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"Recession". There is no alternative

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Uploaded on Oct 6, 2008

Monday 6 October 2008 - "Recession". There is no alternative

Presented by Paul Donovan


+ In the wake of ongoing financial turmoil and (so far) an ineffective policy response, UBS economists worldwide have revised down their outlook for 2009. We now see global growth at 2.2% yoy (previously 2.8%). The IMF brands 2.5% yoy a "recession".


+ The US is seen growing at 0.3%, Japan at 0.7%, the Euro area at 0.3% and the UK at -0.3%. Negative growth is very rare, and it takes a special effort to achieve it. The Fed, BoE and ECB are seen cutting rates significantly. The BoJ remains on hold (as there is less deleveraging in Japan).


+ Asia does not decouple. Weak exports will hit domestic demand as exporters cut back. Fiscal policy can offset but not change the direction (down). The idea that consumers in one of the poorest economies on the planet (China) can substitute for one of the richest (the US) is, of course, absurd.


+ Europe's summit of European leaders produced a half hearted desire for global cooperation. This was then immediately ignored by Germany who unilaterally guaranteed all bank deposits. The UK seems to be considering a Nordic style bank bail out. The approach is clearly fragmented.

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