삼성경제연구소가 10일 국가부도설까지 나돌고 있는 영국이 몰고올지도 모를 '영국발 2차 세계금융위기'에 대한 경계심을 늦추지 말아야 한다고 경고했다.
삼성연은 이날자 보고서 <최근 영국경제의 부진요인과 시사점>을 통해 올 들어 로열뱅크오브스코틀랜드의 주가는 연초대비 79%, 바클레이스는 65% 폭락하는 등 영국 은행들의 주가가 연일 폭락하고, 파운드화 가치가 달러화에 비해 반년새 30%나 폭락한 점 등을 열거한 뒤, "야당과 일부 언론에서는 영국경제의 파산 가능성을 제기하고 있다"고 심각한 상황을 전했다.
보고서는 이어 "국제적 투자자인 짐 로저스는 북해유전 고갈 및 금융산업 약화로 인해 영국경제와 파운드화에 대해 비관적인 입장을 표명했다"며 "미국발1차 금융위기에 이어 영국발 2차 금융위기 가능성까지 우려되고 있다"고 전했다. 보고서는 "영국경제에 문제가 생길 경우 국제 금융시장 및 세계경제 회복에 타격이 우려된다"고 덧붙였다.
보고서는 오늘날의 영국 위기를 금융산업 위주의 잘못된 경제정책에서 찾았다.
보고서는 "노동당 집권 10년간 영국 정부는 해외자본을 자국으로 유치하기 위한 고금리 및 고환율 정책을 유지하는 등 금융산업 위주의 경제정책을 고수했다"며 "1997년 노동당 집권 이후에도 개방과 경쟁을 표방한 대처 수상의 '금융빅뱅' 법안을 일관성 있게 추진한 결과 10년 동안 금융산업이 GDP에서 차지하는 비중은 9.4%로 증가했으며, 부동산 및 비즈니스 관련 서비스가 GDP의 34%를 차지하게 됐다"고 밝혔다. 보고서는 그러나 "반면 제조업 기반은 약화돼, 고금리 및 고환율 정책으로 생산 비용 상승에 부담을 느낀 제조업체들은 영국을 빠져나가는 결과를 초래했다"고 지적했다.
미국의 뒤를 따라 금융산업 중심의 앵글로색슨 정책을 펴다가 미국발 서브프라임 사태 및 영국부동산거품 파열로 국가부도적 위기를 자초하게 됐다는 지적인 셈.
보고서는 "그 결과 다른 서유럽 국가들에 비해 낮은 실업률을 유지해왔던 영국은 금융권의 구조조정으로 인해 2008년 이후 실업률이 급격하게 상승, 2010년에는 이탈리아, 프랑스보다도 높은 10.1%에 이를 것"이라고 전망했다.
보고서는 또 "구제금융과 경기부양책으로 GDP 11.3%까지 확대될 재정적자는 향후 거시경제 건전성에 큰 부담이 될 수 있으며 향후 국가신용등급을 하락시킬 위험이 있다"며 "재정적자, 국채발행 증가 등으로 인한 국가신용등급 하락과 기준금리 인하 조치는 파운드화 약세를 지속시키며 영국발 2차 세계금융위기가 발발할 가능성이 있다"고 경고했다.
보고서는 영국 위기를 통해 우리가 배워야 할 교훈과 관련, "근본적으로 영국의 금융불안 패턴과는 차이를 보이고 있으나, 한국의 금융 불안 양상에도 일부 시사점이 존재한다"며 "가계 채무가 민간소비를 위축시키고 있는 점과 은행 재무건전성이 급격히 악화되는 양상은 일견 비슷하다"며 우리도 경계를 늦추지 말 것을 조언했다.
다음은 삼성연 보고서 요지 전문.
