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David Smith. The Sunday Times. The Boustead Annual Globalisation Lecture. The global financial crisis and the changing world economy. The global economy’s shifting sands. After the upheaval. How did we get here and where are we going?. A self-feeding cycle. - PowerPoint PPT PresentationTRANSCRIPT
![Page 1: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/1.jpg)
David Smith
The Sunday Times
![Page 2: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/2.jpg)
The Boustead Annual Globalisation Lecture
The global financial crisis and the changing world
economy
![Page 3: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/3.jpg)
The global economy’s shifting sands
![Page 4: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/4.jpg)
After the upheaval
How did we get here and where are we going?
![Page 5: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/5.jpg)
A self-feeding cycle
Prolongedgrowth
Risingconfidence
Excessivelending
![Page 6: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/6.jpg)
The global economy looked unstoppable
![Page 7: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/7.jpg)
The (brief) rise and fall of sub-prime
![Page 8: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/8.jpg)
A leveraged buyout boom
![Page 9: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/9.jpg)
The long credit boom
![Page 10: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/10.jpg)
The rise of shadow banking
![Page 11: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/11.jpg)
The financial sector lent to itself
![Page 12: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/12.jpg)
… and to the rest of the economy
![Page 13: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/13.jpg)
Housing boom and bust: Spain, UK, US, Japan
![Page 14: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/14.jpg)
House of cards topples
US house prices start to fall sharply, first big national fall since the depression.
Subprime loans and securities start to look unsafe – not AAA but junk.
Banks realise they are heading for huge losses and, importantly, so are other banks.
![Page 15: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/15.jpg)
The biggest financial storm in a century
![Page 16: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/16.jpg)
Extreme financial volatility (VIX)
![Page 17: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/17.jpg)
Time heals – a long time since 2008
![Page 18: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/18.jpg)
A dramatic response (central banks)
![Page 19: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/19.jpg)
But the worst post-1945 world recession
![Page 20: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/20.jpg)
The 1970s, 80s and 90s in context
![Page 21: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/21.jpg)
A world trade collapse
![Page 22: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/22.jpg)
And a rise in unemployment
![Page 23: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/23.jpg)
Shrinking banking capacity
![Page 24: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/24.jpg)
And very painful fiscal hangovers
![Page 25: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/25.jpg)
… which will endure
![Page 26: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/26.jpg)
Plenty of global green shoots
![Page 27: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/27.jpg)
Global PMIs have recovered well
![Page 28: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/28.jpg)
As world trade bounces back
![Page 29: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/29.jpg)
Led by Asia
![Page 30: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/30.jpg)
… globalisation threat averted
![Page 31: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/31.jpg)
A more open world
![Page 32: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/32.jpg)
A V-shaped recovery from the IMF
![Page 33: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/33.jpg)
A fast-changing world
![Page 34: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/34.jpg)
China and India were mighty before
![Page 35: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/35.jpg)
Start of the great divergence
![Page 36: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/36.jpg)
No double-dip with emerging economies strong
![Page 37: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/37.jpg)
Not just an Asian story
![Page 38: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/38.jpg)
But a recovery led by Asia
![Page 39: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/39.jpg)
Barely a missed beat in China
![Page 40: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/40.jpg)
Back to the future
![Page 41: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/41.jpg)
But how quickly will it happen?
![Page 42: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/42.jpg)
Where the growth will come from
![Page 43: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/43.jpg)
Closing the per capita gap
![Page 44: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/44.jpg)
China imports as well as exports
![Page 45: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/45.jpg)
But global imbalances remain
![Page 46: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/46.jpg)
A rising Asian middle class
![Page 47: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/47.jpg)
Large reserve holdings
![Page 48: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/48.jpg)
Closing the innovation gap?
![Page 49: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/49.jpg)
Accelerating the global shift
2007: China was expected to overtake Japan’s GDP in 2015, America in the mid-2030s.
2010: China has already overtaken Japan; will overtake America in the 2020s.
Global crisis and its aftermath has accelerated the shift by 5-10 years.
China, India and America will be the world’s big three: only one is flagging.
![Page 50: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/50.jpg)
What could go wrong (short-term)? Credit Crunch II – refinancing and
deleveraging by the banks. Sovereign debt – the euro zone and beyond. Currency wars – China versus America as the
new heavyweight bout but also others. Protectionism – either provoked by or in
addition to currency manipulation. Fiscal consolidation and the economic and
political reaction to it. The unknown unknowns.
![Page 51: David Smith](https://reader035.vdocuments.us/reader035/viewer/2022062409/56814645550346895db350e6/html5/thumbnails/51.jpg)
What could go wrong (long-term?)Politics – a backlash against capitalism;
pressures for greater democracy; inequality.
Growth momentum fades dramatically as the easy catch-up phase comes to an end.
Globalisation goes into reverse, led by the actions of the advanced economies.
Resource constraints.