According to a white paper released by UBS for this week’s World Economic Forum in Davos, the world economy remains as unbalanced today as it has been over the past quarter century – with big implications for the global economic recovery.
The authors argue that the adjustment of current account imbalances in the world economy was mostly a function of recession, not shifts in competitiveness. Large current account deficit countries restored external equilibrium at the cost of domestic disequilibrium, so output plummeted and unemployment soared. Read more
According to a white paper released by UBS for this week’s World Economic Forum in Davos, one of the surprising factors ‘reshaping the world’ – the Davos theme this year – is an aggregate absence of austerity among governments globally.
Viewing the global economy as a single unit, the authors see a very different picture to the post-crisis world of austerity. Indeed, the two largest components of global GDP, namely private consumption and fixed investment, both hit multi-year peaks in the first quarter of 2008. The ensuing recession was arguably made less severe by the ongoing rise in government consumption. Read more
The gist is that recent advances in information and communications technology, new innovations in methods of manufacturing, and fresh ways of harnessing and exploiting energy could unleash significant growth benefits for the world economy over the next few decades. Read more
Commenting on the survey findings, Bank of America’s Chief Executive Officer Brian Moynihan said, “Leaders around the world recognize the value and need for greater global collaboration.”
Moynihan displays a certain lack of concern about the 10 per cent of “global decision-makers” who were found to be riding the Steamboat Lonewolf up the Wantspacetothinkippi River in a single occupancy first class cabin, quietly hatching plans to take over the world, according to a survey commissioned by the bank. Read more
(We’ve checked and we’re not on it. Suppose we’re just gonna have to start angling for a 2014 journo invite or start saving the SFr42,500 each needed for a WEF ticket. But fear not, we have the next best thing to a telepresence device in the form of our own special correspondent Mdm D. Deville. So for what’s really going on behind the snow and canapés be sure to follow her on Twitter at @DavosDeville.) Read more
In a forthright opening speech to the World Economic Forum in Davos, Angela Merkel said that Europe could only recover the confidence of global markets if the weaker European economies boosted their growth and competitiveness with structural reforms, as well as ensuring their debts were sustainable. The FT reports Germany was prepared to show its solidarity, she said, but “what we don’t want is to promise something we will not be able to fulfil”. Germany was prepared to show its solidarity, she said, but “what we don’t want is to promise something we will not be able to fulfil”. In response to calls from the International Monetary Fund this week for much bigger firewalls to protect European sovereign debt from speculative attacks, Ms Merkel questioned whether demands to double or even triple the eurozone rescue funds would be credible. “If Germany promises something that cannot be delivered if the markets attack it hard, then Europe would be left with a wide open flank,” she declared.
John picked up the phone. It was the bank’s legal counsel, Peter Thompson, calling. He had dramatic news. Garland Brothers, one of the world’s oldest banks, would declare bankruptcy tomorrow. As he lay there in his spacious air-conditioned bedroom, unable to return to sleep, John tried to reconstruct the events of the last four years…
A top Goldman Sachs executive has warned that the push to impose more regulation on banks could cause the next crisis by pushing risky activities towards hedge funds and other lightly supervised entities, reports the FT. The comments by Gary Cohn, Goldman’s president and top executive after chairman and CEO Lloyd Blankfein, come as big banks intensify efforts to shape financial regulation amid rising markets and profits. At the World Economic Forum meeting in Davos, Cohn criticised regulators’ focus on traditional institutions and urged them to examine the effects of new rules on the whole financial system. Some critics however dismissed the remarks as “self-interested”.
There will be no panels on bank bonuses or financial regulation at Davos this year, and Wall Street executives say they are more concerned with wooing clients than defending their payouts, says Bloomberg. Indeed –most US financial services professionals managed to take home a bigger bonus in 2010 than a year ago, despite a year of tepid trading, the FT reports. According to a new poll, more than half of respondents received higher year-end payments, although the average bonus has fallen. Most respondents also said that being awarded more stock as a proportion of their bonus would be a consideration in deciding to move jobs.
Investment bank strategists headed to this week’s Davos World Economic Forum are betting on emerging markets restoring the world economy to a generation-long period of high growth — the ‘super-cycle’, Bloomberg says, that will send US Treasury yields flying and favour hard commodities. It’s perhaps a telling fixation. What is striking about Davos is that a veneer of micro-level optimism goes hand in hand with a gnawing insecurity about the macro picture, the FT’s Gillian Tett writes. This is partly because CEOs are uneasily aware that hostility towards elites is rising. And while much of this has been focused on bankers, continued high levels of unemployment have prompted wider concerns about a bigger backlash in the west.
