Transcript Security Scenarios And The Global Economy

Global Trends
and Economic Security
2014 CCMR Executive
Course in Decision Making
Naval Postgraduate School
October 21, 2014
Dr. Robert E. Looney
[email protected]
Outline
•
The Global Economic Crisis and Aftermath
• Patterns of Recovery
• The Current Situation
• What Markets are Saying in October 2014
• Implications for the Future
• Forecasts
•
• Risks, Concerns, and Scenarios
Key Risks
• Emerging Economies -- Slowdown
• Eurozone Crisis -- Stagnation
• Asian Tensions – Increased defense expenditures
• China Hard Landing – Instability in the global economy
• Backlash Against Globalization – Increasing nationalism
•
• Falling Defense Expenditures in the West – Declining world security
General Lessons
2
The Global Crisis
3
Economic Crisis and Security Threats
“The global recession is America’s primary near-term security
concern.”
Admiral Blair – Director of National Intelligence
(February 2009)
“The single biggest threat to national security is the national
debt.”
Admiral Mullen, Chairman of the Joint Chiefs of Staff
(August 2010)
“I have to confess, I paid no attention to this (economics) as a
cadet and have done nothing to increase my awareness of
economics issues between age 22 and 59. I should have
paid attention.”
General Dempsey, Chairman of the Joint Chiefs of Staff
(October 2011)
4
Global Economy Overview I
• Before the 2008-09 crisis, the main feature of the global
economy was its rapid integration – has continued at a
slower pace since the crisis
• Trade relative to GDP, capital flows relative to the global capital
stock and so on are all rising
• However, economic policies largely set at the national
level to benefit domestic economy
• These policies are increasingly affecting other economies
• External effects are particularly important in the financial
sector due to potential for large and abrupt changes in:
• Capital flows
• Asset prices
• Interest rates, exchange rates, and
• Credit availability.
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Global Economy Overview II
• The 2008-09 global economic crisis and its aftermath
illustrate this new reality
• Characterized by defective growth models in advanced
economies based on
• Excess monetary expansion/credit and
• Debt-driven domestic aggregate demand
• Complicated by structural flaws and limited adjustment
mechanisms in Europe leading to
• Instability
• An on-going crisis
• Large negative shock to the real economy
• Emerging economies were subsequently affected by
• Credit tightening (including trade finance)
• Rapid declines in exports
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Global Economy Overview III
• Post-crisis policy largely based on credit expansion and
debt reduction
• Unconventional monetary policy – United States
• Lowered cost of credit for debtors and those seeking to borrow
for business expansion
• Came at the at expense of savers – lower interest rates
• Did not work well because investment constrained by deficient
domestic demand relative to capacity
• Savers sought higher returns in emerging economies
• Causing increases in credit and causing upward pressure
on exchange rates and asset prices – Emerging
economies responded with
• Limits on capital inflows
• Reserve accumulation and
• Measures to restrict credit and restrain asset-price inflation
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Global Economy Overview IV
• Situation changed in May 2013 when U.S. Federal reserve
indicated it might taper its purchase of long-term assets
• Asset prices shifted and in emerging economies
• Capital rushed out,
• Caused credit markets to tighten and
• Exchange rates to fall
• Causing a slowdown in short-term growth.
• The reversals may have longer term adverse effects – although
not clear at this point
• While China’s output is affected by advanced country
economic performance – financial system largely isolated
• Capital account less open, foreign currency reserves of $2.5
trillion mean exchange rate is controllable
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Global Economy Overview V
• Decentralized policy and growing externalities will result
in a partial de-globalization
• Not a good idea to run persistent current account deficits and
become dependent on (temporarily) low-cost foreign capital
• Open capital accounts may be replaced by rules-based
constraints on financial capital flows
• Lesson from crisis
• Pattern of accumulating reserves via current account surplus will
be more pronounced in order to manage exchange rates
• Public purchases of domestic assets to stabilize asset prices net
capital flows will become increasingly common.
• Successful countries will be those who learn to live with
growing policy interdependency without much policy
coordination
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Crisis Has Accelerated Changes in World GDP
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Decline of the G-8
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Patterns of Future Pubic Debt
12
Debt Vulnerability
13
Industrial Recovery
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Current Global Situation I
• Six years after the 2008-09 crisis, economic performance
still disappoints, failing to regain pre-crisis vitality
• Emerging economies far from the dynamic miracles they once
seemed
• Rich countries still grappling with problems exposed by the crisis
• Return to days of buoyant growth seems far away
• Level of dissatisfaction summed up at September 2014 G20 meeting – their summary statement:
• “Growth in the global economy is uneven and remains below the
pace required to adequately generate much needed jobs.”
