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Economic playoffs: Greece vs Japan vs China vs the US
Goldman Sachs' Jim O'Neill cautions that unless the fall out of the Greek debt restructuring results in fresh challenges for Italy and Spain, it’s best to remain unexcited about it.
February 12, 2012 4:19 by kippreport
Why is any of this now especially relevant? It may not be. But it may. Greece being “resolved” one way or another will either cause the bears to search elsewhere or make people focus on countries with impossible debt burdens. Japan is one of those. At a minimum, it seems to me that the days of Japan’s “happy depression” are coming to an end, and an era of some sort of “creative destruction or destructive creativism” is coming. It will probably mean a much weaker Yen, higher JGB yields, and if they can get away with it, perhaps stronger equities.
THE US STILL SHOWING BETTER SIGNS
In contrast to other parts of the world, the US has continued to report encouraging signs, although even here, this week it wasn’t uniform. Amongst the most encouraging parts, following on from the better-than-expected January payrolls, the latest weekly job claims declined further. The possibility of a reinforcing circular turn in the economy and employment is rising in my view. That is without getting too carried away with things afoot in the housing markets. This past week, Tom Teles and his colleagues have published an extremely interesting paper on a possible turn in the housing market, which is something I have felt is coming. This could be a source of major consensus underestimation for the US economy in the months and quarters ahead and trends here need to be watched really closely.
CHANCE FOR THOSE AWAITING A PULL BACK TO START INVESTING
While the immediate Greek issues will dominate financial market headlines over the weekend and early next week and give the bears all the ammunition they have been searching for these past few weeks, more objective participants should be thinking about using this set back to take a more objective stance. Unless the fall out of the Greek debt restructuring results in some fresh challenges for Italy and Spain, I remain unexcited about it.
Jim O’Neill, chairman, Goldman Sachs Asset Management