Jim O'Neill "Anyhow, dear grizzlies....bet your [sic] worried about today’s rally? See u later." Not sure this type of smugness by god's firm should be surprising, or even deserve to be pointed out, but we just wanted to store this for posterity, as we are confident we will return to this quote on many occasions in the future.
Full comment from the Joseph Cohen's transatlatnic twin.
Anyhow, I am off to sunny northern ( well at least, light) Sweden this pm for a client offsite, and back early next week. Some other thoughts;
1. China-US meetings. It certainly seems a much better tone exists between senior US policymakers and their counterparts in Beijing than earlier in the year. It is especially pleasing to see US policymakers stating that they recognize the signs of a rise in the contribution of Chinese consumption, and that global imbalances are easing. About time it was acknowledged.
2. The world 2010-19. As I mentioned last weekend, and in the piece I wrote in the Global Economics Weekly of 19th May, the China/US economic outlook is simply way more important than all this European stuff. So long as there is no major tightening of US financial conditions as a result of the European turmoil, from a global perspective, if Europe wallows in its own mess, then ……..I took another look at the chart Swarnali Ahmed created for me. We expect China to increase by $ 7 trillion this decade, nearly 2 x its current size, 2 times the change in the US, and equivalent to the change in the US and the other 3 BRICS put together. Not a single Euro area country will be in the top ten contributors.
3. The Euro area mess. It still seems to me there is so much emotional, subjective nonsense flying around. Irrelevant of the considerable challenges within many individual countries, in aggregate, the Euro Area is in modest, current account surplus, and its Broad Basic balance is in surplus too. And, even before the fiscal tightening announced in various Club Med countries in the past couple of weeks, the aggregate fiscal position appears better than the US.
4. Euro area issues. Despite the above, there is clearly a number of major challenges. And now the centre of attention is, now, rightly, Spain. Stopping Greek style financial market turmoil through Spain, and Spain dealing with its Cajas challenge is absolutely key. While calls for a US style stress test applied collectively across the Euro Area strikes me as a bit naïve, one for Spain seems a good idea. And if what our analysts think is true, the Spanish should be quite chilled about this. Javier PerezDeAzpillaga wrote a highly relevant piece on Tuesday on this topic.
5. UK issues. I had a dinner with a number of UK company CEO’s and Chairman last night, primarily retailers. I had dined with a number of them some months ago, and they acknowledged things had turned out better than they had expected back then. Despite that, virtually all of them were pretty negative about the future, worrying about VAT hikes, unemployment, how they might get home, global warming, Manchester City, you name it……….my answer was, we will stick to following the lead and coincident indicators. Couple of other issues. The UK PSBR- fiscal deficit in normal language- was revised down again in latest numbers. It is now £156bn, down from 167, which was down from 178 last December, i.e. 15pct lower than what was forecast just six months ago………amazing what a bit of growth can do for you…( no surprise there, UK –and other –deficits probably not as big as everyone worries about). UK GDP was revised up in latest quarter, continuing a pattern we have bored you about……..
6. Stop press on UK. Just as was about to move on to another topic, the latest CBI Distributive Trades survey shows a less healthy path. Guys from last night’s dinner will love that… See what Ben, Kevin and co have to say about it.
7. OECD forecasts for the world increased this week. Now they do have a tendency to move slowly, but it is quite interesting that a/they still went ahead with these upgrades, and b/ I noticed their China forecast for this year is 11.3pct now…………hurrah someone finally got to our vicinity.
8. SDR, constituents, usage and the Dollar. Mike Buchanan and I have just published a Global Paper on this important topic, exploring what currencies might be in it, as we go through the next decade ( definitely CNY, maybe RUR), and whether the case for suggesting it could and should replace the US$ is half decent or not- answer is, not really.
Anyhow, dear grizzlies…….bet your worried about today’s rally? See u later.