. Even in the UK, optimism is growing that the housing recession is over and prices are beginning to rise. Of course, for all of these bright spots on the economic landscape, we are talking about inclines from a very low base. The point is that the recovery is stronger than I would have expected and disappointed expectations should be rethought.

What we can say with some, if not complete, confidence is that the world economy is no longer in free fall. The sense of crisis, of impending doom, of economies lurching from one precipice to another, appears to be abating. This is welcome news for value investors. In a crisis all that matters is cash. Correlations become one. Everything is going down and value is irrelevant if it cannot be liquefied into notes and coins immediately. Now that the crisis is moving into the rear view mirror and market participants have time to breathe, they can be more discerning. As investors relax and pause for breathe, undervalued stocks, bonds and currencies will rally the most, reinforcing the general picture of recovery.

From a macro-perspective, emerging markets and European equities that fell into the Liquidity Black Hole of 2008 will be some of the first markets to re-emerge. I particularly like the Brazilian real. It fell too far too fast last year. Commodity prices are recovering and Brazil is one of the few countries actually paying interest on deposits. In addition to value, investor risk appetite will be returning, even if consumers risk appetite is not. Markets are no longer as expensive as they were, volatility is falling and interest rates cannot fall further and are likely to edge higher slowly from here. This would seem, on paper, to be the perfect time to put on risk like small-cap stocks, emerging currencies and junk bonds. Of course, the perfect time to do so never feels like it as it is often just after a calamity and risk aversion is excessively high and backward looking.

In the end the outcome for markets is determined by the battle between rentiers and debtors. In the US, where the voting population is relatively younger and more indebted than in Europe or Japan, the debtors will win. US creditors are foreign and so this will be bad for the dollar. I am a long-run dollar bear. Creditors will fare better in Europe and Japan where the electorate is older and less indebted. This will support the euro and yen in the long-run. However, two things have me moderating my dollar short positions today. First the US economy is in recovery as rapidly as any other and into this mix, the US dollar is undervalued. Its undervaluation is more extreme against continental European currencies than against sterling, the Canadian dollar and some Asian currencies and so the name of the game is to become more discerning with regards to dollar-shorts and no longer expect the dollar to fall indiscriminately from current levels.

The Canadian and Australian dollars look attractive. They are not expensive versus the dollar. In Australia?s case, the rebound in China should help and for both Canada and Australia the firming of commodity prices should support their currencies even if dollar?s weakness is less general.

The author is chairman, Intelligence Capital, chairman, Warwick Commission, member, UN Commission of Experts and member of the Pew, US Congressional Task Force on Financial Reform