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谢国忠

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麻省理工学院经济学博士

个性介绍: 1960年出生于上海,1983年毕业于上海同济大学路桥系,1987年获麻省理工学院土木工程学硕士,1990年获麻省理工学院经济学博士。同年加入世界银行,担任经济分析员。在世行的五年时间,谢国忠所参与的项目涉及拉美、南亚及东亚地区,并负责处理该银行于印尼的工商业发展项目,以及其他亚太地区国家的电讯及电力发展项目。1995年,加入新加坡的Macquarie Bank,担任企业财务部的联席董事。1997年加入摩根士丹利,任亚太区经济学家,2006年9月辞去该职务。

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谢国忠:一个时代的结束  

2009-03-03 03:45:47|  分类: 言论 |  标签: |举报 |字号 订阅

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谢国忠:一个时代的结束

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Policymakers around the world have not shown understanding of thecurrent crisis. It is the end of a two decade-long bubble. It is theend of the asset-based economy. It is the end of productivity dividendsfrom IT revolution and globalization. Perhaps one tenth of the incomein the global economy was from bubble activities and is permanentlylost. The income will shift elsewhere. The resulting demand isdifferent. The supply side has to change to meet a different demand mixin the post bubble economy. If governments don’t understand, the worldmay suffer a lost decade ahead. No, it is not Japan in the 1990s. It isJapan of the 1990s plus inflation, aka stagflation.



Stockmarkets around the world have fallen close to or below the lows ofNovember 2008. Concerns over bank bailout uncertainty and deepeningrecession drove the decline that reversed the 20% bounce from the lowsof November 2008. The delays in releasing details by the US Treasury onits bank bailout plan led to suspicions that it didn’t know what to doyet. The exposure of European banks to Eastern Europe caused concernsover their solvency. If big global banks remain mired in bad assets,credit system won’t function normally, and the global recession has nohope to end soon.



On the economic front, the news isgrim: Japan’s GDP contracted by 3.3%, Euro-zone 1.5%, and the US 1% inthe last quarter of 2008. The US fared better because it piled upinventories, which would lead to a worse situation later. The globaleconomy probably contracted by 2% in the last quarter of 2008 from theprevious quarter, the worst decline since the World War II. The firstquarter of 2009 won’t be better. The January trade data of East Asianeconomies already cast a dark shadow over the quarter. All the data areportraying a global economy amidst collapsing.



Threeforces are driving the collapsing. First, the collapse of LehmanBrothers triggered a sharp increase in credit cost. Its impact wassimilar to increasing interest rate by 3-5 percentages by all thecentral banks together. To cope with high cost of capital everybusiness has been running down inventory, which is the cheapest sourceof fund raising. In commodity industries, inventory unwinding has beendramatic. Most commodity users kept inventories high out of fear ofprice rise or for speculation. When commodity prices reversed, theywere stuck with a depreciating asset and had to run it down as quicklyas possible. I suspect that this force accounts for half of theeconomic contraction at present.



Second, faced withrising credit cost and declining demand, businesses around the worldhave cut their capex sharply. This force is most visible in the ITsector. Japan, Korea, and Taiwan are most exposed to it. Their exportshave declined dramatically, much more than China’s that has a broadermix. The tech heavy NASDAQ has lost half of its value from its recenthigh in 2007, despite its terrible beating during the tech burst in2000-03 that saw the index down by 80% from the 2000 peak. (NASDAQtoday is about at the same level as ten years ago. Despite technologyrevolutions like internet, mobile phone, digital TV over the pastdecade, investors have not made money in NASDAQ. It demonstrates thatthere is no direct relationship between making money and technology.)Semiconductor that is a major input into IT equipment is hitparticularly hard. The Philadelphia Semiconductor index is down 60%from its 2007 high. Many semiconductor companies on NASDAQ are tradingat market capitalization below 10% of their sales revenue. I suspectthat the capex suspension is one fourth of the current economiccontraction.



Lastly and the most obvious, the negativewealth effect from the evaporation of $50 trillion paper wealth iscutting into consumption. The rule of thumb suggests that the negativewealth effect is about 5%. As two thirds of the global economy isconsumption, ceteris paribus, the global economy can contract by 3%just due to this effect. Its impact is not all felt yet. Most consumerswill adjust slowly.



