1. THE POST-CRISIS GLOBAL ECONOMY
JANUARY 13, 2010
THE POST-CRISIS GLOBAL ECONOMY By
Jeffrey E. Garten
Yale School of Management

2. PRESENTATION LAST YEAR
DESCRIBED GLOBAL ECONOMY IN SYNCHRONIZED FREE FALL
ECONOMIC GROWTH CONTRACTING EVERYWHERE
MANUFACTURING, TRADE, INVESTMENT, WORSENING CREDIT CONDITIONS
MULTIPLE GOVERNMENT INTERVENTIONS AROUND WORLD

3. PRESENTATION ONE YEAR LATER
MORE STABLE, AT LEAST
NUMBER OF ENCOURAGING TRENDS
WORLD MUCH MORE DISAGGREGATED
STILL BIG UNCERTAINTIES
STILL BIG UNRESOLVED PROBLEMS

4. POINTS TO COVER OVERALL CONTEXT REPORT CARD ON ACTIONS TO DATE
ALTERNATIVE RECOVERY SCENARIOS
CHALLENGES AHEAD

5. OVERALL CONTEXT THE GREAT MODERATION – (1995-2007)
THE GREAT CREDIT CRISIS – ( )
THE GREAT RECESSION – ( )
THE GREAT STABILIZATION – (2009)
THE GREAT .… UNCERTAINTY? – ( )
THE GREAT STRUCTURAL CHANGE – ( )

6. OVERALL CONTEXT SIX OBSERVATIONS
THE GREAT MODERATION WAS PARTLY AN ILLUSION OF SOLID ECONOMIC FOUNDATIONS
THE GREAT CREDIT CRISIS BEGAN IN THE 1990s, NOT 2007
THE GREAT RECESSION ISN’T OVER FOR EVERYONE. CHANCE OF DOUBLE DIP

7. OVERALL CONTEXT SIX OBSERVATIONS
THE GREAT STABILIZATION COULD CONTAIN THE SEEDS OF ANOTHER CRISIS
THE GREAT UNCERTAINTY RESULTS FROM THE IMPOSSIBILITY OF A RETURN TO STATUS QUO; BIG QUESTIONS ABOUT REGULATION ;AND SHAKEY GROWTH FUNDAMENTALS
THE GREAT STRUCTURAL CHANGES RELATE TO THE SHIFT TO ASIA AND THE ADVENT OF A LOW DOLLAR WORLD

8. REPORT CARD ON ACTIONS TO DATE
RESCUE A REGULATION I [D?] REFORM OF MARKETS I [C?] REBALANCING D RECOVERY C+/B

9. REPORT CARD – BIG QUESTIONS
IN THE END HOW MUCH WILL HAVE CHANGED ON WALL STREET AND IN WASHINGTON?
IS IT POSSIBLE THAT THE GROUNDWORK HAS BEEN LAID FOR AN EVEN BIGGER CRISIS?

10. ALTERNATIVE RECOVERY SCENARIOS 2010 - 2012
V U W L J

11. ALTERNATIVE RECOVERY SCENARIOS OBSERVATIONS
ANY KIND OF RECOVERY WILL LEAVE DEEP SCARS
RECOVERY GREATLY SKEWED TOWARDS EMERGING MARKETS
NUANCES OF “DECOUPLING” THEORY HOTLY DEBATED
MULTI-SPEED WORLD A HUGE COMPLICATION

12. CHALLENGES AHEAD GENERAL OBSERVATIONS
THERE ARE MANY THINGS WE JUST DON’T KNOW. CAUSE FOR HUMILITY
HOW BIG IS TOO BIG FOR GLOBAL FINANCIAL INSTITUTIONS
HOW TO DEAL WITH ASSET BUBBLES?
WHO IS BEST SYSTEMIC REGULATOR ON NATIONAL AND GLOBAL SCALE?

13. CHALLENGES AHEAD SHORT TO MEDIUM-TERM
EXIT STRATEGIES IN GLOBAL CONTEXT
NATIONAL REGULATION*
GLOBAL REGULATION*
TRADE AND FINANCIAL IMBALANCES
___________________
*A major change in social contract between state and banking?

14. CHALLENGES AHEAD MEDIUM TO LONG-TERM
SHIFT OF ECONOMIC GRAVITY TO ASIA
LONG-TERM DECLINE OF DOLLAR
STRONG HEADWINDS FOR AN OPEN WORLD ECONOMY

15. SHIFT OF ECONOMIC GRAVITY TO ASIA AND OTHER EMERGING MARKETS
ECONOMIC GROWTH AND DYNAMISM
INTRA REGIONAL TRADE
LOCATION OF FINANCE AND INDUSTRY
ECONOMIC AND SOCIAL PHILOSOPHY
POLITICAL CLOUT
POTENTIAL CRISES

16. LONG-TERM DECLINE OF U.S. DOLLAR SIX REASONS
SOARING DEBT AND INFLATIONARY TEMPTATION
FISCAL NIGHTMARE AND BROKEN POLITICAL SYSTEM
NEED TO REVIVE MANUFACTURING AND “PRODUCTION ECONOMY” AND CHEAP DOLLAR EASIEST ALTERNATIVE

17. LONG-TERM DECLINE OF U.S. DOLLAR
LIKELY PERCEPTIONS AND BEHAVIOR OF FOREIGN INVESTORS WHO WILL WANT TO DIVERSIFY
MORE TRADE SETTLED IN OTHER CURRENCIES
NOT “WHETHER” BUT “WHEN”, SO NEED TO PREPARE

18. A LESS OPEN WORLD ECONOMY
END OF A 30-YEAR ERA OF DEREGULATION, IN FINANCE AND ELSEWHERE
STEADY REGULATORY INTERVENTIONS ON HORIZON, IN FINANCE, ENVIRONMENT, TRAVEL, FOOD
PUBLIC SUPPORT FOR FINANCIAL INDUSTRY AND BUSINESS SERIOUSLY ERODING
OPEN TRADING SYSTEM OVERWHELMED
INFLUENCE OF EMERGING MARKETS, INWARD EU, OVERSTRETCHED AND INWARD U.S.

19. CONCLUSIONS WORST AVOIDED BIG UNCERTAINTIES LOOM
BUT NO RETURNING TO WHAT WE KNEW PAST 30 YEARS

20. THE POST-CRISIS GLOBAL ECONOMY
JANUARY 13, 2010
THE POST-CRISIS GLOBAL ECONOMY By
Jeffrey E. Garten
Yale School of Management