• Worse -- they saw new threats in financial markets and
deteriorating geopolitics
• Little unity among the member countries who account for
85% of world output
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Current Global Situation II
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Current Global Situation III
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Current Global Situation IV
• Although the global picture is disappointing there are
signs of optimism along with underperformance:
• The growth surge in the in the UK along side economic
weakness in France
• Recent optimism in India together with the disappointing
performance of Russia and Brazil exposing their weaknesses.
• Across the world recovery can not be easily
characterized as V-shaped or L-shaped
• Instead OECD feels there is a “growing degree of divergence
between the major economies”
• U.S. economy appears to be expanding at a moderate pace with
unemployment falling
• U.K and Canada are also growing above their normal rates of
expansion
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Current Global Situation V
• Most of the current concern is with the Eurozone.
• With inflation falling close to zero, demand in the region
• Appears insufficient to bring down an 11.5% unemployment rate
• May not prevent bloc from sliding into deflation
• The loss in economic momentum may
• Dampen private investment and
• Heightened geopolitical risks – populist governments that have a
further negative impact on business and consumer confidence.
• In Japan early optimism over Abenomics – economic
policies of the prime-minister is now
• Tempered with the fear that rising taxes are a major drag on
growth
• Facing the need for major, but politically unpopular structural
reforms – resulting in questions over whether Japan would
continue on its path
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Current Global Situation VI
• In today’s global economy
• No longer the advanced world that is most important for global
trends
• Fully 30 percent of global growth in 2014 will occur in China –
about twice the share of the U.S.
• Clearly the success of China’s economy is now vital for
the rest of the world. However there are problems.
• For the medium-term, there is not much evidence that the
Chinese economy has made much progress in its critical
rebalancing efforts
• In the short-term, are fears of a housing crash and bank failures
• Housing prices have dropped 9.3% over the last year with
• Sales registering the deepest contraction since 2008
• Moody’s estimates that a 10% fall in both property transactions and
prices would reduce growth by 1.5% to 2% bringing it to 5 or 6%
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Current Global Situation VII
• At October 2014 Conference, even the IMF showing
increased pessimism
• The IMF feels there are many emerging concerns:
• Geopolitical tensions from the Middle East and Russia could
• “trigger large spillovers of activity in other parts of the world
through a renewed bout of increased risk aversion in global
financial markets.”
• The Fund has just downgraded many of their forecasts
• Big question is why countries are struggling to sustain
decent rates of growth
• Much has to do with remaining hangover from the
financial crisis.
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Current Global Situation VIII
• Factors continuing to limit the return to growth and job
creation
•
•
•
•
• High levels of public and private debt act as constraints on
• Government fiscal policy and
• Consumer spending
• Work to suppress aggregate demand below levels needed for
steady growth
Increased income inequality also tends to reduce consumer
spending
Policy uncertainty in many countries has resulted in falling
investment rates
Slowing world economy makes export-led growth more
difficult
Situation made worse by signs that productivity growth is
slowing, limiting the potential for sustainable growth revival
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Current Global Situation IX
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Current Global Situation IX
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Current Global Situation IX
• In the emerging economies
• Growth has slowed from 7% per year before the crisis
• To a forecast of 5% between 2014 and 2018
• Moreover the decline is not just due to the slowdown in
China and India
• Growth rates are now lower than pre-crisis average in 70%
of emerging economies.
• The slowdown in emerging economies is due to:
• The prolonged weakness of high income economies,
• Failure to sustain economic reforms and
• The exhaustion of policy induced post-crisis boosts to
domestic demand.
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Current Global Situation X
• Policy makers are in a bind in many countries
• In the Eurozone and Japan they are still trying to find ways to
stimulate demand
• In the U.S. and U.K interest rates are about to increase, but
there is widespread concern that any movement back to normal
might trigger financial turmoil
• However leaving monetary policy loose will encourage excessive
borrowing which may create bubbles and another financial crash
• In emerging markets the need is to push forward on structural
reforms to labor and product markets as well as education and
social security to enable more secure and rapid growth
• Not easy and mistakes are certain to happen.
