The developed world is not reshoring or automating half as quickly as the technologists would have us believe, and on the macro level the impact is likely to be insignificant for many years yet.
That’s it. That thing that seemed first impossible, then worryingly plausible, then shockingly probable — it’s actually happened. The stunning vote for Leave hasn’t just cratered financial markets. It also introduces a period of baffling uncertainty that, we suspect, far too many advocates of Remain have been too complacent about ever having to face one day. But ready or not, it’s here. As far as we can tell, these are the immediate questions raised by the stunning outcome:
David Levy’s April forecast, by way of Jerome Levy Forecasting Center, presents three notable viewpoints worth sharing this month. The first is that capital gains are accounting for an increasing share of total investment returns, now making-up probably the majority of them. But, says Levy, it will be challenging to maintain those capital gains from now on. The second is that whilst there is a popular view that foreign exchange can explain the extreme volatility so for in 2016, this is probably wrong. According to the prevailing view, Davy notes, the stability of the global economy leans heavily on currency stability and especially on a benign set of stable dollar exchange rates.
Ben Bernanke first gained the catchy but unfortunate nickname “Helicopter Ben” when he gave a speech in 2002 endorsing Milton Friedman’s idea of a metaphorical helicopter drop of money as an extreme but effective way of combating deflation – a moniker that haunted him when he introduced a $4tn quantitative easing programme at the Federal Reserve. But in his latest blogpost at Brookings he has cautiously endorsed the concept again. While careful not to step on current Fed chair Janet Yellen’s toes by suggesting at all that this is a likely course of action – and the US economy is doing fairly well, if unspectacularly – he now writes that it shouldn’t be ignored as a policy tool:
We’ve recently looked at a famously wrong economic prediction based on an accurate demographic forecast, Japan’s experience with rapid aging, and the dangers of relating household demographics to asset price valuations. Suppose, even after reading those posts, you still agree with Alan Greenspan (and Toby Nangle, Charles Goodhart, etc) that slowing growth in the world’s working-age population necessarily implies a bigger share of output headed to workers and faster rates of inflation. Don’t worry. There are even more reasons for scepticism.
Pick your terrible band-gag: Simple Minds… Tears for Fears… Rough Trade… Er, Alphaville. From Goldman, our emphasis: The financial crisis can be viewed as a number of separate but related waves. Wave 1; the US Wave started with the housing market collapse, spread into a broader credit crunch and ended with the Lehman collapse and the start of TARP and QE. Wave 2; the European Wave began with the exposure of banks to leveraged losses in the US and spread into a sovereign crisis, given the lack of a debt sharing mechanism across the Euro area. It ended with the OMT, promises to ‘do whatever it takes’, and finally the introduction of QE. Wave 3; the EM Wave coincided with the collapse in commodity prices.
The FT has just published its big “When Rates Rise” package on the prospects of tighter US monetary policy. Of course, it remains far from certain that the Federal Reserve will act later this month – or even this year – but we thought a more visual guide would be appropriate. Back in the noughties, the global economy was growing at a healthy clip, and the finance industry was feeling great. Essentially, things were a bit like this.