삼성경제연구소 ‘최근 영국경제의 부진요인과 시사점’
1. 최근 영국의 경제 상황
글로벌 금융불안의 영향으로 거시경제 지표들이 현저히 악화
거시경제 상황은 2008년 글로벌 금융불안의 직접적인 영향을 받으며 급격히 악화. 지난 몇 년간 잠재성장률에 가까운 성장을 유지해왔으나 2008년 하반기부터 금융위기의 영향을 직접적으로 받으며 마이너스 성장에 빠짐. 2008년 4/4분기의 경제성장률은 전년 동기 대비 -1.8%를 기록. 소비와 투자의 급격한 감소가 성장률 급락의 주요 원인. 물가오름세는 완화되었으나 실업률은 지속적으로 상승. 소비자물가상승률은 VAT 인하, 유가 하락, 의류가격 하락 등에 힘입어 2008년 11월 4.1%에서 12월 3.1%로 하락. 2008년 4/4분기 실업률은 1999년 이래 최고치인 6%를 상회
금융 불안의 지속은 국가부도 위기에 대한 논쟁 촉발
글로벌 금융불안과 함께 주가가 크게 하락했으며, 금융기관들의 위험 회피 성향 강화로 인해 신용경색 문제가 본격적으로 심화. 2008년 6월 이후 하락세로 전환되었던 영국의 주가지수(FTSE100)는 리먼브러더스 사태 이후 급락(2008년 연중최고치 대비 약 42% 하락). 주가지수 6479.4(2008년 1월 3일) → 3781.0(2008년 11월 21일). 2차 구제금융안이 발표되었음에도 불구하고 주가지수는 은행주를 중심으로 다시 급락세 (1월 22일 기준). 로열뱅크오브스코틀랜드(RBS)1)의 주가는 연초 대비 79% 폭락, 바클레이스(Barclays)는 65% 하락, HSBC 홀딩스는 24% 하락. 2009년 초 금융기관들의 손실 발표는 2008년 10월 이후 하락세에 있던 리보(Libor) 금리를 다시 상승시키는 등 금융불안을 초래. 3개월 만기 리보 금리는 1.24%까지 상승 (2009년 2월 4일)
영국 경제에 대한 불확실성으로 파운드화의 가치는 약세를 지속. 달러나 엔화 등 안전자산으로 회귀하는 경향이 강화되면서 2009년 1월 파운드화 대비 달러는 08년 8월에 비해 30% 하락, 유로는 19% 하락. 2월 들어 파운드화 가치의 급락 국면은 다소 진정세
국가부도 위기에 대한 논쟁까지 금융불안에 가세. 야당과 일부 언론에서는 영국경제의 파산 가능성을 제기. 국제적인 투자자인 짐 로저스(Jim Rogers)는 북해유전 고갈 및 금융산업 약화로 인해 영국경제와 파운드화에 대해 비관적인 입장을 표명. 미국發1차 금융위기에 이어 영국發2차 금융위기 가능성까지 우려. 반면 영국 정부는 물가안정, 임금억제, 낮은 정부부채, 경기부양책의 효과 등을 근거로 경제위기 극복에 자신감을 피력. 영국경제에 문제가 생길 경우 국제 금융시장 및 세계경제 회복에 타격
2. 향후 영국경제의 취약 요인
금융산업의 약화는 성장동력 상실과 실업문제를 심화
노동당 집권 10년간 영국 정부는 해외자본을 자국으로 유치하기 위한 고금리 및 고환율 정책을 유지하는 등 금융 산업 위주의 경제정책을 고수. 1997년 노동당 집권 이후에도 개방과 경쟁을 표방한 대처 수상의 '금융빅뱅' 법안을 일관성 있게 추진. 중앙은행의 독립, 세금감면, 런던의 금융중심지화. 10년 동안 금융산업이 GDP에서 차지하는 비중은 9.4%로 증가했으며, 부동산 및 비즈니스 관련 서비스가 GDP의 34%를 차지. 세계 금융 서비스업 전체 수출에서 영국의 금융서비스업 순수출이 차지하는 비중은 24.4%로 세계에서 가장 큰 규모(약 230억 파운드). 반면 제조업 기반은 약화. 고금리 및 고환율 정책으로 생산 비용 상승에 부담을 느낀 제조업체들은영국을 빠져나가는 결과를 초래
금융산업의 약화로 인한 성장 동력 상실과 실업률 상승의 문제가 다른 서유럽 국가들과 비교하여 더욱 심화될 전망. 미국發금융위기 발생 직후 영국의 주요 금융기관들이 부실을 노출.
·RBS : 공격적 경영으로 급부상했으나 부실 규모가 컸던 ABN 암로 인수와 서브프라임 투자 손실로 위기에 직면(1차 구제금융 200억 파운드 투입) ·HBOS : 영국 최대 모기지 업체였으나 부동산 시장 침체와 리먼브러더스 투자설이 알려지면서 위기 (1차 구제금융 115억 파운드 투입) ·로이즈 TSB : HBOS 합병 시도 (1차 구제금융 55억 파운드 투입)
시티(City of London), 카나리와프(Canary Wharf) 등 런던 금융의 직접적인 피해는 영국경제 전체에 타격. 런던은 영국 전체 GDP의 19%, 전체 세금수입원의 18%를 차지. 런던 금융산업 종사자는 런던 총 노동자 수의 약 33%를 차지
다른 서유럽 국가들에 비해 낮은 실업률을 유지해왔던 영국은 금융권의 구조조정으로 인해 2008년 이후 실업률이 급격하게 상승할 전망. 2010년에는 이탈리아, 프랑스보다도 높은 10.1%에 이를 것으로 예상
주택시장 침체로 인한 가계부실의 확대
실업률의 상승과 함께 높은 가계부채 비율과 주택가격의 하락세는 가계에 큰 부담으로 작용할 전망. 지난 10년간 과잉 소비의 결과로 가계저축률이 지속적으로 감소. GDP 대비 가계저축률: 15.7% (1999년) → 13.4% (2008년). 반면 가처분소득 대비 가계부채 비율은 급격히 증가. 1997년 100% 이하였던 가처분소득 대비 가계부채 비율은 지속적으로 증가하여 2007년에는 177%까지 도달. 영국의 가계부채 비율은 다른 선진국들과 비교해서도 높은 수치:미국 141%, 스페인 112%, 독일 100%, 프랑스 66%
주택가격 증가율은 마이너스로 전환되었으며, 이에 따른 이자상환 부담의가중은 가계 부실로 이어질 가능성. 모기지대출액 증가율도 07년 하반기부터 마이너스로 전환
금융권 부실로 인한 기업 생산 활동의 위축
금융기관들의 위험회피 성향이 강화됨에 따라 신용경색 국면이 지속. 일부 금융기관들은 유동성 확보에 문제를 겪고 있음에도 불구하고 정부로부터의 경영권 훼손을 우려해 정부 지원을 거절. 대신 민간대출 규모를 축소해 신용경색 국면을 더욱 악화시킴. 자금조달에 어려움을 겪고 있는 은행들에 대한 국유화 가능성을 제기. 2008년 정부 지원을 거절했던 바클레이스(Barclays)의 경우 실적 악화로 주가가 크게 하락했으며 국유화 가능성이 거론
금융권 부실과 신용경색으로 인한 기업의 생산 활동 위축도 불가피- 파산하는 기업의 수가 급증할 전망. 2007년 22,832개(전년 대비 5.9% 감소), 2008년 28,462개(10.3% 증가)에 이어 2009년에는 38,201개(15% 증가)의 기업이 파산할 것으로 예상. 총 투자도 지속적으로 감소하는 추세. 2007년 7.2% 증가했으나 2008년 마이너스(-4.3%)로 전환되었으며 2009년에는 8.9% 감소할 전망
대규모 구제금융과 경기부양책으로 인한 부작용
당국은 적극적으로 금융불안에 대응. 두 차례에 걸쳐 대규모 구제금융 투입을 발표. 1차(2008년 10월): 3대 은행의 국유화 등 은행권의 붕괴 방지가 핵심 (5천억 파운드 소요 추산). 2차(2009년 1월): 금융권의 대출 확대가 핵심 (1천억 파운드 소요 예상). 2008년 11월 과감한 경기부양책을 발표 (200억 파운드 소요 예상). 부가가치세 인하 (17.5% → 15.0%), 법인세 인상 연기, 세금납부 기간연장을 통한 세제 지원이 핵심. 1615년에 설립된 영란은행은 기준금리를 사상최저치인 1%까지 인하(2009년 2월)
그러나 구제금융 및 경기부양책 집행을 위한 대규모 재원 마련도 쉽지 않을 뿐 아니라 부작용을 초래할 위험. 향후 세금 인상을 통한 재원 마련 계획에는 한계. 2011년부터 고소득자에 대해 최고세율을 현행 40%에서 45%로 인상하고 알코올, 담배, 휘발유 등의 세금도 인상할 계획. 하지만 영국 재정연구학회(IFS)에 따르면 소득세 인상안으로는 20억파운드 밖에 조달할 수 없을 것이라고 분석. 국채가격 하락이 전망되며 이는 회사채 발행에 장애가 될 것으로 예상됨. 2009년 발행될 영국의 국채 규모는 2,305억 달러(세계 4위)로 GDP의9.9%를 차지할 것으로 예상. 대규모 국채 발행으로 국채가격이 하락하면 민간 기업들이 회사채를 발행하는 데 어려움을 겪기 때문에 경기회복에 부정적 영향을 미칠 가능성
구제금융과 경기부양책으로 발생한 재정적자는 향후 거시경제 건전성에 큰 부담이 될 수 있으며 향후 국가신용등급을 하락시킬 위험. 대규모 경기부양책에 따라 적어도 당분간은 재정적자가 불가피해 GDP대비 재정적자의 비중은 큰 폭으로 증가할 가능성. 2008년 GDP 대비 11.3%로 확대될 전망
재정적자, 국채발행 증가 등으로 인한 국가신용등급 하락과 기준금리 인하 조치는 파운드화 약세를 지속시킬 가능성. 대규모 재정적자, 국채가격 하락, 금융권 부실의 지속, 신용등급 하락 등은 파운드화의 약세를 지속시킬 수 있는 원인을 제공. 특히 유로존 보다 낮은 기준금리는 파운드화의 약세를 지속시킬 가능성
3. 전망 및 시사점
금융 시장의 불안이 향후 지속될 가능성
금융불안에서 실물경기 침체로, 실물경기 침체에서 다시 금융불안으로 이어지는 악순환의 고리를 형성- 가계의 자산 감소, 기업의 수익 악화, 은행의 자금조달 어려움, 파운드화 약세 등으로 인해 금융시장의 불안은 지속될 가능성. 그럼에도 불구하고 현재 영국이 선택할 수 있는 정책의 폭은 제한적. 은행 국유화의 확대는 오히려 신뢰를 하락시키는 역할 → 2차 구제금융안 발표 직후 대상 은행들의 주가가 급락한 사례. 재정적자 폭이 확대될 것으로 예상되는 만큼 배드뱅크 설립도 거시경제기초에는 큰 부담으로 작용
구제금융과 경기부양책으로 인한 후유증은 장기불황으로 이어질 위험. 금융불안에 대응한 양적완화조치, 배드뱅크 설립, 국유화 확대 등 재정건전성에 악영향을 줄 수 있는 요소들이 상존. 재정 건전성 악화로 인한 국가신용등급 하락과 파운드화의 약세는 영국금융시장의 불안을 가속시킬 수 있다는 점에서 예의주시할 필요
영국경제의 상황을 타산지석(他山之石)으로 삼을 필요
근본적으로 영국의 금융불안 패턴과는 차이를 보이고 있으나, 한국의 금융 불안 양상에도 일부 시사점이 존재. 여러 단계의 파생상품을 거치면서 부실이 확산되는 영국의 금융불안 양상과는 달리 금융규제가 엄격했던 한국은 불안의 정도가 상대적으로 크지 않은 편. 주택시장 불안도 영국에 비해 양호. 하지만 높은 가계 채무가 민간소비를 위축시키고 있는 점과 은행 재무건전성이 급격히 악화되는 양상은 일견 비슷
영국의 은행 국유화 사례는 국유화의 효과와 한계, 보완점에 대한시사점을 제공. 은행권에서 막힌 자금의 흐름을 신용회복을 통해 원활히 하는 것이 금융불안 문제 해결에 있어 핵심 사안인데, 영국 정부의 경우 국유화를통해 문제를 해결하려고 시도. 노던록(Northern Rock), 브랜드포드앤드빙글리(B&B), RBS, HBOS 등의 국유화에 900억 파운드 가까이 지출
