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The US & the Future of the
Global Economic System
Prof. Jacob A. Frenkel
STRICTLY PRIVATE AND CONFIDENTIAL
Chairman, JPMorgan Chase International
Chairman, Group of Thirty (G30)
Former Governor, Bank of Israel
Herzliya Conference
February 6-9, 2011
J.P.Morgan Chase
Global GDP Growth (%)
6
IMF Projections:
2 0 0 9 : -0 .6 %
2 0 1 0 : 5 .0 %
2 0 1 1 : 4 .4 %
(Percent change)
5
4
3
2
1
0
IMF Forecasts
World Growth
-1
1995
1997
1999
2001
2003
2005
2007
2009
2011
Source: IMF, av. Annual growth rates, last update Jan 31 2011, WEO (2010 & 2011 Forecast)
2/1/2011
2
J.P.Morgan Chase
Real GDP Growth (%) World Economy
GDP Growth
(Avg Annual Growth Rate, Constant Prices)
Country
2000
2005
2007
2008
2009
2010
2011
World
4.8
4.6
5.3
2.8
-0.6
5.0
4.4
Industrial Countries
4.2
2.7
2.7
0.2
-3.4
3.0
2.5
Developing Countries
5.8
7.3
8.7
6.0
2.6
7.1
6.5
Source: IMF, av. Annual growth rates, last update Jan 31 2011, WEO (2010 & 2011 Forecast)
2/1/2011
3
J.P.Morgan Chase
Global GDP Shares
1990
2010 IMF Forecast
Other
Advanced
Economies
Latin
America
India, 3%
9%
8%
Latin
America
Other
Emerging
Economies
India, 5%
China, 4%
Other
Advanced
Economies
9%
17%
Other
Emerging
Economies
8%
18%
China
14%
27%
20%
23%
EU-27
9%
United
States
20%
United
States
EU-27
Japan
Japan, 6%
Source: IMF, WEO Database, last update Oct 1 2010, WEO (2010 Forecast)
2/1/2011
4
J.P.Morgan Chase
World Trade Volume
13
IMF Projections:
2 0 0 9 : -1 0 .7 %
2 0 1 0 : 1 2 .0 %
2 0 1 1 : 7 .1 %
(Percent change)
8
3
-2
-7
IMF Forecasts
World trade volume
-12
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Source: IMF, av. Annual growth rates, last update Jan 31 2011, WEO (2010 & 2011 Forecast)
2/1/2011
5
J.P.Morgan Chase
Current Account of Balance of Payments
(U.S. dollars, bill.)
$582
600
US$ billions, 2011
300
$189
Of Which:
China $325
Japan $133
$23
0
-$80
-300
-$400
-600
United States
Latin America and
the Caribbean
European Union
Middle East, N.
Africa, & Russia
Asia
Source: IMF, last update Oct 01 2010, WEO (2011 Forecast)
2/1/2011
6
J.P.Morgan Chase
Accumulation of Foreign Exchange
Reserves (Bill. Usd)
($B)
3,000
2,500
$2,847
2,750
2,250
2,500
Stock
2,250
December
($B)
$2,224
Flow
2,000
(2005 – 2010)
1,750
2,000
1,500
1,750
1,250
1,500
1,250
1,000
$1,036
1,000
750
750
500
500
$433
$382
$292
$329
$215
250
250
$139
$92
0
0
China
Japan
Russia
Taiwan
China
Korea
Japan
Russia
Taiwan
Korea
Source: Nat'l Statistical Institutes, Foreign-Exchange Reserves ex. Gold, Last Observation: 12/10
2/1/2011
7
J.P.Morgan Chase
China’s Role in Global Trade (bill. Usd)
Exports
Exports
$777
Asia
Imports
$283
People’s
Republic of
China
Imports
$631
$879
U.S.
&
EU
Source: National Bureau of Statistics of China, 12-months through November 2010
2/1/2011
8
J.P.Morgan Chase
European Union Exports by Destination
2000
2010
Asia ex
China,
39%
Asia ex
China,
38%
US, 42%
US, 57%
China,
19%
China,
5%
Source: Eurostat, Last Observation: Oct 2010
2/1/2011
9
J.P.Morgan Chase
U.S. Exports by Destination
2000
2010
Asia ex
China,
41%
Asia ex
China,
49%
EU, 41%
EU, 48%
China,
19%
China,
3%
Source: US Department of Commerce, Last Observation: Nov 2010
2/1/2011
10
J.P.Morgan Chase
Gross National Savings as a % of GDP
(2009)
(% of GDP)
51
50
40
33
30
23
19
20
11
10
0
China
India
Japan
Euro Area
United States
Source: IIF (last update: China - December 2010; India - sep 2010), JPMorgan, IMF-IFS (last Update: Oct 2010)
2/1/2011
11
J.P.Morgan Chase
Coordinated Global Rate Cuts
6
(%)
5
4
3
2
C anada,
1 .0%
EUR,
1 .0%
1
UK 0.5%
US
0 .25%
0
United Kingdom
Japan
Eurozone
Canada
United States
Japan
0 .1%
-1
2005
2006
2007
2008
2009
2010
2011
Source: Bloomberg Market Data, Last observation: 2 Feb, 2011
2/1/2011
12
J.P.Morgan Chase
Total Assets of Key Central Banks
(indexed levels)
400
(indexed, end of June 2007 = 100)
350
BoE: 303
300
250
F ed: 282
200
EC B: 163
150
100
50
Jun-07
BoE
ECB
Federal Reserve
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Source: NSI's, Last Observation: ECB (Jan 28, 2011); Fed, BoE (Jan 26, 2011)
2/1/2011
13
