How The Financial And Economic Landscape Has Adapted To Irreversible Change
Credit Suisse today published the third landmark report from its Research Institute: “The World Post the Credit Crisis”.
As financial markets rally and the global economy moves into a recovery phase, the report provides a timely and 'big picture' platform to examine the shape of the financial and industrial landscape post the credit crisis and the strategic challenges that investors face in the early days of the recovery.
Global in perspective, the report comprehensively examines the financial and economic effects of the crisis, but also considers its potential social and political consequences. The report’s contributors include Sir John Major, former British Prime Minister and Senior Advisor to Credit Suisse; Dr Ernesto Zedillo, Nobel prize winner and former President of Mexico; Robert Parker, Vice Chairman of Asset Management at Credit Suisse; and a host of other leading Credit Suisse analysts and external commentators. An overview of topics is outlined below.
Giles Keating, Head of Research for Private Banking and Asset Management at Credit Suisse, said, “We hope this report will help broaden the debate on how the world has changed post credit crisis by focussing on issues such as the need for central banks to target asset prices and the crucial role of Chinese consumers.”
Stefano Natella, Global Head of Investment Banking Equity Research at Credit Suisse added, “We are delighted that we are able to share with our clients the perspectives of a diverse range of contributions from Sir John Major to distinguished scientists and academics, alongside our own analysts and economists.”
Overview of key issues
New World, Old Rules?
The credit crisis has broken many assumptions of how the world operates; we analyze what might replace these old certainties.
Towards a more balanced global economy
Giles Keating, Head of Research for Private Banking and Asset Management, considers how consumption-led imbalances contributed to the credit crisis; these are now being unwound, though further painful adjustment is required. Emerging economies are now bigger and more stable, and should help bolster global growth.
Will central banks now target bubbles?
Before the credit crisis, central banking orthodoxy was that asset bubbles were hard to identify, harder still to prevent and nearly impossible to deflate in an orderly way. This needs to change if we are to avoid further damaging asset price bubbles.
Has capitalism failed?
Sir John Major examines how the credit crisis may have changed the way we regard markets, and also how the role of the State will change in the post-credit crisis world. The role played by governments in their approach to new regulation and any protectionist tendencies they display will prove key in shaping the new environment.
The rise of Chinese consumption
With the American consumer weakened financially by the credit crisis, Dong Tao, Chief Economist, Non-Japan Asia at Credit Suisse, illustrates how consumption in China will still be on a secular rise, providing a lift to the rest of the world and partially offsetting the relative decline from the USA over the next decade.
Re-assessing the anchor role of the US dollar
Joe Prendergast, Chief Currency Strategist at Credit Suisse’s Private Banking business examines how the US dollar’s global role is set to face deep scrutiny in the coming years. Implications for the greenback are negative, while prospects for liquid alternatives to the dollar, such as the Euro, are positive.
The scientist’s view
The implications of the credit crisis cut across many fields. Here, Nobel prize winner Dr. Heinrich Rohrer explores some of the financial, moral, scientific and technological issues that emerge and highlights that future economic growth needs to be built on sustainable investments.
Should we fear protectionism?
Throughout history, economic crises have often triggered protectionism as a way of defending domestic companies and jobs. Things might be different this time; while traditional trade protectionism is unlikely, financial protectionism is a real risk.
Emerging bank business models
New regulation of the banking sector may encourage some large banks to become more focused, emphasizing certain businesses and exiting others. And it may cause a permanent reduction in some banking activities, including structured finance. Overall, new business models are expected to emerge in both developed countries and in emerging countries.
The future of the asset management industry
Robert Parker, Vice Chairman of Credit Suisse’s Asset Management business, highlights the key changes to the asset management industry that will stem from the credit crisis, focusing in particular on industry consolidation, risk management, hedge funds and the growth of the industry in emerging markets.
The big picture – future economic models
Michael O’Sullivan, Global Head of Asset Allocation and Head of UK Research at Credit Suisse’s Private Banking business, examines how the Anglo-Saxon socio-economic model has dominated since the early 1980’s. The credit crisis could alter this. Capitalism will not disappear but could slow to a more “managed” form.
The visible hand of the state
Lars Kalbreier, Head of Global Equity Alternatives Research for Credit Suisse’s private banking business, examines modern financial theory which suggests that the private sector is best suited to allocating capital. Is this theory still valid after the misallocation of capital by the private sector, or can governments allocate capital more efficiently?
The end of globalization?
The credit crisis has slowed the pace of globalization, but it does not herald its end according to Dr. Ernesto Zedillo. Stronger emerging markets and re-engineered world institutions can keep globalization going.
Despite the credit crisis, other important debates continue. One is the revolution in green technologies and the importance of global warming. Nobel prize winner, Dr. Rajendra Pachauri pinpoints the lessons for this from the credit crisis.
From crisis to consolidation
The credit crisis has been an exercise of “the survival of the fittest” across the corporate sector. Andrew Garthwaite, Head of Global Equity Strategy and Richard Kersley, Head of European Equity Research Product at Credit Suisse’s Investment Banking business highlights where we consider the most significant changes will fall and who the winners and losers might be.
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