영국은행 국유화의 효과와 한계. 2008년 10월 부도 직전의 3대 은행에 대해 국유화를 단행함으로써 위기를 막았다는 점은 긍정적으로 평가. 정부의 지나친 경영훼손을 우려한 은행 경영진들이 구제금융을 받기보다는오히려 대출규모를 축소시켰던 점은 금융불안을 지속시킨 주요 원인 중 하나로 평가
장기적인 측면에서 금융시장과 산업구조를 점검할 필요. 금융기관의 건전성을 지속적으로 강화하되 시장 상황에 따라 규제의 정도를 조절할 수 있는 유연성이 필요. 산업구조의 포트폴리오 구성은 지속 가능한 성장을 위한 필수 요소. 제조업 기반이 취약한 상황에서 특정 산업에 대한 지나친 의존은 외부충격에 민감해지는 악영향을 초래.
금융산업이라는 대사기극 원래 그런 산업이란 존재하지 않는다. 게임일 뿐이다. 파생상품이라는 걸 20여년 전에 처음 들었을 때 웃음이 나왔다. 리스크를 분석하고 예언을 해? 지진 나는 것 예언할 수 있으면 그것도 가능하지. 금융비빔밥을 만들면 리스크가 줄어든다는 공식은 어떤 수학자 걸레가 만든 것인고? 영국애들이 금융업에서 700만명이 먹고산다는 것은 뭔가 대단한 착각이 이 나라를 감싼 것이다. 실물에서 버는 게 없는데 금융투기로 다른 나라 자본 빨아먹으면서 산 셈인데. 월가와 시티의 붕괴는 필연이다. 석유가 바닥을 드러내는 것처럼 이제 세계경제와 정치는 아마게돈으로 치닫고 있을 수도.
Nouriel Roubini 교수의 Anglo-Saxon Model Has Failed라는 오늘 기사의 전문 죄송합니다. 너무 길어서 번역을 못했습니다. 그러나 내용이 너무나 중요해서 참고하시라고 올렸습니다. Roubini: Anglo-Saxon model has failed Nouriel Roubini | Feb 9, 2009 The Anglo-Saxon model of supervision and regulation of the financial system has failed, Nouriel Roubini, chairman of RGE Monitor and professor of economics at New York University, told the Financial Times on Monday. Answering questions from FT.com readers, Prof Roubini, who is widely credited with having predicted the current financial crisis, said the supervisory system “relied on self-regulation that, in effect, meant no regulation; on market discipline that does not exist when there is euphoria and irrational exuberance; on internal risk management models that fail because – as a former chief executive of Citi put it – when the music is playing you gotta stand up and dance.” “All the pillars of Basel II have already failed even before being implemented,” he added, referring to the internationally agreed set of banking regulations that are forcing banks to set aside more capital to maintain their existing lending. Prof Roubini also predicted that it was possible another large bank could fail, saying: “In many countries the banks may be too big to fail but also too big to save, as the fiscal/financial resources of the sovereign may not be large enough to rescue such large insolvencies in the financial system”. He also criticised the US and UK approach to bank bail-outs, comparing it with attempts by Japan in the 1990s to solve its banking crisis. “The current US and UK approach may end up looking like the zombie banks of Japan that were never properly restructured and ended up perpetuating the credit crunch and credit freeze,” he said. Economists and politicians hope to identify tentative signs of recovery in leading economies during the second half of 2009, as stimulus measures from governments and action on interest rates by central banks begin to kick in. But recent data suggest it may take a little longer. Meanwhile, the World Economic Forum’s latest report warns of the risks of a fiscal crisis, created by the very government spending intended to rescue economies from the turmoil in the global financial system. So, is the worst nearly over? Or is there still a way to go? Recently returned from Davos, Nouriel Roubini, chairman of RGE Monitor and professor of Economics at New York University, will answer readers’ questions on the outlook for the global economy and its impact on markets from 1400 GMT on Monday February 9. ________________________________________ It is pretty much consensus now that 2009 will be a zero growth year for the world economy (something that you forecast well in advance). It seems that the major risk for the following years is having a lost decade of Japanese-style stagnation but on a worldwide basis. How are the governments in US and Europe faring so far in their effort to avoid that? Marco, Sao PauloNouriel Roubini: To avoid a Japanese style multi-year L-shaped near-depression or stag-deflation (a deadly combination of stagnation, recession and deflation) the appropriate, coherent and credible combination of monetary easing (traditional and unorthodox), fiscal stimulus, proper clean-up of the financial system and reduction of the debt burden of insolvent private agents (households and non-financial companies) is necessary.The eurozone is well behind the US in its efforts as: a) the ECB is behind the curve in cutting policy rates and creating non-traditional facilities to deal with the liquidity and credit crunch; b) the fiscal stimulus is too modest as those who can afford it (Germany) are lukewarm about it and those who need it the most (Spain, Portugal, Greece, Italy) can least afford it as they already have large budget deficits; c) there is lack of cross-border burden sharing of the fiscal costs of bailing out financial institutions.The U.S. has done more (with its aggressive monetary easing and large fiscal stimulus putting it ahead) but two key elements are key to avoid a near-depression and still missing: a proper clean-up of the banking system that may require a proper triage between solvent and insolvent banks and the nationalization of many banks; and a more aggressive and across-the-board solution to the unsustainable debt burden of millions of insolvent households.Thus, I would say the L-shaped near-depression scenario is