I'm very pleased and happy with my life as an economists but, you know, we can be dangerous people.
Three things:
First of all, by definition, predicting those kind of things is extremely
difficult, and as a number of economists have famously highlighted Paul Samuelson's observation that, you know,
economists have predicted eight of the last four recessions or something like that is true.
Secondly, however, all the high frequency cyclical indicators that I
helped develop as part of Goldman Sachs' proprietary global leading
indicators are ones I still follow every month.
And for many months, most of them have been slowing down so that the world
economy is definitely slowing down.
Some of it a little bit worryingly so.
I don't think they are suggestive of some kind of recession, but they are,
they certainly suggest that if there's now some big global shock that the
risk of a significant slowdown, stroke, recession is higher than it's been for some time.
So policymakers need to be careful.
And I have to say in that regard, I'm the camp plays pleased that the Fed
made this rapid shift away from its strong, clear timing binds towards
neutral. I think that's very sensible.
It looks to me to the major in the world,
we've gone from having central bank leaders that
were sort of very academic economists led
to much more pragmatic leaders, including the Fed certainly and the
ECB with Mario Draghi and definitely the Bank of England with Mark Carney.
And I think that's a good development. If for
some reason inflation did now start to pick up sharply, just as we're all
beginning to think it's never going to even with strong levels of
employment, that would be a real problem because then central bankers
would probably have to consider tightening despite slowing, slowing growth.
And that would make a recession a lot more likely.
If something went really, really badly wrong in China that would be as bad
as it could get on simple back of the envelope calculation I've made.
About half of all the nominal GDP that the world has had since 2010, has come from China.
Who knows?
You know, I think economics is a social science.
However, because there doesn't appear to be any real signs of inflation picking up significantly.
There are things that policymakers can do, including in some, but not in the U.S.,
but in some places that we're seeing in China be more aggressive on fiscal policy.
Germany seems to be thinking about it. So I think the risk of it in the next six months or so is not high.
The most important thing for the world now is the rise of the Chinese consumer, which the U.S.
is likely to really benefit from. Not to suffer from because it means great
opportunities for branded American companies as we see with the likes of Apple.
But I can I think the some of the issues that the Trump
appearance, and the spread of this kind of mood and in so many parts of Europe, you know, they're warranted
because if the only real winners of globalization are
the CEOs of Western companies and the, you know, the shareholders.
Then what is the point of all of this?
And so I think some of it is warranted, but I don't see it in a sense of, well, that
means we have to stop these countries, you know, taking themselves out of poverty and becoming wealthy.
Oh, I know I do, I do worry that there are some Western policy makers that actually
do think it's a pure zero sum game. But, you know, we shouldn't have to be.
And I hope this becomes more of the focus going forward. I do believe personally that
globalization and international trade, are if domestic policies are pursued sensibly, a genuine thing
that lifts all boats all over the world. And most importantly, and
this gets lost so easily, we because of primarily China and India,
but also parts of Latin America, we are living through an era of the biggest decline in global
inequality. There's greater inequality within countries. But that's because of bad policy in those countries.
By far and away the single
most important thing in the world economy. full stop is the rise of the Chinese consumer.
The slowdown recently in the Chinese consumer is of some concern, in my view, because if that is the
beginning of reversing what's been a slowly rising trend this decade, that would be of considerable concern.
And you can see evidence of it already. Germany has been so successful at exporting
things to Chinese consumers, has slowed down sharply the past six months.
And I think the biggest reason is because of the slowing in China.
So the single biggest issue for the world economy and
certainly for many international companies and with it markets is that,
is that is what's going on with the Chinese consumer.
And I think secondly, more broadly, ultimately over the next decades, two,
I'd also suggest the same about the consumer in some other big populated emerging
places like India and possibly some of the big places in Africa, particularly ultimately Nigeria.
But does does further down the road, particularly for China. I find it laughable that
people still talk about emerging markets in the financial world in such conventional ways.
I mean, you know, China, China growing at 6.8%, sorry 6.6%, which it did last year. And if it grows by 6% this
year, sort of we'll have the... It's like, it's like the equivalent of Germany growing by, let's say, 18%.
You know, people talk about China as an emerging market, it's sort of ridiculous.