These are the notes which I was able to take on the fly in that plenary session. Pr Walter is sought after by many of the media because he predicted the real estate bust before it happened.Notes from Pr Walter's presentation:
------------------------------------------- Subprime was the trigger but not the cause of the crisi. It is a much deeper thing. It's not just the US either. It's about greed. And if credit is a drug, then banks are drug-dealers.
- where are we now? We have the deepest recession we ever witnessed. But are we on for a big depression? The answer is no.
- The reason is that the causes are very different. The Spanish construction sector went overboard, building 750,000 units vs 250,000 in Germany over the past five years.
- a group of countries like Ireland and Spain went into a bubble
- last Summer, we understood that natural resources are scarce. So everyone started speculating on commodities. Every speculator found themselves with huge piles of stock.
- But places like Dubai or Moscow thought themselves rich whereas they weren't really as much as they thought
- Singapore: no excesses in real estate, always did the right thing in technology, health etc. Yet Singapore is in very deep recession because like Hong Kong, Singapore is a turntable for the world
- sectors in infrastructure (air transport etc.) are in trouble
- in fact the pb is not just an American problem. Recession is not just for others, it's also for those countries which did everything right
- decline in Germany is in fact even more acute in Germany than it is in the US, the so-called origin of the problem
- Gordon Brown's good handling of the financial crisis but didn't get any thank yous from his citizens or his fellow Prime/Finance ministers in Europe
- we are still trying to avoid the collapse of financial institutions, but the financial crisis still hasn't been resolved. The solution is not to take toxic assets out of the failing banks. It's not working. We are in limbo. Fortunately, we have competent Central Banks. They realised it's not just the financial sector that's in trouble.
- US economists should not bash ECB because of the environment in which it evolves. Europeans believe that the Euro is a reason for inflation. Europeans have a 3% inflation rate but believe that there is a 13% inflatiion rate. Therefore the ECB could not lower interest rates any more than they have done.
- monetary policies are believed not to be efficient but in fact they are but the effect is delayed and less than 100% efficient. We should have had anti-cyclical fiscal policies to counter the effects of the crisis.
- We have educated students so as to believe that Keynesian policies weren't effective for the past 35 years. Spending more money is not a real issue when it's used for education, research, research & development (Lisbon target is 3% of GDP, already half achieved), infrastructure ... But such programmes take up to a year to get started.
- 2009: GDP fall in US by 3%, 5% in Europe, 7% in Japan
- China: electricity consumption down by 4-5% so Chinese forecasts for growth are bound to be lower (by 2% probably)
- emerging world: the authorities in China are probably in better position to execute their policies than Europeans. The Chinese are determined to preserve their imports of commodities, hence the importance of certain African countries for China. The economy will certainly be supported by emerging countries. But central European countries are too dependent on other countries. Hungary, in the middle of the recession, had to increase interest rates, and it's very bad. Central and Eastern Europe should not be targeted, and Latin America are probably a good place to invest although they're not yet getting the results that they deserve from the favourable change in their policies. One last point is that the leadership of the US and the chance of presidency in the US is a good think. One worry is partnership. Asia is not yet a viable partner. The one country that could help is Japan but it is in bad political and economical shape. No credible partners in Europe to be seen. Protectionism isn't what we need. What we need is an open global system to do business. Some European leaders will probably emerge and then the world can grow again. But growth will be more moderate, and in China as well, and it could be sustainable. The introduction of more eco-friendly policies is also an asset for the future. More detailed and thorough accounts and analyses will be poste online soon.Orange Business Live 2009 - London
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