possible. ----------------------------------------------------------------------------------------------------------------- How can Davos, a gathering of the greediest, most avaricious and incompetent people of the planet, ever fix any of the problems they have created in the first place, and hugely benefited from?. Do you agree that when the boom was at its height, you were mistreated there when you tried to draw attention on the looming crisis? Are you now afraid of being now co-opted by the system and losing your independence? Marcel Knecht, Villa Santiago, Mexico NR: It is important to keep one’s intellectual rigor and honesty free from any financial conflict of interest (I never trade in markets and so I am never “talk my book” when I present my views). I have kept my balanced and analytically rigorous but bearish view over time and adjusted my outlook only at the margin in light of the evolving circumstances. But the basic thrust of my analysis and views about the severity of this financial and economic crisis – the worst since the Great Depression - has not changed. I don’t think anyone could suggest that I have been co-opted by the system and lost my independence. If anything my concerns that a severe U-shaped global recession may turn into a worse, L-shaped near-depression have somewhat increased over time. -------------------------------------------------------------------------------------------------------------------- It seems clear that governments will not allow their banking system to fail altogether and that they will intervene to rescue whenever needed. My question is: The governments will save the banks, but who will save the governments? Is it possible that we are about to see countries default? What does that mean for the global economy? Which countries are the ones who pose the greatest risk? Jonathan Arad NR: In many countries the banks may be too-big-to-fail but also too- big-to-save, as the fiscal/financial resources of the sovereign may not be large enough to rescue such large insolvencies in the financial system. Traditionally only emerging markets suffered – and still suffer - from such a problem. But now such sovereign risk – as measured by the sovereign spread - is also rising in many European economies whose banks may be larger than the ability of the sovereign to rescue them: Iceland, Greece, Spain, Italy, Belgium, Switzerland and, some suggest, even the UK. The process of socializing the private losses from this crisis has already moved many of the liabilities of the private sector onto the books of the sovereign: banks, other financial institutions and, soon enough possibly, households and some important non-financial corporate companies. At some point a sovereign bank may crack, in which case the ability of governments to credibly commit to act as a backstop for the financial system – including deposit guarantees – could come unglued. --------------------------------------------------------------------------------------------------------------------- What level of oversight is now appropriate from the financial regulatory authorities? Do they need very large new measures or should they have a light touch? Ashok Soni NR: It is clear that the Anglo-Saxon model of supervision and regulation of the financial system has failed. It relied on self-regulation that, in effect, meant no regulation; on market discipline that does not exist when there is euphoria and irrational exuberance; on internal risk management models that fail because – as a former chief executive of Citi put it – when the music is playing you gotta stand up and dance. Furthermore, the self-regulation approach created rating agencies that had massive conflicts of interest and a supervisory system dependent on principles rather than rules. This light-touch regulation in effect became regulation of the softest-touch. Thus, all the pillars of Basel II have already failed even before being implemented. Since the pendulum had swung too much in the direction of self-regulation and the principles-based approach, we now need more binding rules on liquidity, capital, leverage, transparency, compensation and so on... But the design of the new system should be robust enough to counter three types of problems with rules: A tendancy toward ‘regulatory arbitrage’ should be bourne in mind, as bankers can find creative ways to bypass rules faster than regulators can improve them. Then there is ‘jurisdictional arbitrage’ as financial activity may move to more lax jurisdictions. And finally, ‘regulatory capture’ as regulators and supervisors are often captured - via revolving doors and other mechanisms - by the financial industry. So the new rules will have to be incentive compatible, i.e. robust enough to overcome to these regulatory failures. --------------------------------------------------------------------------------------------------------------------- How long will be before we can tell if the US and UK governments’ plans to rescue the banks prove effective or not? If they don’t when do you think lending will recover to near-normal levels? Canh Humphries, Beckenham NR: There are three