Pascal Blanque, Chief Economist Crédit Agricole SA
Blanque: "The economy has to cope with the consequences of four post bubbles situations"

Why do you go to the World Economic Forum?

Essentially catching an atmosphere rather than getting precise figures. Davos provides a unique opportunity to see trends (is Davos a leading indicator or not?!) and countertrends (there is a contrarian reading of themes debated at Davos!) mixed with no clear and cut conclusions on most subjects. I appreciate that debates remain open. Attending means interpreting. No grid of reading provided.

What did you strike most at this year's Davos?

Repentance obviously! (post bubble talks and psychology with regulations, governance and various doubts about financial markets in the driving seat) But, above all, the unconfortable discrepancy between some kind of a macro voluntarist optimism locating the global recovery somewhere around the corner and, on the other hand, an accumulation of micro observations from corporates, basically indicating they are right in the middle of a painful and lasting process of adjustment (cost cutting, debt restructuring, destruction of capacities, refocussing - geography, core business -...). This in my view sets the basis scene for economic developments at foreseeable future.

Lessons learnt. Davos is also about new insights and ideas. What did you learn at this year's Davos?

Amongst others, that there is no monetary or budgetary magic to fix rapidly a post bubble situation. Just time with at best a regime of soft global growth to purge excesses. The global economy has to cope with the consequences of four post bubbles situations. Complete bubble in Japan, credit and investment bubble in Asia and Japan with intact fragilities in the banking system, post reunification bubble in the housing and construction sectors in Germany, corporte bubble in the US that there are fundamental forces at work even in the most difficult to predict markets, i.e exchange rates. The dollar is finally faced with the reality of US external balances that we are living with adaptive expectations regimes in financial markets (equities, the internet, the dollar..next?) and that it takes time for long terme expectations to adjust (learning by doing and failing process!) that Europe could be more present in the panels, speaking with one voice!

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