So here we are in the middle of the Coronavirus/Covid-19 pandemic. Brexit is almost a long forgotten topic and many folk are working from home, where they are fortunate enough to be able.
There are lots of important issues being addressed all over the world. I am aware of all of these and am not avoiding the subject of any of the suffering that is ongoing. This blog is not meant to cover all of those important topics. Its purpose is simply to provide a partial insight into an interesting webinar that I was invited to attend following my participation in the Goldman Sachs 10,000 Small Businesses UK (GS10k sb uk) programme last year. These are just a few notes that I made following and during the business and economic focused webinar.
It was all very high level, macro economic content The key points from the webinar, for information only, are as follows below. Please note that these are only the opinions of two people, albeit very knowledgeable ones, and a few added notes and comments from me in brackets. Don’t base your planning around it!:
First we heard from the Chief Executive of Goldman Sachs international, Richard Gnodde.
Richard signed off and then we heard from a colleague of his, Peter Oppenheimer, Goldman Sachs head of macro research in Europe. He spoke about his thoughts as to how the bank felt things may play out. All of course caveated by the fact that these are unprecedented times. Having said that he made some excellent points that do give hope from a business perspective. If we all plan with hope in mind we can maintain positivity.
My notes from Peters talk included:
We should expect a strong recovery due to this being completely different to the financial crisis a decade ago. Those long made problems and “bubbles” have predominantly all gone and been dealt with. There was a lot of private sector balance sheet debt at that time. All of which needed restructuring. That took a long time to do and to repair. There were not many policy tools that could be used at that time – not like now!
Today activity has been stopped by force and is likely to start almost as quickly when it restarts hence a rebound is expected. (We return to where we were 5 weeks ago).
In the financial crisis the only thing the governments and central banks could do was print money and lower interest rates. Here we are seeing the money pumped into the businesses rather than just into the banks and general quantitative easing. Finance for businesses is also now a lot cheaper and more accessible than it was during the last crisis.
We have seen a very rapid response via fiscal policy to ease the effect of this sudden stop in activity. Never seen before. The UK government has been very aggressive. This included direct fiscal spending such as the wages guarantee scheme, deferred tax and VAT and so on. None of this can prevent a downturn because it is a forced lock down, but when normalisation of activity and mobility come back in, they are very positive stimuli that are in place/have been used.
The main uncertainty is the exit strategy from lock down. There are encouraging signs across Europe starting to be seen. The example given was Wuhan Providence already being open for business and travel in and out.
The worst recessions tend to be associated with big things like the bursting of financial systems such as banking. For example the US housing market and the banking system leading onto the worldwide recession in the late noughties. These see longer slower declines and far slower recoveries.
With a shock/event-driven recession, when something comes out of the blue such as a global conflict; spikes in oil prices; or in this case a virus, the difference tends to be that whilst on one hand you get very big falls in financial markets and economies occurring very quickly, on the other hand the recovery is often swifter too. Historically when this happens it is over a shorter period of time with a quicker recovery.
This is an event driven problem not a cyclical recession. It all looks very bleak and unprecedented but all the signs point to a far quicker recovery than the banking crisis.
There is no reason why, when things return more towards normality, that we should not all find ourselves back in that same position outlined above – an economy that is growing steadily and soundly. In addition we will have all of the positives about people doing things a different way, using technology, and so on and so forth. (END)
This was a great webinar to attend. Who knows if they will be right. What they said made sense and resonated positively. Hence the share.
Thank you for the webinar.
Richard Gnodde – https://www.goldmansachs.com/our-firm/leadership/management-committee/richard-j-gnodde.html
Peter Oppenheimer – https://www.goldmansachs.com/media-relations/in-the-news/current/oppenheimer-oped-folder/bio-oppenheimer.pdf