basic approaches to a clean-up of the banking system: recapitalization together with purchase by a bad bank of toxic assets; recapitalization together with guarantees – after a first loss – of the bad assets; outright government takeover (call it nationalization) of insolvent banks to be cleaned after takeover and then resold to the private sector. Of the three options the first two have serious flaws: in the bad bank model the government may overpay for the bad assets as the true value of them is uncertain; even in the guarantee model there can be such implicit over-payment (or over-guarantee that is not properly priced). In the bad bank model the government has the additional problem of having to manage all the bad assets it purchased. Thus, paradoxically nationalization may be a more market friendly solution: it creates the biggest hit for common and preferred shareholders of clearly insolvent institutions and – possibly – even the unsecured creditors in case the bank insolvency is too large; it provides a fair upside to the tax-payer; it can resolve the problem of government managing the bad assets by reselling most of the assets and liabilities of the bank to new private shareholders after a clean-up of the bank. This “nationalization” approach was the one successfully taken by Sweden while the current US and UK approach may end up looking like the zombie banks of Japan that were never properly restructured and ended up perpetuating the credit crunch and credit freeze. --------------------------------------------------------------------------------------------------------------------- To balance the US economy - given the US structural current account deficit - the fiscal deficit needs to baloon. Can the US default on its debt? Alessandro Magnoli Bocchi, Kuwait And, a related question also addressed in the next answer: What are the possible damaging, unintended consequences of the US stimulus plan? Alessandro Magnoli Bocchi, Kuwait NR: While a large fiscal stimulus is necessary to avoid a greater fall of aggregate demand there are also reasons to be skeptical about the effectiveness of such a stimulus: Most infrastructure spending is not ‘shovel-ready’ and its implementation may take too much time. The tax stimulus may – like the 2008 rebate – be mostly saved or used to reduce credit card and mortgage debt, since, given the credit crunch, the ability of households to leverage the tax rebate to buy durable goods or homes is massively impaired. Furthermore, the multipliers of fiscal policy are ambiguous and, more importantly, a tsunami of new public debt issuance may lead by the end of 2009 to a significant increase in long government bond rates as most countries in the world will now run budget deficits and thus the global supply of public savings will shrink. With US fiscal deficits likely to be about $2 trillion in 2009 and $1.5 trillion in 2010; who, outside the US, as most of the financing of US fiscal deficits is done by non-residents, is going to buy such debt and at what dollar value of and level of interest rates? Eventually, large and persistent fiscal deficits may even lead to a downgrade – in a few years – of the AAA rating of the US government. -------------------------------------------------------------------------------------------------------------- Do you think investigations and prosecutions should be conducted by the U.S. Government on the naked short selling of equities in the stock market? Should they be? Erich Benner, Blythewood, South Carolina NR: The ban on naked short selling of equities was a mistake. Short selling did not cause this crisis: it only reflected the concern about the solvency of many firms. And the ban on naked short selling only transferred the speculative pressure from equities to the credit defualt swaps market creating even greater problems in the credit derivative markets. When equity markets were in a speculative frenzy of an asset bubble no one requested limits to the ability of investors to go long (even if such restrictions in the form of higher margins for leveraged purchases of stocks would have been beneficial). And when during the same bullish bubble analyst after analyst showed up in the financial media and talked his book up, with no one objecting to this spin cycle. But when investors become bearish and start short selling stocks one hears talk about prosecuting the “evil short sellers”. This is an outright silly view even if, in the downwards speculative frenzy, market prices can fall below fundamental valuations as cascading effects cause falling prices to lead to margin calls and greater forced selling. But banning short selling is not the proper way to address this disruptive market dynamic. Starting with the excesses of the boom period of a bubble is a more appropriate response, and one that would prevent such bubbles from becoming excessive, limiting the damage from the bursting of such massive bubbles. --------------------------------------------------------------------------------------------------------------------- Has financial globalization come to an end? Jacques Ergas, Chile NR: Financial globalization