The outlook for 2013 and beyond – Philip Coggan at the LBS Investing Strategy event


Published on

Philip Coggan is the Buttonwood columnist of The Economist. Previously he founded the "Short View" column and wrote the "Long View" and "Last Word" columns at the Financial Times. In the presentation he explores current issues with the eurozone.
The “Investment Strategy 2013: Peering into the Crystal Ball” event was organised by The Pensions Management Institute and London Business School’s Alumni Club. It took place on 8 October 2012.

Published in: Economy & Finance
  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

The outlook for 2013 and beyond – Philip Coggan at the LBS Investing Strategy event

  1. 1. The outlook for 2013 and beyondPhilip Coggan, Buttonwood columnist
  2. 2. Europe: four problemsToo much debtToo much owed to foreignersToo big a deficitToo uncompetitive
  3. 3. Too much debt
  4. 4. Too big deficits
  5. 5. Too much owed to foreigners
  6. 6. Not competitive, part 1
  7. 7. Not competitive part 2
  8. 8. Adding the totalsCombined ranking (low is bad, high is good)Greece 10Italy 21Portugal 21Ireland 23Spain 24France 26Germany 46
  9. 9. The long-term cycleMoney has two main functionsMedium of exchangeStore of valueDebtors emphasise the former, creditors the latterIf creditors “fix” the value of money, via gold standard or exchange rate, debtors are overwhelmed
  10. 10. Expunging debtDebt can be written off, inflated away or devalued awaySOMEONE MUST LOSEProblem with euro crisis is that they have been slow to recognise thisDebt passed round system, like Queen of spades in Old MaidGermans must choose their poison
  11. 11. Here is the bill, Angela
  12. 12. Extend and pretendCosts of exit are so large that forbearance will keep being triedNew ECB programme; Britannia rules the waves and the ECB waives the rulesMoney won’t be paid back but debt will be endlessly extendedNot great for eurozone economy but not catastrophic either
  13. 13. Long-termToo much debtUS might grow its way out of itBut Europe has demographic problemNumber of workers per pensionerBritain: 1970 4.3, 2010 3.6, 2050 2.4Germany: 1970 4.1, 2010 3, 2050 1.6Spain; 1970 5.6, 2010 3.7, 2050 1.5Japan: 1970 8.6, 2010 2.6, 2050 1.2
  14. 14. So we must retire later70 or bustPeople in DC schemes already retire one year later than DBBut two problems; DC not saving enoughPublic sector in DBBattle between rich and poor, old and young, taxpayers and public sector workers, one country and another
  15. 15. Final thoughtAll pensions are claims on future workers; can’t get round itCatch two-and-twenty; May be some niche sources of excess return but everyone can’t get themBasic return – economic growth and risk-free rate. No inherent source of return in, say, volatility