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Download PERDANA LEADERSHIP FOUNDATION CEO FORUM 2014 “IS THE WORLD HEADING
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PERDANA LEADERSHIP FOUNDATION CEO FORUM 2014 “IS THE WORLD HEADING TOWARDS ANOTHER FINANCIAL CATASTROPHE?” 24 September 2014 AZMAN YAHYA 1 SIMPLE ANSWER IS YES BUT • WHEN? • SEVERITY? • FINANCIAL OR ECONOMIC OR BOTH? TO GAUGE WE NEED TO LOOK AT TRENDS Live Better ! 2 www.symphonylife.my FOUR MAIN TRENDS TO CONSIDER 1. ECONOMIC CYCLES 2. GROWING DEBT 3. DIMINISHING INVESTMENT RATIO 4. RISING UNEMPLOYMENT Live Better ! www.symphonylife.my 3 The world economy bounces up and down but hit first truly global recession in 2009 since WW2 4 Government debt has increased since the start of the crisis and is expected to grow further in many countries gggh 5 Risk of deleveraging ► Global debt exceed $100 trillion in 2013 ► Government debt now stands at $54 trillion ► US public debt is $14 trillion ($44,000 per every man, woman and child) ► Deleveraging is inevitable but how do you stop a juggernaut without being crushed? 6 Risk of induced inflation ► The core view is US debt is so large that it cannot repay ► Options: • • • • Default (Argentina) Haircut (Greece) Austerity (state defaults on its own citizen) Inflation (erodes the real value of public debt) ► In 1946, US debt to GDP ratio was 108.6%. But reduced by about 40% within a decade by inflation ► 50% of US public debt is owed to foreign creditors. Inflation risk > lost of confidence > offloading > crash financial markets 7 Declining investment in developed economies reflects the ebbing of a post-WWII investment boom in Western Europe and Japan 8 Global unemployment exceeded 200 million in 2013 9 What can trigger another financial crisis? ► Weak oversight ► Bursting bubbles ► Inflation ► Credit event ► Loss in confidence in US$ 10 NOT ALL BAD NEWS ☺ Shift in global economy Live Better ! www.symphonylife.my 11 12 Asia healthier than pre 1997 crisis ► Asian central banks sitting on $6 trillion reserves ► Many currencies no longer pegged ► China moderating growth – move from high investment to more sustainable consumption led growth ► Potential for regional coordination - Asean + 3 13 Malaysia needs to put house in good/better order ► Avoid temptation of easy credit and proliferation of shadow banking ► Purposeful government spending to reduce public debt early ► Shore up reserves ► Change social fabric ► Address inequality by ensuring Equal opportunity Avoid political capture Appropriate tax structure 14 THANK YOU THANK YOU [email protected] [email protected] 15