J.P.Morgan Chase
Fiscal Positions: General Government
Balance
2
(Percent of GDP)
0
-2
Euro Area,
2 0 11:
-5 .1%
-4
-6
Japan,
2 0 11:
-8 .9%
-8
-10
US, 2011:
-9.7%
-12
IMF Forecasts
United States
Euro Area
Japan
-14
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Source: IMF, WEO Database, last update Oct 1 2010, WEO (2009 Estimate, 2010 & 2011 Forecast)
2/1/2011
14
J.P.Morgan Chase
Fiscal Positions: Net Debt
140
(Percent of GDP)
120
Japan,
2 0 11:
1 2 9.5%
100
US, 2 011:
7 2 .7%
80
Euro Area,
2 0 11:
7 0 .4%
60
40
20
2000
IMF Forecasts
Euro Area
2001
2002
United States
Japan
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Source: IMF, WEO Database, last update Oct 1 2010, WEO (2009 Estimate, 2010 & 2011 Forecast)
2/1/2011
15
J.P.Morgan Chase
Fiscal Position: General Government Balance –
Select Euro Area Economies
5
(Percent of GDP)
0
Eu ro Area,
2011:
-5.1%
-5
Portugal,
2011:
-5.2%
Sp ain,
2011:
-6.9%
G reece,
2011:
-7.3%
-10
Ireland, 2011:
-11.2%
-15
IMF Forecasts
Ireland
Spain
Greece
Portugal
Euro area
-20
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Source: IMF, WEO Database, last update Oct 1 2010, WEO (2009 Estimate, 2010 & 2011 Forecast)
2/1/2011
16
J.P.Morgan Chase
Fiscal Positions: Net Debt – Select Euro
Area Economies
Greece,
2011:
117.2%
(Percent of GDP)
120
IMF Forecasts
Greece
Germany
Ireland
Spain
Portugal
110
Portugal,
2011:
82.9%
100
90
Ireland,
2011:
63.0%
80
70
Sp ain,
2011:
60.9%
60
Germany,
2011:
60.4%
50
40
30
20
10
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Source: IMF, WEO Database, last update Oct 1 2010, WEO (2009 Estimate, 2010 & 2011 Forecast)
2/1/2011
17
J.P.Morgan Chase
Gross Government Debt and Budget
Deficit (% of GDP 2009)
Gross General Government Debt (% of GDP), 2009
130
Greece
Italy
110
Belgium
"Bad" - Zone"
90
France
Hungary
Germany
70
Portugal
US
Euro Area
UK
Netherlands
Ireland
50
Spain
Sweden
Slovakia
Latvia
30
Czech
Bulgaria
Romania
10
0
-2
-4
-6
-8
-10
-12
-14
-16
General Government Balance (% of GDP), 2009
Source: Eurostat, National Statistical Institutes
2/1/2011
18
J.P.Morgan Chase
Current Account Balance and Budget
Deficit (% of GDP 2009)
Current Account (% of GDP), 2009
15
10
Latvia
Netherlands
5
Estonia
Germany
Japan
0
Hungary
Euro Area
France
UK
Italy
US
Romania
Ireland
Slovakia
-5
Spain
Bulgaria
Portugal
-10
Greece
"Bad" - Zone"
-15
0.00
-2.00
-4.00
-6.00
-8.00
-10.00
-12.00
-14.00
-16.00
General Government Balance (% of GDP), 2009
Source: Eurostat, National Statistical Institutes
2/1/2011
19
J.P.Morgan Chase
Gross National Saving Rate and Budget
Deficit (% of GDP 2009)
30
Gross National Saving Rate (% of GDP), 2009
Latvia
25
Estonia
Sweden
Austria
Germany
Japan
Czech
Hungary
20
Romania
Netherlands Belgium
Slovakia
Bulgaria
15
Spain
Euro Area
France
Italy
UK
Portugal
10
US
Ireland
Greece
5
"Bad" - Zone"
0
0.00
-2.00
-4.00
-6.00
-8.00
-10.00
-12.00
-14.00
-16.00
General Government Balance (% of GDP), 2009
Source: Eurostat, National Statistical Institutes
2/1/2011
20
J.P.Morgan Chase
World Demographic Challenge
Change in Population between 2010 - 2030 (in millions)
350
300
250
200
150
100
50
0
-50
0-9
10-19
20-29
Source: United Nations Populations Division, Last update 2009
2/1/2011
30-39
40-49
50-59
Projected Change in Population
from 2010 - 2030:
21
60-69
+1400.2M
70-79
80+
2010 Level:
6909M
2030 Level:
8309M
J.P.Morgan Chase
Developing Countries Demographic
Challenge
Change in Population between 2010 - 2030 (in millions)
300
250
200
150
100
50
0
-50
0-9
10-19
20-29
Source: United Nations Populations Division, Last update 2009
2/1/2011
30-39
40-49
50-59
Projected Change in Population
from 2010 - 2030:
22
60-69
+1355.8M
70-79
80+
2010 Level:
5671M
2030 Level:
7027M
J.P.Morgan Chase
Developed Countries Demographic
Challenge
Change in Population between 2010 - 2030 (in millions)
40
30
20
10
0
-10
-20
-30
0-9
10-19
20-29
Source: United Nations Populations Division, Last update 2009
2/1/2011
30-39
40-49
50-59
Projected Change in
Population from 2010 - 2030:
23
60-69
+44.4M
70-79
80+
2010 Level:
2030 Level:
1237M
1282M
J.P.Morgan Chase