• The economic environment in many parts of the world is
thus quite fragile with forecasts increasingly pessimistic.
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October 2014 Markets Sending Bad Signals: I
Worrying signals from the markets – October 2014
• When economic outlook becomes gloomy, investors buy
government bonds of nations viewed as secure
• When the economic outlook appears to worsen, investors
assume central banks will keep interest rates low
• Follows that government bond yields of advanced
countries works as a convenient proxy for whether
economic expectations are becoming more or worse
pessimistic
• Inflation – can gauge how much investors in the bond
market expect prices to rise in the years ahead based on
the difference in prices between regular bonds and those
indexed to inflation
• Last few months point to a sharp drop in inflationary
expectations – powerful forces pulling prices down
around the world
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October 2014 Markets Sending Bad Signals: II
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October 2014 Markets Sending Bad Signals: III
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October 2014 Markets Sending Bad Signals: IV
• Commodity prices – declining sharply
• Crude oil down $22 barrel or 22% since June 30
• Corn futures down 31% since end of April
• Currency – value of dollar
• Primarily shaped by shifts in interest rates, economic growth and
inflation rates in various countries
• Dollar has been rising sharply against most other currencies
since summer – during a period where prices and inflation
expectations have been falling worldwide
• Dollar’s rise has been steepest against currencies in places
where the domestic economic outlook is worse,
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October 2014 Markets Sending Bad Signals: V
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October 2014 Markets Sending Bad Signals: VI
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October 2014 Markets Sending Bad Signals: VII
Adding it up:
• Markets aren’t anticipating on a catastrophe yet
• If they were stock prices would be down more
• They are betting that central banks and other policy
makers aren’t going to be able to control global
deflationary forces
• Means world economy could be in for a slow grind in
which both global growth and inflation both stay below
normal levels
• Situation much better than fall of 2008, but much worse
that it should be six years after a crisis.
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China: Signs of Economic Slowdown
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Implications for the Future
• The slowdown will mean
• Weaker growth in world trade
• Lower commodity prices and
• The possibility of unexpected losses in the financial sector
• Increasing burdens on debtors
• With growth in high income economies constrained by
inadequate domestic demand, a risk of feedback effects
exist
• The channels go from
• slowing emerging economies to
• high income economies especially the more export dependent
ones and
• back again
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IMF Forecasts: October 2014: I
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IMF Forecasts: October 2014: II
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IMF Forecasts: October 2014: III
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Risks and Concerns I
• IMF October 2014 Message
• Risks have increased:
• Uneven Fragile growth
• Risks from protracted low inflation
• Financial sector excesses
• Simmering geopolitical tensions
• Emerging markets slowing
• Surprises in monetary policy normalization
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Risks and Concerns II
Other Assessments Conclude:
• Tail Risks (probability of occurrence less than 10%)
Include:
• “Positive” outcome of bubbles is possible in 2014-15
• Hard landing in China
• Disorderly events in EZ (more likely to be a long stagnation or
deflation as in Japan post 1990)
• EM political risks amid numerous elections
• Geopolitical risks include: North Korea, China-Japan, Egypt,
Syria, Iraq and Iran (despite improved international
relations/nuclear deal).
• Longer-Run Trends Pose Policy Challenges
• Falling productivity
• Increased inequality
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Scenarios to 2018
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Assessment of Key Risks
• The current consensus forecasts and scenarios are
sensitive to a series of possible shocks/adverse
developments.
• Adverse developments in one or more areas might result
in increased instability and/or negative linkages leading
to lower growth rates:
1. Emerging Economies Slowdown
2. Eurozone Crisis -Stagnation
3. China Hard Landing
4. Backlash Against Globalization
5. Asian Tensions
6. Declining Defense Expenditures in the West
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Key Risk I: EM Slowdown I
• Range of factors will confront the emerging economies
• Weak financing, currency overvaluation or policy
missteps will likely have major negative impacts on many
• Considerable differentiation in the emerging world. For
some:
• A policy-induced slowdown after some overheating:
Many Ems tightened monetary policy in 2011
• A lack of full decoupling from hobbled DMs (EZ)
• State capitalism is now distorting economic activity and
leading to a fall in potential growth
• A fallout from the Chinese slowdown: China is negatively
affecting growth across Ems (especially in Southeast
Asia, Latin America, metals exporters
• The end of the commodities supercycle.
