Kenneth Courtis: Former vice-chairman, Goldman Sachs (Asia) and co-founder of Themes Investment Management:
"The fundamental force driving markets is the
coordinated and desperate action of the world’s central banks to offset
powerful depressive forces released with the popping of the Bush Bubble
and the contagion which resulted for the world financial system. Despite
five years of an unprecedented global effort to dominate the crisis,
global economic growth, employment, and world trade remain substantially
below peak 2007 levels.
Financial systems and economies in OECD
(Organisation for Economic Co-operation and Development) countries
remain fragile, despite repeated claims of bankers and policy officials
to the contrary.
With governments virtually everywhere in
the developed world imposing austerity (in order to) reduce overall debt
levels, the reality is that leverage has continued to increase in just
about every OECD economy since the onset of the crisis. It seems that
the greater the austerity, the greater has been the increase in debt
This equation has just become more powerful with the government
in Tokyo committing to a surge in new deficit spending to dramatically
increasing the levels of liquidity being injected into the system.
At the same time, the US (Fed) remains
committed to increasing liquidity again this year, and the ECB (European
Central Bank) and the Bank of England are on standby to do “whatever it
takes”. We will continue to have a highly powerful, sustained effort by
central banks to force investors to take on more and more risk.With world trade flat and the weak economies of
the developed world leading exporters everywhere into pressuring
governments to generate more competitive currencies, we have entered
into a period of competitive devaluations."
Currency wars have begun and they are very serious,
difficult to predict, and cannot be easily reversed. Excessive money
printing is the cause.