The inventory cycle and capexreduction are temporary factors in pulling down the global economy. Atsome point, inventories are ago, and capex is too low to cut. I suspectthat inventory destocking will be completed in the first quarter of2009, and capex stablizes in the third quarter. The global economy willprobably show stability then. As fiscal stimulus kicks in around theword, we may see a significant bounce in the global economy in thesecond half of 2009. But, stability or stimulus-inspired bounce won’tlead to sustained recovery. Consumption weakness will haunt the globaleconomy for a long time. The over-levered western consumer needs to paydown debt for years to come. Rising unemployment will make the problemworse. The western consumer-the driver of the global economy for thepast decade is down and out for good.



Governmentsmust understand the lasting nature of the current downturn. Thebursting of the credit bubble triggered the fall. The mismatch betweenincome and demand could delay a sustainable recovery for years. Duringthe bubble era income distribution became more and more skeweredtowards asset-based activities. For example, the profit share offinancial activities among the US listed companies quadrupled. Similartrends happened in many countries. The income for the workers infinance increased in a similar fashion. The bulging income from thefinancial sector was quite concentrated among a small group that spentmoney in luxuries and financial investment. This is the most importantfactor for rising concentration of income distribution around the worldin the past decade.



The bursting of the bubble willdestroy most income in financial activities. The amount lost could beone tenth of GDP. From limo drivers to luxury homebuilders the multiplyeffect from the financial meltdown will leave unemployment across manyindustries and countries. The recovery becomes sustainable only whensupply side is restructured to cater to a different demand mix. Thisprocess would take a long time to complete. But, governments couldprolong the downturn by making the wrong decisions. For example,governments around the world are engaging in fiscal stimulus. To someextent they are choosing winners. If the choices of spending are wayoff what market would support, the stimulus would delay recovery.Stimulus is necessary in a severe downturn like now. It just needs tomatch the structural changes to come.



Let us thinkthrough the problem facing an unemployed banker and his ex-driver. Thebanker was making 20 times his driver’s. He could splash and hire thedriver. Of course, in addition, he was paying for his florist, tailor,maid, masseur, etc. On average, he spent 70% of his income on theequivalent of 15 people like his driver full time serving him and put30% back in financial investment like in a hedge fund. Now, theex-banker moves to Kansas City and becomes a high school teacher. Hiscurrent income is the same as his ex-driver’s. He drives to work,cleans his own house, and forgoes massage. The economic problem is whathappens next to the fifteen people who were serving him.



Thebanker’s income before came from asset market activities, essentiallyredistributing income to himself by manipulating asset prices. As hestops doing that, the cost for economic activities goes down by theamount equal to his income. But, the people serving him have lost theirincome. The net result is that the economy contracts by the same amountas the banker’s income plus 15 unemployed people. In addition, the 15unemployed people can’t spend. The multiplier effect magnifies thebanker’s income contraction, possibly by a factor of 2. The world looksworse off with a smaller economy and more unemployed.



Whenthe government steps in to stimulate, it is essentially borrowing theequivalent of banker’s ex-income to spend. The purpose is to keep the15 people employed. However, the government won’t spend on drivers,nannies, florists, or masseurs. The mismatch means the government can’tget the economy back with stimulus. It shouldn’t. The driver must findnew consumers. The banker is gone for good. What the government shouldtarget is to stop the multiplier effect from the 15 people that thebanker no longer hires. If these 15 people get unemployment insurance,it goes a long way to mitigate the multiplier effect. The economy cancome back when it is restructured so that the 15 people find newemployment.



The world will eventually be better off.The banker was just redistributing income to himself. The money wouldlead to more productivity if it could be directed to more productivepeople. It’s just that the process of adjustment could be long. Theworld has experienced an asset-based economy for two decades. It hasled to extreme income distribution. In the last few years, largemanufacturing companies like GE and GM came to depend on financialactivities for profits. Their industrial activities were really used asa fund raising platform. In China manufacturing companies depended onproperty development or stock market speculation for profits. Theprofit margins from their main businesses kept dwindling. Reversing thetrend of the past two decades would take a long time. If governmentsdon’t understand and try to bring back the ‘good time’ of the past, itwill prolong the adjustment. The risk is high that the world may suffera lost decade.