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Key Risk I: EM Slowdown II
• The end of QE and easy money: Will slow, in for reverse,
trillions in EM capital flows
• Increasing frequency of large current account deficits:
many financed in ever-riskier ways
• Rising political risk in many EMs: Busy electoral cycle in
2014 including Brazil, Turkey and South Africa
• Macro and financial fragilities in some EMs: A handful of
EMs have high and unsustainable debt ratios that will
require coercive debt restructurings, particularly if a
sudden stop occurs
• The risk of a middle income trap: Many running out of
easy sources of growth
• In the case of Asia, exports have failed to maintain
sustained growth as they did after previous economic
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crises.
Key Risk I: EM Slowdown III
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Asian Export Slowdown
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Key Risk II: Eurozone Crisis I
•
•
•
•
•
•
The current crisis in the Euro-zone can be easily traced back to a
fundamental flaw in the Zone’s economic model:
The model concentrated monetary policy in the European Central
Bank (ECB) while leaving fiscal policy to individual member states
– inherently unstable arrangement
It denies member states monetary policy levers with which to help
their recoveries
Also makes deficit-funded stimulus harder as monetary policy can
be used to keep borrowing costs low.
The EZ is not an optimal currency area – the common monetary
authority is likely to act in ways that help some countries but not
others.
•
The ECB has pursued tight monetary policy that may prevent inflation in highgrowth states like Germany but could also be worsening the recession in Greece,
Spain and other struggling states.
•
Rigid labor markets prevent adjustments common in the United States.
Also Europe still lacks key elements necessary for a common
currency to work – Joint European Bank Regulator and a system
for dealing with troubled financial institutions, unconstrained
independent, central bank
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Key Risk II: Eurozone Crisis II
• In Europe much of current stability is due to
• The pledge of the European Central Bank (ECB) to defend the
euro “at any cost”
• New financial instruments to defuse debt, and
• The start of a banking union
• However fiscal adjustment remains unsupportive;
unemployment is high in the core economies and
continues to increase in Southern Europe
• The ECB is under increasing pressures to move toward
US-style large-scale bond purchases – controversial
whether this will make any difference
• At the national level, many of the troubled countries have
the option of cutting spending or not cutting – both with
major downsides.
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Key Risk II: Eurozone Crisis III
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Key Risk II: Eurozone Crisis IV
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Debt 01-2015
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Key Risk II: Eurozone Crisis V
1. Cut spending – pretty sure to deepen the recession
• Probably means more unemployment (already well
over 20% in Spain)
• May push wages down to more competitive levels –
history suggests this is very hard to do.
• Even so, lower wages will just make people’s debts
even harder to repay
• Meaning they are likely to cut their own spending
even more, or stop repaying their debts
• Lower wages may not even lead to a quick rise in
exports if other European economies markets are in a
recession too
• In any case, can probably expect more strikes and
protests and more nervousness in financial markets
(causing even higher interest rates) about whether 52
you really will stay in the euro
Key Risk II: Eurozone Crisis VI
2. Don’t cut spending
• Risks a financial collapse
• Amount borrowed each year has exploded since 2008 due to
economic stagnation and high unemployment
• But if economies are chronically uncompetitive within
the euro
• Markets liable to lose confidence in you – may fear that economies
simply too weak to support increasing debt load
• Meanwhile other European governments may not have
enough money to bail you out, or are legally/politically
constrained from doing so
• European central bank has said its mandate doesn’t
allow it to provide unlimited bond purchases
• Clearly only way out of crisis is a coordinated approach
involving creditors and debtors and international
institutions such as the IMF
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Key Risk II: Eurozone Crisis VII
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Key Risk II: Eurozone Crisis VIII
• Europe: Defense Spending by Country
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Key Risk II: Eurozone Crisis IX
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Key Risk III: Asian Tensions I
• Asia – Escalating Friction
• Ukraine crisis is far from Asia, but the region is coping
with geopolitical risks of its own
• Since last fall tension increased in East and Southeast
China Sea among
• Japan, China, South Korea, Philippines, Vietnam. and Other
Southeast Asian counties
• The friction is long-standing, but it has escalated since
2009 when President Obama initiated the U.S. pivot to
Asia
• Reinforced Chinese rebalancing in the region
• S&Poors:
• While economic growth should be strong, any major incident
could cause significant damage and a substantial spillover to
sovereign creditworthiness in Asia Pacific
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Key Risks III: Asian Tensions II
• Asia: Total Defense Spending by Country
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Key Risk IV: China Hard Landing I
Overview:
• China’s economy is currently going through a painful
transition to a more consumption based economy
• The days of double digit economic growth clearly over
• In the short run, slower growth is generating concern about
the nation’s near-and medium-term prospects
• There is an up-side to the gradual slowdown over the past
several years
• Growth in the coming years will be both robust and more sustainable
• The structural reforms that are central to the 12th Five Year Plan (20112015) will become somewhat easier to achieve
• On balance it appears China’s economy is headed in the
right direction, but still worrisome in the short-run
• However, key economic and political risks – including
corruption, social inequality and lack of progress in
governance reforms – must be addressed in order to assure
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long-term economic growth.
