Overview:
2009 was an exciting year for Global Markets! Consequent to the global financial crisis, the State re-emerged as a force for the public good after a 30-year absence in which deregulation and Free-market orthodoxy had dominated global finance and economic thinking. Governments around the world – with the U.S. reluctantly being pulled along in the wake of global financial reform – reasserted a degree of control over Markets after the debilitating global economic crisis began in 2008. When the G-20 nations representing the leading developed and developing countries met in London (April) and Pittsburgh (November), they agreed to a multi-lateral approach to financial regulatory reform and global economic recovery. Global finance and banking centers belatedly recognized and accepted the need for global regulatory governance. However, in the U.S. the financial industry remains recalcitrant to regulatory change and executive compensation – a sentiment not unexpected given the industry’s rather cozy, fraternal relationship with the Chief change agents, U.S. Treasury Secretary Timothy Geithner and the Administration’s top economic advisor Lawrence Summers who have crafted an overly-generous trillion dollar bailout for Wall Street at taxpayer expense. In addition, big banks that are considered ‘too big to fail’ because of their central importance to the financial system, again started engaging in the same risks that precipitated the financial crisis, leading to calls to break them up. Still, credible voices of change have joined the public debate such as TARP monitor Elizabeth Warren, former Fed Chair Paul Volcker, current FDIC Chair Sheila Bair, Economist Nuriel Roubini of NYU, Nobel economist and columnist Paul Krugman and former New York Governor Eliot Spitzer, among others.
Talk of the demise of ‘Anglo-Saxon capitalism’ in the aftermath of the global economic crisis was fast and furious – if somewhat premature – but not entirely wrong. What emerges as global financial regulatory reform progresses in major financial centers around the world will look more like European-style capitalism than Anglo-American (or Laissez-faire) capitalism. China’s leaders, meanwhile, worried about their trillion-dollar investment in U.S. Treasury notes, gave the federal government a public lecture on responsible economic management. China’s central bank governor even suggested a new basket of global currencies as an alternative to the Greenback (the U.S. dollar) as the global reserve currency of choice. In economic foreign policy terms, it appears to the surprise of many that President Obama is not so much a Neo-liberal adherent of free trade and globalization, as much as he is a Realist adherent of economic nationalism (protectionism). Surprises come in exotic packages: who knew..??
The Rise of China – and the other so-called BRIC nations, with Brazil foremost among the others – on the global economic stage was a welcomed, if somewhat predictable, new twist among the leading players in Global Markets. Moreover, Emerging Market economies appear to be leading the global economic recovery. Until the recent wobble in Dubai where the Gulf emirate nearly defaulted, world equity markets were remarkably buoyant. Some fretted about the threat of new bubbles, particularly in the property market in Asia, but overall, investors who dared to enter the market at the beginning of the year saw handsome returns. Brazil was a success story, bolstered by successful bids to host the Olympics and World Cup. Gold prospered too, on the back of a weak Greenback, a reminder that confidence remained fragile.
Person of the Year:
The choice may seem cliché to some, but objectively speaking, no one has dominated the world stage in 2009 in quite the manner that U.S. President Barack Obama has. Moreover, to the chagrin of his many detractors at home, no single U.S. president since perhaps Kennedy has been received with the international acclaim that Obama has enjoyed in nearly every port-of-call around the globe. He has almost single-handedly restored American popularity abroad, and induced a collective sigh of relief at home after eight years of unilateral and preemptory erosion during the Bush presidency. And he has done so despite a sustained level of what can only be described as gratuitous criticism and irrational hostility beginning the day after he took office – something never before endured by any new, popularly elected president. That he has been able to accomplish so much, in so little time, with so much gratuitous and cynical political hostility at home defies logic, and says far more about the mucky nature of modern American political culture than it does about the president.
But Obama wins the Global Markets & Foreign Policy ‘Person of the Year’ kudos not just on style points, but on substantive matters as well. For instance, immediately upon taking office in January, Obama moved aggressively on domestic economic issues. First he passed federal bailout legislation to rescue the financial industry and preventing the demise of the global financial system; next he passed a suite of economic rescue packages that pulled the economy back from the precipice of a global economic depression, rallied the Stock Market, saved homeowner from foreclosure, saved the demise of the U.S. auto manufacturing industry, and stanched the loss of jobs from over 700,000 per month when he took office, to fewer than 150,000 per month in November. Then there is the Obama Stock Market recovery – currently up a robust 60% since he took office; not to mention that he is on the verge of (finally!) adding the U.S. to the list of leading wealthy nations who provide universal health coverage to their citizens. An impressive string of accomplishments less than one year into his presidency.
Internationally, the president has clearly articulated an Economic Foreign Policy vision in the appointment of his commerce secretary and on his first official visit as President to our Canadian neighbors, and in March he delivered a ground-breaking address to the Arab World in Cairo, Egypt pledging a ‘new covenant’ with the West. And in the process he has also firmly established what can now be called ‘the Obama Doctrine’ in U.S. Foreign Policy – outlined before the United Nations General Assembly in September, and during his recent visit to Oslo, Norway. Oh, yes! And then there was winning the Nobel Peace Prize – no easy feat for a world leader managing two unpopular wars abroad.
Runner-Up: Elizabeth Warren, Chair – Congressional Oversight Panel for TARP (bailout) assets, because she is cogent and prescient on so many issues surrounding the financial crisis.
Most Unexpected Event:
The selection of President Obama as the recipient of the Nobel Peace Prize less than a year into his eventful presidency was the most unanticipated event in 2009 that elicited praise around the globe, but scorn from his detractors at home. The committee gave as reason for the selection, his “extraordinary efforts to strengthen international diplomacy and cooperation between peoples,” seemed more about hope and encouragement by the Nobel committee for the president’s future potential and a consensus-driven brand of American leadership around the world. With two wars, a global economic crisis to manage via the G-20, WTO negotiations and new multi-lateral agreements to negotiate, his selection carries strong global markets & economic implications.
What to Watch for in 2010:
Here are seven(7) items that I believe will emerge as important issues in Global Markets and the global economy at-large in 2010. Unlike some bloggers, I don’t regurgitate investment bank research, so check back the end of next year to see how I stack-up.
