ICB has just published the blog’s annual New Year Outlook. The interview above summarises its key points. ICIS deputy editor Will Beacham opens the interview with the key question:
“A year ago, we were about the only people who didn’t have unbridled optimism for the whole of 2012. Why do you think there was all this unfounded optimism?”
The answer seems to be that the experience of the 25 year economic SuperCycle from 1982 – 2007, when the USA suffered only 16 months of recession, has led to the assumption that continuous growth is ‘normal’. Unfortunately, it isn’t, as we are now relearning.
In addition, as the Bank of England noted back in December 2008, even relatively small banking/financing crises take an average of 4.3 years to resolve. And they typically caused a 7% loss in GDP. Today’s crisis was clearly set to be larger in scale, even if policymakers had pursued really wise and far-sighted policies.
The blog still sees major opportunities ahead, once policymakers begin to address the real issues.
4 of today’s 5 major challenges are self-inflicted: Eurozone debt, US subprime housing, China’s bank lending and the record level of oil prices.
The 5th, the demographic challenge of the ageing of the Western BabyBoomers, could become a really wonderful opportunity if policy makers would only open their eyes to new possibilities.