- Horizon Preference™
- Banks and the Economy
- Asymmetric Recovery
- Financial Crisis Parallels
- Re-syndication of Risk
Our outlook on time and space reflects our mood and affects our decisions. At the top, in 2000, prosperity would extend forever everywhere. Since then, as social mood has deteriorated our time preferences have become shorter and our view of the world more near-sighted.
Changes in Horizon Preference affect everything from homeownership and philanthropy to immigration policies and sourcing.
Bank balance sheets provide one of the best real time analysis tools for the economy. They are both mirror and telescope, enabling one to gage the real underlying strength of the consumer and corporations.
In 2008, banks were the dog while the rest of the economy became the tail. In 2011, it is the reverse as changes in social mood (particularly as manifest through politics and regulation) are driving banking results.
The economic recovery since 2009 has been marked by an unprecedented asymmetry, as those with financial and commodity related assets have benefitted from exceptional monetary and fiscal stimulus. At the other end of the spectrum, the "have not's" and the savers has suffered. The divergent recoveries are manifesting themselves in political and social tension, placing increasing pressure on governments globally as they attempt to deal with the growing wealth gap.
The mortgage, banking and sovereign debt crises are all variations on the same theme: Too much debt applied to borrowers of weaker and weaker credit quality. And the progression of loss recognition across all categories is entirely consistent as a result.
During 2008, risk was transferred to the public sector in developed world economies in an effort by governments to stem the consequences of the banking crisis. Now, due to fiscal challenges and changes in social mood, developed nation governments are neither "willing" nor "able" to bear the cost alone. With our "Asymmetric Recovery" the decisions as to how, when and to whom risk is transferred back into the private sector will seriously challenge developed nation political leaders and will shape developed nation economic growth for years to come.
