Enzio's Clock

1) Comment on Barack Obama's inauguration speech and the immediate tasks that the new administration is likely to undertake. What are some of the urgent issues that must be tackled?

·         He will shine as a speaker

·         His key issue is to tackle the unemployment problem

·         But he also is going to have to placate irate tax payers about the fat bonuses being paid the bankers out of taxpayer money

2) Outlook for the U.S. economy, and discuss any concerns that you may have about what's being done to prevent the U.S. economy from worsening.

·         Whilst what Obama is trying is commendable, you cannot skip cycles: you cannot move from autumn to spring without going through the healthy, rejuvenating effects of winter: this is the time when that which is meant to die does die, so that when Spring arrives, the healthy can get on with growing

·         What this means in plain talk is that the overall budget deficit of about $4 trillion (if you include the Fed’s $2 trillion)  is going to weigh on markets: once things stabilize, global investors will worry about overpriced Treasury bonds and thus about their dollar holdings

·         Indeed, this is why we have telling our website subscribers to short government bonds; our advice is up by 25% since the market peak of October 2007, very much for this reason

 3) What Obama means for Asia in terms of trade, economy?

·         If you accept my assessment that you cannot skip cycles, then Asia cannot look to America for the stimulus

·         Instead, this is a golden opportunity for Asian governments to figure out how to stimulate their own, domestic demand

·         Not much of a change in trend: output and prices down, (reported) employment down

·         There are some investors thinking that China may “lead the pack” and recover faster than others (see next): I hardly think so

·         The RMB 4 trillion stimulus package obviously is not enough – otherwise, why do they keep introducing supplementary packages?

4a)  Is China going to be the first big economies to recover?

·         Hardly.

·         The key reason is that it cannot recover quickly is that there is nothing “to recover”: with unemployment rising, people will not spend, so any stimuli along the lines of making housing more affordable are simply missing the point

·         A quick solution for China, for instance, would be to introduce universal, free health insurance: that would remove the yoke of having to save in case of illness

 5) What are your thoughts on the U.S.- China relations under Obama?

·         Part of Obama’s job is to disappoint people

·         Whilst he needs China for geo-political reasons (Korea, financing the US budget deficit, etc), he  needs local, U.S. constituents most

·         Indeed, in today’s press we read that he was more protectionist during the campaign than McCain was

·         In my most recent book, Trade Myths, I warn of rising US as well as Chinese protectionism

·         So you will see co-operation in geo-political issues like Korea, but protectionist rhetoric in trade issues on both sides of the Pacific