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strategic overview of the global financial crisis today

Friday 30 October, 2009

The Chicago Counicil on Global Affairs hosted this event NAVIGATING GLOBAL BUSINESS IN THE NEW ECONOMY featuring David Nelms, CEO of Discover, Carlos Cabrera, former CEO of UOP, & moderated by Paul Laudicina, Chairman of the Board of A.T. Kearney.  They had some interesting insights on how the world is fairing in the global financial crisis.  Laudicina led off by noting there have been 120 actions by WTO countries to battle the financial crisis since the WTO’s November, 2008 meetings, so the world has been working on getting its finances back in order.  AT Kearney’s framework looks @ 5 drivers:

  1. globalization
  2. demographics
  3. natural resources/environment
  4. changes in consumer preferences
  5. activism/regulation

He noted there has been an explosion in productivity, which is what happens when you fire lots of people & force those who remain to do the same work.  Also for every 5 years baby boomers work rather than retiring, it contributes $1T of economic benefit to the economy.

Nelms offered a few interesting tidbits:

  • American savings has risen from 0 in 2004 to 7%
  • debit card use is up 50%
  • lending capacity has been cut so there is less credit available @ higher prices, resulting in less debt & risk:  the new normal should result in lower interest rates

Cabrera posited:

  • there is a standstill in investment in oil, resulting in supply problems
  • since fossil fuels provide 95% of energy world-wide & there is a “cap” of 10-15% for non-fossil fuels, the argument isn’t about carbon, rather “how do we change our energy diet?”-substitution or diversity?
  • China is worried about its environment, but 80% of its energy comes from coal & they have no scale in distribution/transportation.

issues are:

  • sources of lithium for electric cars
  • wind turbines require magnets of which the raw materials come from China
  • the US is the biggest supplier of natural gas in the world, but all oil reservoirs only use 30% of capacity
  • electricity users will see relief if nuclear power comes online
  • demand in the future is coming from the developing world
  • think diesel, not gas

Q&A

short/medium/long-term outlooks-

  • Nelms-most worried about Fannie Mae/Freddie Mac
  • Cabrera-worried about a China intervention to securing energy sources

Nelms-the fed has done a fine job, but mortgage rates will rise to bite us again & holiday spending will be flat

Cabrera-new energy discoveries are coming:  technology will create opportunities

My last word-Nelms really only addressed domestic issues, but why host a speaker who only talks about the US @ a GLOBAL affairs event?

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