David Wyss an economist is a visiting fellow, Watson Institute at Brown University. His talk was called "Half-Speed Ahead". This was the last presentation at the Money show.
The US is in year 4 of its recovery. The European debt crisis can spread to the US. The US government is dysfunctional.
Housing is still a problem. There is still a house bubble. House prices got too high and they built too many houses. The only thing to do is to stop building houses and for house prices to drop. Foreclosures peaked in 2013. There is still a pool of underwater houses, but things are moving in the right direction.
The housing bubble was not just in the US. There was housing bubbles in the UK, Ireland and Spain. All 4 Irish banks were bankrupt and needed to be bailed out. Spain did not recognize it had a banking crisis and so now they have large unemployment.
The Fed brought down bond and mortgage rates by buying bonds and mortgages. (They also brought down the Fed interest rate.) The expansion of the central bank's balance sheet happened in the UK and the US. In the EU people cannot walk away from mortgages like they can in the US. However, this does not mean that the mortgages are going to be paid.
Spanish mortgages where not only held by Spanish banks, but were held by German and UK banks also. However, no one is saying who is holding these mortgages. Interest rates in the EU converged in 1999 with the Euro but they are now diverging. German and French banks loaned money to other EU countries.
The US and the UK have bankruptcy rules and so got on the problem right away. So they both are doing better economically. The GDP growth has turned around. However in the EU zone there is no GDP growth and there is high unemployment. The EU is not turning around now. It will be a long hard time for them to get out of their present difficulties.
If you have excessive debt going into a recession, it is hard to get out of the recession. You cannot spend your way out. It is a long slow process to get out. Their drag of weak growth is affecting the rest of the world.
A lot of lower unemployment is because participating rates are lower, people are retiring and children are staying in school longer. The global recovery remains fragile and uneven. In the last recession, Canada did better than the US but now the US is doing better than Canada. The US is stagnating, Japan has problems and China is slowing down. Things are improving, but they are not improving very fast.
China probably has more growth over the next 10 years. Good idea to buy Chinese companies listed on the Hong Kong exchange.
The US$ is still the reserve currency. People are not willing to use the Euro. China would like people to use their currency, but it is not convertible.
In Canada house prices are too high but as long as the economy stays stable they could stay too high for a long time. The house bubble in Canada is smaller than the one in the US. Canadian housing prices could be flat for a long time rather than drop.
China is not as interested in the tar sands oil as it once was and it has shale gas. The Saudi's want to discourage new sources of oil so they are bring the price of oil down.
He thinks that the EU will survive because of politics. Ireland was the first to crash and now it has turn around. There is a need for political will.
On my other blog I am today writing about IBI Group Inc. (TSX-IBG, OTC-IBIBF) ... continue ...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.