PPT (1.16.2012): Turning Japanese - the Eurozone & the World

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Peter Tasker on the Eurozone crisis.

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PPT (1.16.2012): Turning Japanese - the Eurozone & the World

  1. 1. Turning Japanese – the Eurozone & the World Peter Tasker – 16 th January 2012
  2. 2. Japan Syndrome <ul><li>Bubble burst - size counts </li></ul><ul><li>De-leveraging - (Koo – “balance sheet recession”) </li></ul><ul><li>Government MUST go into deficit </li></ul><ul><li>Yet government bond yields fall to “absurd” level </li></ul><ul><li>Presaging very low growth in nominal GDP </li></ul><ul><li>Policy appears to have no traction </li></ul><ul><li>Deteroriating credit quality / banking crisis </li></ul><ul><li>Expectations self-reinforcing – negative bubble </li></ul><ul><li>Everyone gets older </li></ul>
  3. 3. Japanese 10 year Bond Yield
  4. 4. Japan Nominal GDP
  5. 5. Similarities & differences <ul><li>Bubble – scale and timing, inclusiveness </li></ul><ul><li>Precedent - learn from hanmen kyoshi </li></ul><ul><li>Policy response – speed, efficacy, focus </li></ul><ul><li>One country, many countries, every country </li></ul><ul><li>Commodity prices - high or low </li></ul><ul><li>Bank capital – sound or not </li></ul><ul><li>Policy orientation – growth or austerity </li></ul><ul><li>Social cohesion - immigration, blame game </li></ul>
  6. 6. US Bond Yield
  7. 7. Global Bond Yields
  8. 8. Risk & Uncertainty <ul><li>Keynes, Friedman, Austrians? </li></ul><ul><li>Policy effectiveness – limited or not? </li></ul><ul><li>Super-cycle – real or not? </li></ul><ul><li>Bond yields say what? Is deflation “good”? </li></ul><ul><li>Imbalances – international, eurozone </li></ul><ul><li>Euro – a deliberately disastrous idea </li></ul><ul><li>Politics – back to nationalism? </li></ul><ul><li>Half world in double digit inflation </li></ul>
  9. 9. Summary <ul><li>Real risk of crisis of growth, jobs </li></ul><ul><li>Eurozone most vulnerable </li></ul><ul><li>Centrality of banks, lack of capital - Dexia </li></ul><ul><li>Expectations, policy settings </li></ul><ul><li>Many countries far less social capital than Japan </li></ul><ul><li>Checklist – bond yields, stock markets </li></ul>

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