Key Risk IV: China Hard Landing II
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Key Risk IV: China Hard Landing III
•
•
China’s economic adjustment after the 2008 crisis has been
impressive but risks may have intensified. These include:
•
Corruption and social inequality
•
The possibility of financial instability due to the proliferation of many new, poorly
supervised financial products as well as increased corporate leverage
•
Falling profit margins which have lowered business confidence
•
Though the housing market in big cities seems to have stabilized a large stock of
vacant apartments continues to weigh on prices
Widely reported over investment in basic infrastructure will by
contrast probably turn out to be less of a problem than
overinvestment in manufacturing and high end real estate
•
•
•
Most of the new infrastructure has been created ahead of needs as part of the
government’s strategy to stimulate new development opportunities.
Greatest risk facing China today is stagnant political reform,
including promotion of the rule of law
Without progress on this front, social inequality, and perceived
unfairness could jeopardize the transition to the next stage of
development and with it the country’s long term economic
prospects.
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Key Risk IV: China Hard Landing IV
• The risk of a sharp slowdown in China remains elevated
and will rise in the medium term as:
• Financial liberalization contends with
• Legacy debts from unproductive local government investments
and excess residential real estate construction
• Scenarios in two stages. Outcomes at the intermediate
stage can lead to any of the longer-term scenarios with
various probabilities
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Key Risk IV: China Hard Landing V
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Key Risk V: Backlash Against Globalization I
• In the aftermath of the 2009 global financial crisis
• Policymakers success in preventing the Great Recession from
Turning into the Great Depression II held in check demands for
protectionist and inward-looking measures
• Now the backlash against globalization – and the freer
movement of goods, services, capital, labor and technology has
arrived
• New nationalism takes different economic forms:
• Trade barriers
• Reaction against foreign direct investment
• Policies favoring domestic workers and firms,
• Anti-immigration measures,
• State capitalism, and
• Resource nationalism
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Key Risk V: Backlash Against Globalization II
• These forces are hostile to international organizations
that globalization requires:
• The European Union (EU),
• The United Nations (UN),
• The World Trade Organization (WTO), and
• International Monetary Fund (IMF)
• Even the internet at risk in more authorities countries –
China, Iran, Turkey and Russia as they seek to restrict
access to social media and crack down on free
expression.
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Key Risk V: Backlash Against Globalization III
• The main causes of these trends are clear:
• Anemic economic recovery has provided an opening for
populist parties, promoting protectionist policies, to
blame foreign trade and foreign workers for the
protracted malaise.
• Rise in income and wealth inequality in most countries
creates the perception of a winner-take-all economy that
benefits only elites has become widespread.
• Powerful groups perceived in control – in advanced
economies (where unlimited financing of elected officials
by interest groups) and emerging markets (where
oligarchs often dominate the economy and the political
system).
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Key Risk V: Backlash Against Globalization IV
• Secular stagnation for many with depressed employment
and stagnating wages.
• Resulting economic insecurity for the working and
middle classes is most acute in Europe and the Eurozone
• As in the 1930s when the Great Depression gave rise to
authoritarian governments in Italy, Germany and Spain, a
similar trend may now be underway
• If income and job growth do not pick up soon, populist
parties may come closer to power at the national level in
Europe, with anti-EU sentiments stalling the process of
European economic and political integration.
• Worse the Eurozone may again be at risk: some countries
(the UK) may exit; others (the U.K., Spain and Belgium
eventually may break up.
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Key Risk V: Backlash Against Globalization V
•
•
In the U.S. economic insecurity across a vast share of the
population has resulted in feelings of threat from immigration and
global trade.
• These groups are characterized by economic nativism, antiimmigration, protectionist leanings and geopolitical isolation.
