Global structural imbalances if left unaddressed will lead to another crisis. (The message of this blog.)
Ian Bremmer has written a new book "Every Nation for Itself"; he was on Charlie Rose recently promoting it.
He remains more optimistic than I do about Europe, a view, which i think is disconnected from his perspective on America's economic fortunes. At about min 17, he suggests that Obama may not get re-elected because of globalization, and says "the reality is those jobs aren't coming back." Europe obviously has the same problems as the US and then some, but he seems to think the Euro zone will remain intact.
Also he suggests that the new world order that is evolving, where America's role as the only superpower wanes, will not be good for the multinationals.
Yesterday, I quoted this week's Hussman letter, where he talks about valuation models based on current earnings that are failing to take into account that these earnings are at historic highs. My own intuition is that the low hanging fruit from Chinese off shoring is gone. I have suggested several times in the past year, precisely what the title of Bremmer's book sugggests. This will not be good for corporate profits nor global growth.
Ian Bremmer of the Eurasia Gropu was a recent guest on Charlie Rose. He has a view in sharp contrast to mine.
"Eurozone breakup -- probably the single most overrated risk of 2012, The political will to maintain the eurozone remains strong among all the major political parties in the core eurozone states, almost across the board in the European periphery and, just as importantly, among eurocrats in the ever-growing European bureaucracy. Further, there is no effective political mechanism for a
Once again, political will does not generate long term economic growth or employment unless it results in structural changes. Where are they? The core problem in the Euro zone (and the US) is structural unemployment and the inability of these economies to replace lost middle class jobs for their low(er) skilled workers
Also, they think no hard landing for China this year. I agree, but I believe the hard (or not soft) landing (growth 3% or lower for half a decade or more) is coming in the back half of 2013. China adjustments are lagging adjustments in Europe, the US and Japan. Once global trade imbalances start to get adjusted then we will see the flow through impact of investment and exports being hit in China. My view on China and the BRICS is similar to Pettis.
I believe he/it is a respected group, so for the benefit of my readers, I present the link as a counterbalance. I watched his CR interview and was not persuaded by anything he said to change my opinions. Admittedly, my principal analytical weaknness is that I am often too early on issues, sometimes way too early (as measured in years).
Finally, Ian gave Charlie a version of the "We have nothing to fear but fear itself speech". That left me "alone in the house, late at night, after watching the 'Excorsist/Silence of the Lambs' double feature" type of afraid.