What goes around.......

It never rains but it pours - following the packed houses for Oliver Stone's talk earlier in the week, the FCCT last night hosted The LUV perspective: Global recovery or renewed recession? featuring expert panellists, John Sheehan of Global Markets Asia, Jeremy Charlesworth, Europe's #1 performing Commodity/Hedge Fund manager 2009 and Dr. Kobsak Pootrakkol of The Bank of Thailand.
 

A number of dominant themes began to emerge:
 

Jeremy is extremely fearful about economic prospects in the year ahead and sees the 2nd half of 2010 as being a critical juncture that determines whether we can experience a relatively benign period of sustained, albeit very low, growth or whether economic cataclysm returns to haunt the markets.

Dr. Kobsak believes that the challenges facing Asia are very different to those facing the west and that if Chinese data is reliable and if it continues, supported by India, to power the Asian growth story then decoupling of Asian economies from western economies is inevitable - although Dr. Kobsak stressed that he doesn't see it in such regional polarisations but more as a matter of indebted economies struggling under the weight of their impaired balance sheets while nations with healthy balance sheets prosper.

John sees American hamstrung by its indebtedness, future debt servicing costs, imminent capital needs and powerlessness to devalue its currency on its own account now that so much of the impetus for USD exchange rate policy has passed to Chinese monetary authorities.

All the panellists agreed that the failure of America and the western world to address problems both prior to, during and subsequent to the financial crises of 2008 has left the indebted nations such as UK, USA, Australia and some of the Eurozone economies in far worse shape today than they were a year ago. All 3 recognised that letting insolvent banks fail would have been painful in the short term but would have done a great deal to ultimately fix the damaged banking system which is the main reason why all the panellists fear a western repetition of the lost decades that have destroyed Japan since 1989. It was also noted that the kind of unpleasant medicine prescribed by the IMF in 1997 to Asian nations which did so much to enable the end of the Asian currency crises and economic problems has been refused by western nations this time around.

I reminded the panellists of IMF's Michel Camdessus standing menacingly over President Suharto while the humiliated, aging leader reluctantly but desperately signed the IMF's loan terms agreement and wondered whether we might see Chinese Central bank governor Zhou Xiaochuan similarly humiliate western leaders desperately dependent on Asian funding of sovereign debts.