has not come to an end, but there is certainly a backlash against it. To paraphrase Churchill - capitalist market economies open to trade and financial flows may be the worst economic regime, apart from the alternative, as non-market economy models have failed. So while this crisis does not imply the end of market economy capitalism it has shown the failure of a particular model of capitalism: the laissez faire unregulated (or aggressively deregulated) wild-west model of free market capitalism with lack of prudential regulation and supervision of financial markets and with the lack of proper provision of public goods by governments. It is the failures of ideas such as the “efficient market hypothesis” that deluded itself about the absence of market failures such as asset bubbles; the “rational expectations” paradigm that clashes with the insights of behavioral economics and finance; the “self-regulation of markets and institutions” that clashes with the classical agency problems in corporate governance that are thenselves exacerbated in financial companies by the greater degree of asymmetric information -how can a chief executive or a board monitor the risk-taking of thousands of separate profit-and-loss accounts? Then there are the distortions of compensation paid to bankers and traders. This crisis also shows the failure of ideas such as the one that securitization reduces systemic risk rather than actually increase it; that risk can properly priced when the opacity and lack of transparency of financial firms and new instruments leads to unpriceable uncertainty rather than priceable risk. ------------------------------------------------------------------------------------------------------------------ Will the crisis bring about a permanent, significant shift in the economic power balance of the world? Giles Chance, China NR: The Anglo-Saxon economic and financial model is wounded and the role of the US as the leading global economic, financial and even geo-strategic superpower is reduced. Even without this crisis, the relative and absolute power of the US would have been reduced by the rise of the fast growing economies of Brazil, Russia India and China and by the emergence of the European Union. But the policy mistakes of the US that perpetuated twin fiscal and current account deficits and triggered the worst financial and economic crisis since the Great Depression has accelerated this shift in the economic and financial power balance of the world. Economic and financial superpowers or empires tend to be net creditors and net lenders (running current account surpluses) such as the British Empire at its peak. But such empires decline - the British pounds role as the world’s leading reserve currency was lost during World War II when the UK became a large net debtor and net foreign borrower (running current account deficits) and had large domestic fiscal deficits. The US is now the largest net borrower in the world (running huge current account deficits) and the largest net debtor in the world while its domestic fiscal deficits are surging too. And unlike the 1980s when the US twin deficits were financed by the its friends and allies (Japan, Germany and the rest of the EU) this time around the largest lenders and creditors of the US are either its strategic rivals (Russia, China, etc.) or a bunch or relatively unstable petro-states. So this balance of financial terror makes the US vulnerable to the kindness of strangers. This growing weakness of the US suggests a paradigm shift in the economic and financial – and eventually even geostrategic - power balance of the world. --------------------------------------------------------------------------------------------------------------------- Do you believe in the projections made by the Chinese officials predicting a return to steady growth when all the planned stimulus measures have been implemented? Do you expect a reversal in the decisions taken the last 5 years to outsource a majority of the developed economies production to China? Fiorini Mauro, Belgium NR: China is now experiencing a hard landing and I predict that Chinese growth in 2009 may not be higher than 5 per cent. For a country that needs a growth rate of about 10 per cent to move millions of poor rural farmers to the modern urban industrial sector, a growth rate of 5 per cent would effectively be a hard landing. Fourth quarter gross domestic product growth in China – measured on a quarter to quarter annualized basis – was closer to 0 per cent than to the 6.8 per cent year-over-year growth reported by the Chinese government. Other factors also suggest a hard landing: There was a sharp fall in generation of electricity in the fourth quarter. China’s purchasing manager’s index was well below 50 and closer to 40 for six months in a row; there has been a sharp fall in imports, mostly of intermediate inputs and raw materials. And while some of the latest data show a marginal improvement in the second derivative of growth in January, the first derivative still shows contraction. The manufacturing sector is still 40 per cent of GDP and it is clearly shrinking. Whether the