Conference Presentation, Panel
Leading Economists Debate Where the World Is Headed
- The U.S. economic expansion initiated in mid-2009 is projected to persist as a historically long but weak and sluggish recovery for another two to three years, characterized by persistent underemployment and stagnant growth driven by post-crisis adjustments, global competition, political paralysis, and income redistribution from labor to capital.
- A prolonged deleveraging process in both private and public sectors is expected to reduce consumption growth and create excess capacity, while income inequality trends may force firms to hold trillions in cash rather than engage in capital expenditure.
- Monetary policy is anticipated to remain very easy with the Federal Reserve likely concluding asset purchases before the end of the current year and slowly shifting toward rule-like policies from the 1980s and 1990s, though this creates a "knife edge" risk between killing the recovery and fueling bubbles.
- Future financial stability in the U.S. is predicted to face cycles of bubbles and crashes over the next 25 years if reliance on excessive private sector indebtedness continues, with a massive bubble in real estate, credit, and equity markets expected to form over the next two years due to easy money.
- Technological innovation in energy, biotech, IT, and robotics is expected to accelerate rapidly, refuting claims of slow progress, while simultaneously causing major employment disruptions in healthcare, education, and finance through automation that may replace white-collar jobs.
- Over a 20 to 30-year horizon, technological advances are expected to potentially benefit the broader population through full employment, higher incomes, and shorter work weeks, potentially funded by more progressive taxation on wealth, income, and capital.
- Inflation in the Eurozone is expected to fall from 2.7% in 2011 to 0.5%, risking "Japanification" and moving the region one or two shocks away from outright deflation due to low potential growth, prompting a quantitative easing implementation by June by the ECB to weaken the euro.
- The Eurozone faces a downside scenario where a hot war between Russia and the West could trigger a recession via gas supply price shocks, while the U.K. economy is expected to outperform both the Eurozone and the U.S. despite fiscal challenges.
- Emerging markets are expected to encounter headwinds over the next 10 years, including the end of global tailwinds and the normalization of U.S. interest rates, leading to returns and growth weaker than the previous decade with potential growth falling by 1% to 2% due to a lack of structural reforms.
- Emerging markets adopting state capitalism models are expected to struggle with implementing necessary macro adjustments due to political difficulties, while advanced economies face the challenge of funding investments in education and training for displaced workers.