Variant of this dynamic can be seen in Russia, many parts of
Eastern Europe and Central Asia where the fall of the Berlin Wall
did not usher in
• Democracy
• Economic liberalization and
•
• Rapid output growth
Instead, nationalist and authoritarian regimes have been in power
for most of the past quarter century
• Pursuing state-capitalist growth models that ensure only mediocre
economic performance.
• Putin’s dream of a Eurasian Union – destabilization of the Ukraine
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to recreate the former Soviet Union.
Key Risk V: Backlash Against Globalization VI
• In Asia, too nationalism is resurgent
• New leaders in China, Japan, South Korea and now India are
political nationalists in regions where territorial disputes remain
serious and long-held grievances fester
• These leaders as well as those in Thailand, and Malaysia
who are moving in a similar nationalist direction and
must:
• address major structural-reform challenges if they are to revive
failing economic growth and
• In the case of emerging markets, avoid a middle income trap.
• Economic failure could fuel further nationalist,
xenophobic tendencies – and even trigger military
conflict
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Key Risk V: Backlash Against Globalization VII
• The Middle East remains a region mired in backwardness.
• The Arab Spring – triggered by slow growth, high youth
unemployment and widespread economic desperation
has given way to a long winter in Egypt and Libya where
alternatives are a return to authoritarian strongmen and
political chaos.
• In Syria and Yemen there is civil war.
• Lebanon and Iraq – ongoing instability
• Iran is both unstable and dangerous to others, and
• In all these cases economic failure and a lack of
opportunities and hope for the poor and young are
fueling political extremism, resentment of the west and in
some cases outright terrorism
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Key Risk V: Backlash Against Globalization VIII
• In the 1930s the failure to prevent the Great Depression
empowered authoritarian regimes in Europe and Asia
eventually leading to the Second World War.
• This time, the damage caused by the Great Recession is
subjecting most advanced economies to secular
stagnation and creating major structural growth
challenges for emerging markets
• Ideal terrain for economic and political nationalism to
take root and flourish
• Today’s backlash against trade and globalization should
be viewed in the context of what as we know from
experience could come next.
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Key Risk VI: Falling Defense Expenditures I
• Military expenditures are only one gauge of military
power.
• A given financial commitment may be adequate or
inadequate depending on:
• The number and capability of a nation’s adversaries
• How well a country invests its funds and
• What it seeks to accomplish
• Nevertheless trends in military spending do reveal
something about a country’s capacity for meeting threats
• Policymakers are currently debating the appropriate level
of US military spending given:
• increasingly constrained budgets
• the winding down of involvement in Afghanistan and
• the potential threats posed by Russia and China
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Key Risk VI: Falling Defense Expenditures II
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Key Risk VI: Falling Defense Expenditures III
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Key Risk VI: Falling Defense Expenditures IV
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Key Risk VI: Falling Defense Expenditures V
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Key Risk VI: Falling Defense Expenditures VI
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Key Risk VI: Falling Defense Expenditures VII
• Although there are a few exceptions there is a stinking
contrast between rising defense expenditures in still
growing economies and austerity-induced cutbacks
elsewhere
• Robust growth in emerging world means that these
countries can increasingly afford to procure cutting edge
defense technologies
• Increased military spending is a zero sum game and will
inevitably generate arms races
• Certain countries – China, India, and Russia take the view
that their economic growth should be matched by
equally impressive developments in their military
capabilities.
• U.S. and European allies risk falling behind on defense
expenditures unless they can revive growth and better
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control social expenditures.
General Lessons
• Nobody Really Understands the World Economy – economic
outcomes hard to predict because world economy is
continually in flux – “unknown unknowns” will always be
with us.
• That Goes Double for Financial Markets – financial markets
even more volatile than real economy – Starting with the
Dutch Tulip Bubble have had 350 years of financial crashes
and panics – unlikely to stop anytime soon – each one that
comes will take most people by surprise.
• The Battle of Financial Markets is Over: The Battle of State
Finance Has Begun – Speculators will test sovereign debt
markets. Clear that governments can no longer do
whatever it takes to fix economic problems. New, large and
unpredictable risks now hang over the global economy.
• The US and its allies will face a long period of slow growth
with contracting defense budets. This will require increased
cooperation, coordination, and flexibility in adapting to a
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fundamentally altered budgetary environment
The End
• Questions?
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