Why This Is A G-Zero World

Today, the United States lacks the resources to continue as the primary provider of global public goods. Europe is fully occupied for the moment with saving the eurozone. Japan is likewise tied down with complex political and economic problems at home. None of these powers’ governments has the time, resources, or domestic political capital needed for a new bout of international heavy lifting. Meanwhile, there are no credible answers to transnational challenges without the direct involvement of emerging powers such as Brazil, China, and India. Yet these countries are far too focused on domestic development to welcome the burdens that come with new responsibilities abroad.

We are now living in a G-Zero world, one in which no single country or bloc of countries has the political and economic leverage -- or the will -- to drive a truly international agenda. The result will be intensified conflict on the international stage over vitally important issues, such as international macroeconomic coordination, financial regulatory reform, trade policy, and climate change. This new order has far-reaching implications for the global economy, as companies around the world sit on enormous stockpiles of cash, waiting for the current era of political and economic uncertainty to pass. Many of them can expect an extended wait. - in Foreign Affairs

A G-Zero World

"Over the past several months, the expanded group of leading economies has gone from a would-be concert of nations to a cacophony of competing voices as the urgency of the financial crisis has waned and the diversity of political and economic values within the group has asserted itself." - Bremmer and Roubini wrote in the March/April edition of Foreign Affairs

Emerging Markets Are Behind The Curve In Terms Of Monetary Tightning.

"Some emerging markets are overheating and as inflation is accelerating, they are behind the curve in terms of policy tightening. In China, Russia and many other emerging-market economies that are emphasizing growth over fighting inflation, if inflation gets out of hand, they have to tighten more in the middle or later part of this year.” - in Bloomberg

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Oil Prices, Middle East Tensions & The World Economy

"Writing in the Financial Times, Roubini said the recession that began in the autumn of 2008 was caused not only by the Lehman Brothers insolvency but also by the fact that oil prices had doubled in the previous 12 months.

While no one should feel any sympathy for rulers associated with corruption, poverty, high unemployment and inequality, recent experience of “free elections” and “democracy” in the Middle East has been sobering, Roubini wrote.

The U.S. invasion of Iraq has brought civil war and an unstable pseudo-democracy, now at risk of falling under the control of radical and Shia groups, he said.

Because of the latest turbulence, oil prices are close to $100 a barrel and more radical regimes in Egypt and Tunisia can’t be ruled out; meanwhile, the world economy is recovering only tentatively from its worst crisis in decades, Roubini concluded." - in Bloomberg

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Changes In The Middle East

"I am all for democracy/elections & against autocrats. But so far change in Middle East (Iran, Gaza, Iraq and Lebanon) hasn't led to stable democracy." - in Twitter

Middle East Has Two Thirds Of World`s Oil Reserves

"Middle East has two thirds of world oil reserves and almost half of the gas reserves. So political instability there impacts global economies/markets." - in Twitter

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Three Past Global Recessions Caused By Middle East Political & Oil Shocks: `73, `79 And `90

"Three past global recessions caused by MidEast political & oil shocks: Yom Kippur War '73; Iran's revolution '79; Iraq invaiding Kuwait '90" - in Twitter

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Geopolitical Risk Is On The Rise

"There's already political contagion from Tunisia to Egypt...geopolitical risk is on the rise. It has a negative effect on growth or rising inflation. All this is not good." - in CNBC

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A G-Zero World

"A world where countries see global problems as a Zero Sum Game is a G-Zero World rather than a G20 World" - in Twitter

Some Upside Risks To Global Growth And Several Downside Risks

I was a speaker in the Davos initial panel on the global economic outlook: some upside risks to global growth and several downside risks

Downside risks for growth: sovereign risk; Eurozone crisis; inflationary rise in commodity prices; US risks (housing, labor market, budget deficit)

Positives for growth: global recovery; profitable corporations; strong emerging markets; less tail risk of double dip; asset reflation/risk on

in Twitter

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A World Without Global Leadership And International Cooperation

"It is not a G7 world; it is not a G20 world; it is a G0 world without global leadership and international cooperation" - Nouriel Roubini in Twitter

The United Kingdom Is Already Double Dipping

"United Kingdom already double dipping while inflation is rising: a whiff of stagflation with fiscal and monetary policies not helping growth recovery." - in Twitter

India May Grow Faster Than China

"In the next few years, it is possible that the growth of India might surpass that of China, with India maintaining a close to double-digit growth, while China might slow down to eight per cent or so" - in www.sify.com

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How Could China Maintain Its 8 Percent Plus Growth?

"How has China been able to maintain its high—8 percent–plus—growth despite the collapse of its net exports? It did not do it by reducing its saving and consuming more; rather, it has boosted further fixed investment in real estate (commercial and residential), in infrastructure (roads, airports, bullet trains), and in manufacturing capacity, which already suffers from a glut. Fixed investment in China is now close to 50 percent of GDP.

But no country can be so productive that it can take, every year, half its GDP and reinvest it into more capital stock without eventually ending up with a huge excess capacity and a mountain of bad loans. Thus, China needs to radically change its growth model from net exports and investment to reduced saving and more consumption." - in Newsweek

A Likely Double Dip In The Housing Market

"The U.S. faces a likely double dip in the housing market, weak job creation and gaping budgetary holes at the state and local levels this year. Credit growth on both sides of the Atlantic will be restrained as many financial institutions maintain a risk-averse stance." - in Bloomberg

Growth In Advanced & Emerging Economies

"Global growth this year will be shaped by “an anemic, below trend, U-shaped recovery in advanced economies” and a “V-shaped recovery” in emerging countries due to their stronger macroeconomic, financial and policy fundamentals. That means about a 4 percent global expansion, with advanced economies growing by about 2 percent and emerging-market countries by about 6 percent." - in Bloomberg.com

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The Risks Of Financial Contagion In Europe

“One of the most important risks is financial contagion in Europe if the euro zone’s problems spread, as seems likely, to Portugal, Spain and Belgium.” - in Bloomberg

China Needs To Radically Change Its Broken Growth Model.

"Clearly China needs to radically change its broken growth model in the direction of reduced exports, investment and savings, and increased consumption. But there are structural—and cultural—reasons why the Chinese save so much and consume so little. Radical policy reforms may take more than a generation to rebalance the Chinese economy toward a more sustainable growth model." - in www.newsweek.com

Emerging Markets Outlook

"In China and other emerging-market economies, delays in policy tightening could fuel a rise in inflation that forces a tougher clampdown later, with China, in particular, risking a hard landing. There is also a risk that capital inflows to emerging markets will be mismanaged, thus fueling credit and asset bubbles." - in Project Syndicate

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There Are Upside And Downside Risks To The Global Economic Outlook

"The outlook for the global economy in 2011 is, partly, for a persistence of the trends established in 2010. These are: an anemic, below-trend, U-shaped recovery in advanced economies, as firms and households continue to repair their balance sheets; a stronger, V-shaped recovery in emerging-market countries, owing to stronger macroeconomic, financial, and policy fundamentals. That adds up to close to 4% annual growth for the global economy, with advanced economies growing at around 2% and emerging-market countries growing at about 6%.

But there are downside and upside risks to this scenario. On the downside, one of the most important risks is further financial contagion in Europe if the eurozone’s problems spread – as seems likely – to Portugal, Spain, and Belgium. Given the current level of official resources at the disposal of the International Monetary Fund and the European Union, Spain now seems too big to fail yet too big to be bailed out." - in project syndicate