short-run policy stimulus in China will be effective or not is not clear. Instead, consumption levels are still depressed and private savings too high because of structural reasons that will take time to change. The out-sourcing of production to China and other emerging markets was not a mistake. But a model of growth based on cheap exports given an undervalued currency is now in crisis as the US downward adjustment of consumption requires an increase of domestic private and public demand in the surplus countries. --------------------------------------------------------------------------------------------------------------------- I have read your grave warning about deflation. But, nevertheless, won’t the enormous increases in money supply (out of thin air largely) eventually give rise to serious inflation, possibly hyperinflation? George Todd, Benalmadena, Spain NR: In the short run the greatest risks to the global economy are coming from deflationary pressures: slack in goods markets as aggregate demand falls relative to aggregate supply; slack in labor markets as unemployment rises sharply; slack in commodity markets as commodity prices tumble. Concerns have been expressed that the massive injections of liquidity will be eventually inflationary. But with large output gaps and surging unemployment rates, inflationary pressures are unlikely until such gaps are shrinking sharply. Also, the injections of liquidity are satisfying a surging demand for liquidity so that the absence of such a large supply of money would lead to spikes in money market rates; while base money is sharply rising other measures of money and credit are flat or shrinking as the money multiplier falls. This signals that the extra liquidity is being hoarded rather than spent or lent out. It is true that eventually there may be a temptation to use permanent – inflationary - monetization of large fiscal deficits to reduce the real value of public and private debts; indeed the inflation tax may become politically the path of least resistance if government would find it hard and unpopular to raise actual taxes. But even a relatively dovish central bank such as the Federal Reserve under Ben Bernanke cannot afford to let the inflation genie out of the bottle – if inflation expectations were to rise from low single digits to high single digits or even double digits – because such a surge in inflation would - eventually – cause the need for a harsh Volcker-style recessionary disinflationary policy to bring the inflation- expectations-genie back behind glass. Also, unexpected inflation can reduce the real value of nominal debts at fixed interest rates. But many liabilities are at variable rates: mortgages, bank deposits, short term debts of households, banks, governments, corporations. So a surge in inflation cannot reduce the real value of such debts as the interest rate on them would rapidly be re-priced to include any increase in expected inflation. So the inflation tax may not even be effective in reducing the liabilities of the private and public sector unless it becomes extremely and dangerously large. --------------------------------------------------------------------------------------------------------------------- You recently mentioned total credit losses of $3.6 trillion compared to current losses of $1.6 trillion. Will the institutional and geographic distribution of the $2 trillion increase match that of the first $1.6 trillion, or will it be new regions and new institutions, that will get sucked in? Paul Broder NR: Our RGE Monitor estimates of $3.6 trillion of peak credit losses refer only to loans and securities that were originally generated by US financial institutions. Of these $3.6 trillion $1.8 trillion will be borne by US banks and broker dealers while the rest by other capital market firms and investors. Since the losses coming from securities are estimated to be $2 trillion and about 40 per cent of them (based on IMF and Federal Reserve estimates) are borne by non-US investors we already have $800 billion of losses that will hit foreign investors/financial institutions, mostly in Europe. But we have not done yet a systematical analysis of the losses that will hit Eurozone and UK banks or banks in other regions of the world. Losses to these institutions include the $800 billion from US securitized products sold abroad as well as the other losses deriving from loan origination and securitization and issuance of other instruments in areas such as Europe and other parts of the world. A preliminary analysis suggest that, in the aggregate, the US banking system is insolvent as its capital before the crisis was $1.4 trillion and below expected losses of $1.8 trillion; a good part of the UK banking system appears also to be insolvent. ------------------------------------------------------------------------------------------------------------------ Is the solution to just keep re-inflating bubble after bubble to recapitalize our consumer driven economy or is it time for a huge systemic paradigm shift away from consumerism? What type of shift would you envision and would it destroy the economy as we