Wolfgang Munchau brings up some under covered ideas, and gives a decent perspective for the year to come. Link.
"It is easy and difficult at the same time to predict the economy in 2009. It is easy to predict it will be an awful year for the US, Europe and large parts of Asia. The industrialised world will be in a deep synchronised recession. Global gross domestic product will probably contract also for the first time since the 1930s. There is not a great deal we can do to prevent this."
This is an idea that most of us over look. The relative stability of the last few weeks has made distant the idea that we are in the midst of (not at the end of) the most dangerous economic time and economic environment since the Great Depression. In his analysis Wolfgang speaks of EU, US, and Chinese coordination.
I could not agree more, but I think the answer must go further. First of all I think that those parties only make up 55% to 60% of Global GDP, so larger parties like Japan (12% of GDP), Russia, India, Brazil, and others all need to be included. Undoubtedly he nailed three of the four major players on the head, but to jolt market confidence a broader (surprise) coordination is necessary. A Global coordinated recapitalization of banks and fiscal stimulus could send both the right message to markets and the right medicine to the real economy.
Although this first step may be necessary, it is not sufficient. Wolfgang's point about regulation was spot on, but again I would go one step further. The regulatory regime needs to be a principles based regime coordinated by all of the large players, and this must be coupled with confidence that regulators will act swiftly and efficiently across the Globe.
Once these pieces are set in place Global markets and economic participants may start to regain confidence, resources, and opportunity to get on the path to recovery in 2010.
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