SESSION TWO: The way forward - PowerPoint PPT Presentation

Session two the way forward l.jpg
Download
1 / 32

  • 172 Views
  • Updated On :
  • Presentation posted in: Home / Garden

SESSION TWO: The way forward. Lessons from Great Depression. THE ROARING TWENTIES. Lessons from Great Depression. THE ROARING TWENTIES 1 – Banks: - dynamic &lucrative - eager to make loans 2 – Consumers: - easy money and HP - household debt soared

I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.

Download Presentation

SESSION TWO: The way forward

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Session two the way forward l.jpg

SESSION TWO: The way forward


Lessons from great depression l.jpg

Lessons from Great Depression

THE ROARING TWENTIES


Lessons from great depression3 l.jpg

Lessons from Great Depression

THE ROARING TWENTIES

1 – Banks:

- dynamic &lucrative

- eager to make loans

2 – Consumers:

- easy money and HP

- household debt soared

- speculated stock market

- high level of inequality

3 – Government:

- few rules and regulations


Lessons from great depression4 l.jpg

Lessons from Great Depression

THE ROARING TWENTIES


Lessons from great depression5 l.jpg

Lessons from Great Depression

THE GREAT DEPRESSION


Lessons from great depression6 l.jpg

Lessons from Great Depression

THE AFTERMATH:

- Government REGULATION increased significantly

- BANKS tightly regulated and conservative

- BUT despite “boring banking”, living standards doubled


Lessons from great depression7 l.jpg

Lessons from Great Depression

THE AFTERMATH:

- CONSUMERS reduced debt and spending frugal

- MIDDLE CLASS emerged as inequality declined


Lessons from great depression8 l.jpg

Lessons from Great Depression

Historical excess wage in the financial sector

  • A SECOND GILDED ERA

  • 1980s political winds shift

  • Period renewed DEREGULATION

  • - BANKS dynamic and lucrative

  • - Financial sector doubles to 8% of GDP

  • - Households accumulate DEBT

  • Income INEQUALITY re-emerges


Lessons from great depression9 l.jpg

Lessons from Great Depression

A SECOND GILDED ERA

CONSENSUS: dominant FINANCIAL sector critical for prosperity


The way forward scenarios l.jpg

The way forward: scenarios

REPAY, RESTRUCTURE, REBUILD

60% - Stagnation: belated US bank rescue

30% - Gradual recovery: quick resolution US crisis

10% - Global depression: current trends continue

0% - Quick turnaround: business as usual


Green shoots or weeds l.jpg

Green shoots (or weeds?)

  • Clear signs activity stabilising:

  • impact of government stimulus plans

  • lower turning point in cycle?


Major risks to emerging recovery l.jpg

Major risks to emerging recovery

Adjustable rate mortgage reset schedule


Major risks to emerging recovery13 l.jpg

Major risks to emerging recovery

“It is a triumph of hope over reality”

- Justin Urquhart Stewart,

Seven Investment Management


Likely trends as economy recovers l.jpg

Likely trends as economy recovers?


Trend end of the retailing era l.jpg

TREND: end of the retailing era

“If I wanted to destroy a nation, I would give it too much and I would have it on its knees, miserable, greedy and sick.”

– John Steinbeck, 1966


Trend end of the wealth illusion l.jpg

TREND: end of the wealth illusion

American household net wealth tumbles

Personal savings rises as wealth plunges

There are many reasons to cut spending but the most important is the destruction of wealth


Trend the new normal l.jpg

TREND: the new “normal”

Threat to wages will fade as economy recovers, but damage to housing and other assets will probably linger

Households likely to remain conservative ito borrowing,

lending and investing


Trend return of the middle classes l.jpg

TREND: return of the middle classes

  • 1. Slump in asset prices:

  • - housing & equities

  • 2. Government policy:

  • - notably taxes

  • 3. Education:

  • - more equitable distribution

  • of income


Trend the persistence of thrift l.jpg

TREND: the persistence of thrift

JAPAN: ‘01 to ‘07 per capita consumer spending +0.2%


Trend end of consumer binge l.jpg

TREND: end of consumer binge


Trend subdued commodity prices l.jpg

TREND: subdued commodity prices

  • China to the rescue?

  • boost from government stimulus package

  • securing resources to diversify out of dollars

  • BUT unlikely rebound without US recovery


Trend subdued growth world trade l.jpg

TREND: subdued growth world trade

Volume of world trade


Trend return to protectionism l.jpg

TREND: return to protectionism

World Bank: 17 of G20 nations violating promise to avoid

protectionist measures

Thus far, 78 measures have been implemented by G20

Threatens to worsen decline in trade, worst in 80 years

Hard to resist in face of domestic pressure: “Buy America” clause


Trend rising unemployment l.jpg

TREND: rising unemployment


Trend rising social instability l.jpg

TREND: rising social instability

US Director National Intelligence, Dennis Blair, warns Congress the global economic turmoil, and the instability it could ignite, has outpaced terrorism as the “most urgent threat facing America”


Implications for south africa l.jpg

Implications for South Africa?

  • Banking sector well regulated and

  • financially sound

  • National Credit Act halted debt-fuelled

  • consumer boom

  • Healthy state finances, scope for more

  • government spending

  • Conservative monetary policy, scope to

  • cut interest rates


South africa crisis dampens exports l.jpg

South Africa: crisis dampens exports

European banking crisis: Europe at far greater risk than US

Protectionist measures in South Africa


Sa heavily dependent on consumer l.jpg

SA: heavily dependent on consumer

Consumer spending as % GDP


Sa heavily dependent on consumer29 l.jpg

SA: heavily dependent on consumer


Sa consumer spending to stagnate l.jpg

SA: consumer spending to stagnate?


Sa unemployment social instability l.jpg

SA: unemployment & social instability

ESTIMATED JOB LOSSES:

South Africa: 400 000 (2.2%)

China: 20 million (2.5%)

USA: 6 million (3.9%)


Global crisis brave new world l.jpg

Global crisis: Brave New World

The force of a correction is equal and opposite to the deception that preceded it

- Daily Reckoning Australia


  • Login