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David Smith

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.

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David Smith

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  1. David Smith The Sunday Times

  2. The Boustead Annual Globalisation Lecture The global financial crisis and the changing world economy

  3. The global economy’s shifting sands

  4. After the upheaval How did we get here and where are we going?

  5. A self-feeding cycle

  6. The global economy looked unstoppable

  7. The (brief) rise and fall of sub-prime

  8. A leveraged buyout boom

  9. The long credit boom

  10. The rise of shadow banking

  11. The financial sector lent to itself

  12. … and to the rest of the economy

  13. Housing boom and bust: Spain, UK, US, Japan

  14. 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.

  15. The biggest financial storm in a century

  16. Extreme financial volatility (VIX)

  17. Time heals – a long time since 2008

  18. A dramatic response (central banks)

  19. But the worst post-1945 world recession

  20. The 1970s, 80s and 90s in context

  21. A world trade collapse

  22. And a rise in unemployment

  23. Shrinking banking capacity

  24. And very painful fiscal hangovers

  25. … which will endure

  26. Plenty of global green shoots

  27. Global PMIs have recovered well

  28. As world trade bounces back

  29. Led by Asia

  30. … globalisation threat averted

  31. A more open world

  32. A V-shaped recovery from the IMF

  33. A fast-changing world

  34. China and India were mighty before

  35. Start of the great divergence

  36. No double-dip with emerging economies strong

  37. Not just an Asian story

  38. But a recovery led by Asia

  39. Barely a missed beat in China

  40. Back to the future

  41. But how quickly will it happen?

  42. Where the growth will come from

  43. Closing the per capita gap

  44. China imports as well as exports

  45. But global imbalances remain

  46. A rising Asian middle class

  47. Large reserve holdings

  48. Closing the innovation gap?

  49. 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.

  50. 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.

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