currently know it? Robert Singer, Oregon, USA NR: For the last 30 years the US has been growing fast only during periods of asset bubbles that eventually burst with significant economic and financial costs. The 1980s real estate bubble went bust in the late part of that decade leading to a severe banking crisis for the Savings and Loan banks, a credit crunch and a severe recession in 1990-91; next the 1990s tech/internet bubble went bust in 2000 leading to the 2001 recession; massive monetary and credit easing – as well as lax supervision/regulation of mortgages and credit – led to another housing and credit bubble that has now gone bust creating a severe financial crisis and recession. The current monetary easing may lead to another bubble but we are somehow running out of bubbles to create. Housing, credit, equities, commodities, hedge funds, private equity bubbles: they have all gone bust now. We need to create an economic system that is less prone to bubbles and more likely to lead to sustainable stable growth. For the last few years the US has overinvested in the most unproductive form of capital – residential housing stock that increase utility but not labor productivity – and not enough into physical capital that increases the productivity of labor. Also we overinvested in the financial sector, a corollary of the housing boom: when the S&P500 market capitalization of financial firms was 25 per cent of the market and when over a third of the profits or earnings of S&P500 constituents came from financial companies, that was an excess of finance. And having a country where there are more financial engineers than computer engineers or mechanical engineers means a misallocation of human capital as well. So we need to create a growth model relying less on housing/real estate, less on finance and less on having the brightest minds of the country going into financial services rather than into the production and innovation of new and improved goods and services. --------------------------------------------------------------------------------------------------------------- Could any of the weak eurozone countries should be forced out of the single currency because of the effects of the crisis, and if that happened, how is the euro likely to behave? Vincenzo, Italy NR: There is now a rising – even if still quite low – risk that some countries will eventually be forced out of the eurozone. The whole idea of a monetary union was that since member countries would not have independent monetary policy, independent fiscal policy and independent exchange rate policy they would be induced to implement more aggressively structural reforms to ensure convergence of productivity growth and prevent divergence of economic performance. Germany went through a brutal corporate restructuring that led to rising labor productivity growth with modest nominal wage growth that restored the competitiveness of the country. In Spain, Portugal, Italy and Greece instead such structural reforms lagged and nominal wage growth outstripped productivity growth leading to increases in relative unit labor cost and real appreciation that reduced competitiveness. And now, on top of this loss of competitiveness some eurozone economies suffer also of a too-big-to-be-saved problem as the potential losses of their banks are larger than the national fiscal resources. And now, on top of this loss of competitiveness some eurozone economies suffer also of a too-big-to-be-saved problem, as the potential losses of their banks are larger than the national fiscal resources. So the monetary union is under pressure as sovereign spreads are also rising. Two years ago – while still being in the opposition – the current Italian prime minister, Silvio Berlusconi and Mr Tremonti, his exonomic minister, argued that the euro had been a disaster for Italy. With friends like these who needs enemies in the monetary union? While the risk of a break-up of the eurozone is still distant this financial and economic crisis is the first real test of the monetary union. -------------------------------------------------------------------------------------------------------------------- Many analysts are now predicting that the bond market is the last and most serious bubble which will burst shortly. Do you agree? Mike, Qatar NR: The current fall in government bond yields is justified by economic fundamentals: a severe recession, risks of deflation, risk aversion and move away from risk assets such as equities. But certainly, over time, large and unsustainable budget deficits in many emerging and advanced economies, may lead to a rise in sovereign risk and a risk in government bond yields. Also the risk – small but rising – that excessive permanent monetization of such deficits will lead to much higher inflation suggests the existence of a minor bubble in government bond yields. And indeed, in the last two weeks, the back-up in yield on US inflation-linked bonds and traditional 10 to 30 year bonds suggest the concerns of market participants about the sustainability of large fiscal deficits that – over the long run – may lead to solvency concerns.
