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Global Economy Continues to Strengthen, but Concerns Remain

World Economic Update

Speakers: Lewis Alexander, Managing Director and Chief U.S. Economist, Nomura Securities International Inc.
Peter R. Fisher, Senior Fellow, Center for Global Business and Government, Tuck School of Business, Dartmouth College
Vincent Raymond Reinhart, Managing Director and Chief U.S. Economist, Morgan Stanley
Presider: Sebastian Mallaby, Director, Maurice R. Greenberg Center for Geoeconomic Studies, and Paul A. Volcker Senior Fellow for International Economics, Council on Foreign Relations
May 7, 2014

Event Description

Lewis Alexander of Nomura Securities, Dartmouth's Peter Fisher, and Vincent Reinhart of Morgan Stanley sit down with CFR's Sebastian Mallaby to provide an overview of the current state of the world economy and to identify potential trouble spots on the horizon. Though the U.S. economy continues to grow, concerns remain about a shrinking labor force and the potential for a bubble in asset prices. Elsewhere, inflation remains worryingly low in Europe, while China faces the possible start of a correction in the real estate market.

This series is presented by the Maurice R. Greenberg Center for Geoeconomic Studies.

Event Highlights

Vincent Reinhart on the declining U.S. labor force participation rate:

"Could something be done? The answer is there's a large collection of potential policies. We haven't been very good in terms of figuring out training programs. We haven't been very good over the years in bringing the skill set needed to our population. That's a national failure. Can we do better? Yes. The good news is that we're so far inside the efficient frontier of delivering fiscal policy, we don't have to go in just one direction to get better. Pretty much any way is up. Should you be optimistic that we'll do any of those things? No."

Peter Fisher on the chances of monetary policy being used to stimulate growth in Europe:

"I completely agree that the ECB has in its DNA the ability to run a more accommodative policy than they've been running So they could be expanding their balance sheet, rather than contracting it. Do I think the ECB council has it in its DNA to do a Bernanke or a Kuroda? No. But they're not going to—they don't have it in their DNA to double or quadruple their balance sheet. That's just so far out the probability spectrum as to not be worth considering. And I think that's a problem for Europe. Because I don't know whether just a little accommodation is going to make that much difference."

Lewis Alexander on China's real estate market:

"The property market is starting to correct. There are a number of cities where things like property prices and construction activities are down year on year for almost the first time in, you know, decades. And, I think they have the capacity to contain it. I don't think this is the moment when it's going to really blow up the system, but I don't say that with a degree of confidence that I would like."

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