Japan suffered a lost decadecharacterized by stagnation, rising fiscal deficit, deflation, andstrong yen. These characteristics were supported by Japan’s highsavings rate and export competitiveness. The world as a whole could notreplicate Japan’s experience. The US, for example, must borrow fromforeigners to fund its budget deficit. Its currency is likely to beweak for years to come. As dollar is the currency for trade, capitalflows and foreign exchange reserves, its weakness will lead toworldwide monetary expansion. The loose monetary condition will sooneror later lead to commodity speculation. The resulting inflation wouldlead to wage demand by organized labor, which opens up the channelbetween money supply and inflation. When I look at the governmentpolicies around the world, I fear for prolonged stagflation ahead.



Whilewe need to worry about the long term stimulus effectiveness, the shortterm effectiveness is not yet secure. With global banks still mired intoxic assets, they won’t be able to lend normally. If stimulus pushesup economic activities, businesses that want to invest to meet newdemand may not get loans. In an upward virtuous cycle, rising demandleads to investment that leads to more jobs and more demand. Without afunctioning banking system, this virtuous cycle is not possible.Instead, stimulus just perks up economy temporarily, i.e., it would bewasted.



The immediate task is to repair the bankingsystem, especially in the US. The US Treasury is promising overwhelmingforce now and details later. This may be a stalling tactic. The pricesof big bank stocks and toxic assets already assume nationalization. TheUS government is right to be concerned of the permanent damage to itsfinancial system from nationalization. But, to avoid it, the governmenthas to grossly overvalue the toxic assets. The US taxpayers wouldn’tagree to throw taxpayers money at failed banks. If the US doesn’t fixits banking system, the $780 billion fiscal stimulus will be wasted.



Theright approach is to nationalize these banks, separate the toxic assetsinto a different entity, and relist the healthy halves. The proceedsfrom selling down the healthy banks could be used to pay for absorbingthe losses from disposing toxic assets. This is what China did torepair its banking system. It may be the only way out for the US.



Second,the West must contain the cost of its entitlement programs, beginningwith healthcare in the US. If the US doesn’t institute radical reformsto contain its healthcare cost, it will go bankrupt, possibly within adecade. If Europe doesn’t reform its pension and unemployment benefits,it will have to raise taxes or run bigger budget deficits permanently,and its economy would stagnate.



The biggest economicchallenge among developed economies is aging, which leads to escalatingpension cost and exponentially rising healthcare cost. While the wrongpolicies allowed the credit bubble to happen, the desire to defendlifestyle during escalating social overhead cost associated with agingwas a major contributing factor. It allowed the western economies todelay the hard choices. The current system was set when aging was not abig challenge. The only viable course forward is to increase retirementage and ration healthcare access.



Third, emergingeconomies must decrease export dependency. Export-led developmentusually reflects weaknesses in political economy-the inability toefficiently turn savings into investment. The causes are usually lackof the rule of law and income and wealth concentration. The exportorientation is to import the global system. The model has worked for along time. From Japan one century ago to the Asian Tiger economiesfifty years and China thirty years ago, the model has made fastdevelopment possible.



The problem with the model todayis that it is crowded. Developing economies are already 30% of theglobal economy at current price and nearly half on a purchasing powerbasis. The export model cannot thrive for shortage of customers.Developing countries have to trade more with each other and developdomestic demand. It would require painful reforms to their politicaleconomies. The heart of the reforms is property rights and incomedistribution. The two must go hand in hand. Lack of domestic demandtends to result from income concentration, which is due to unevenplaying field in opportunities. Many developing countries, like SouthAmerican and Southeast Asian countries, have stagnated in the pastdecade due to their inability to reform their political economies.



Burstingof the credit bubble is triggering the biggest recession since theWorld War II. Repairing the global economy requires complex anddifficult reforms. Simple stimulus couldn’t bring back prosperity.While stock markets may improve in the second and third quarter, it ismerely a bear market rally. When inflation concerns hit the markettowards the end of 2009, stock markets could fall sharply again.Indeed, the ultimate bottom in the current cycle could happen in 2010.

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