We’re privileged to welcome to the World Economic Forum, the distinguished writer and thinker, Professor Holden Caulfield, 76-year-old president and founder of Rye Introspective LLP. Mr Caulfield has taken as his theme today “Goddam Money: It Always Ends Up Making You Blue as Hell”. Holden – the floor is yours. Read more
The world’s big banks on Tuesday warned that unless countries adopted a co-ordinated approach to banking reforms, their ability to lend would be damaged and the financial system would revert to pre-crisis conditions. On the eve of the World Economic Forum in Davos, top bankers on their way to the Swiss ski resort deplored the fragmentation of regulatory initiatives that has seen bonus taxes introduced in the UK and France, a US levy on banks, and the proposed “Volcker rule” limiting banks’ size and activities.
Top Wall Street bankers attending the World Economic Forum this week in the Swiss town of Davos will use the meeting to lobby regulators against Barack Obama’s plan to curb banks’ size and trading activity and break-up big institutions. Executives said they would push their case quietly to avoid giving the US president the “fight” he promised last week. Alistair Darling, UK chancellor, at the weekend rejected the US idea of limiting banks’ size and activities. But billionaire financier George Soros welcomed the plan.
There’s been an interesting exchange between the FT’s Martin Wolf and Morgan Stanley’s Stephen Roach on the subject of depression. After the civil niceties, the blogosphere tit-for-tat goes something like this (our emphasis):
The annual gathering that is the Davos World Economic Forum gets underway in the small Swiss Alpine resort on Wednesday 28th January. For those of you keen to follow the goings on over the next three days, here is a hand-picked highlight of the coverage that is coming your way.
In a nod to the new mood of sobriety, Goldman Sachs has quietly cancelled its glittering annual party at the World Economic Forum in Davos and has sharply reduced its delegation to the event, which starts Wednesday. Other conspicuous cancellations include John Thain, who was due to host a high-profile breakfast meeting on Friday– until he was ousted from his post at Merrill Lynch on Thursday. Lehman Brothers, which used to send a formidable delegation to the ski resort, has also disappeared. Vikram Pandit, the embattled CEO of Citigroup, has withdrawn this year. So has Howard Stringer, the CEO of Sony. But Jamie Dimon, head of JPMorgan, is hosting a party in Davos’s iconic “Piano Bar, while Barclays is throwing a dinner in a mountain-top restaurant. And curiously, overall attendance numbers are actually up this year.
“This has been the fiercest argument I have had in Davos,” said Stephen Roach, chief economist at Morgan Stanley.
After Wednesday’s post here about the debate in the blogosphere on the effects of derivatives in the financial system, Gillian Tett reports on the arguments at Davos. While discussions about big economic themes lacked real drama, the role that derivatives may or may not be playing in distorting the cost of credit provided more lively debate. Read more
When big names in private equity get together in one place, you tend to expect news of yet more deals to follow. Not necessarily, says Reuters. Sometimes they’re just gathering for a bite to eat and a spot of charity.
Last night 800 of the deepest pockets in private equity, investment banking, accounting and law assembled in London for the launch of the Private Equity Foundation – which managed to raise just over £5m by the end of the dinner event. Read more
Davos always attracts a cluster of global bankers, but the list of those braving the Swiss weather this year includes a particularly large contingent of Wall Street financial titans.
Participants include not just Jamie Dimon, Lloyd Blankfein, and Richard Fuld, but also a large contingent of private equity leaders, including Stephen Schwarzman of Blackstone, David Rubenstein of Carlyle. One topic causing a buzz: growing transatlantic competition for dominance in the financial world. Read more
The market in bird flu is currently sitting at 22 countries during 2007, according to a virtual trading service being run by Thomson Financial and the World Economic Forum ahead of this month’s Davos meeting.
According to the data — extracted from market participants who are trading with play money — such a widespread outbreak (against human cases in nine countries last year) will trigger a fall of 0.4 per cent on the Down Jones Industrial Average. If the spread of avian flu reaches 60 countries, however, traders reckon the Dow will respond with a fall of 10 per cent. Read more