I was in Monaco this week for a conference of people involved in Alternative Investments.
I spoke about the medium term prospects for the world economy. The OECD has recently produced projections for growth rates between 2011 and 2017. The contrasts are quite marked. Whereas they predict growth rates of 6.7% per year for Turkey over the period and 4% each for Mexico and Australia, they expect annual growth rates in Portugal to be only 1.2%, Germany only 1.6% and 1.8% in France. At that rate, some of the Turkish immigrants in Europe could be going home to find work.
I foresee rapid growth continuing in China, India and Brazil. The consumer demands of low to middle income people in these countries will determine where business opportunities in future. Their needs will replace the jaded demand from high income consumers in the West. The Tato Nano economy will replace the SUV economy.
I believe taxes will tend to increase in western countries because Governments will find it too difficult to reduce wages, welfare payments and health entitlements, which is what they would have to do if they were to reduce public spending rather than to increase taxes.
The reform of the system of financial regulation will be a priority, even though it is a question of slamming the stable door after the horse is gone.
Increased supervision of banks and other such entities has a limitation. Of its nature, It is looking at what has already happened . Therefore I favour simply banning some practices outright, such as proprietary trading by deposit taking institutions. At the end of the day, deposit taking institutions are guaranteed by the taxpayer, so they should be banned from gambling.
I also think that it is vital that the European Single Market for finance be not sacrificed. The fact that taxpayers in individual countries have had to bail out their own banks for losses they incurred in other countries may lead to restrictions on cross border banking in future. That must be avoided.
We must either create an EU wide deposit guarantee system, or an accepted and pre agreed system for sharing the burden between Governments of winding up banks that have failed that were active in several EU countries .