A leading economist has predicted continuing slow growth in the near term for both the US and Europe, with the solution being a review of the role of finance in the real economy, during this week's CoreNet Global Summit in Paris.
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Catherine Lubochinsky.
During a session designed to better understand the latest market upheavals and potential impacts on corporate real estate, Catherine Lubochinsky, Professor of Economics at the University of Paris 2 and Member, Cercle des Economistes, predicted that in the near term, the US and Europe will experience continuing slow growth and lower real wages.
Giving consideration to how these major markets can get out of the 'current economic mess and onto firmer footing', Lubochinsky said that the role of finance has to be revisited. "It's too big for the real economy," she cautioned. "Finance can destabilize the real economy."
The real economy, she explained, has to do with productivity and employment. And we haven't seen much of those lately.
There's ample evidence of the outsized influence of financial markets and the disconnect between finance and the real economy.
In 2010, for instance, the value of bonds, equities and bank assets in the US exceeded 431% of Gross Domestic Product (GDP). In the euro zone, it was 533%. In the UK, the figure was 850%.
"It's very easy for China to influence the price of public debt, whether US or Europe," Lubochinsky said. "They both want China to buy their bonds."
The US and Europe face a conundrum: Governments need to increase spending to spur growth, but they also need to reduce deficits. "If anyone has the answer to this, please let me know," she joked.
Concerning tax, she said: "We need taxes because we need to invest in infrastructure, research and education. Sorry for the bad news."
After her remarks, she opened up the dialogue to a panel that included Michael (Mike) Zamora, MCR, Senior Manager Asia & Pacific Regions, Cisco Systems; NLB Capital's Nigel Baker, Past President, CoreNet Global UK Chapter; Ryan Eargle, Director of Real Estate Services, MassMutual Financial Group; and Sanjay Dutt, CEO Business, Jones Lang LaSalle (India).
"Fifteen years ago, Asia was viewed as a place for back-office operations. Now, these economies have grown tremendously and are large consumer markets in their own right," Zamora reasoned.
"India has a tremendous opportunity," agreed Dutt. "India's macro-fundamentals are very strong. Companies can have a bigger work force in India than they do in the US."
"But the big challenge for emerging markets is distribution of income," cautioned Lubochinsky.
"In the US, you do have a certain disconnect," Eargle pointed out. "Corporate profits have been extraordinary, and corporate balance sheets are strong, yet the economy is weak."
This year's Summit has taken the theme 'Social Dynamics: Connectivity, Creativity, Relationships', exploring the global social change that has led people to connect across cultures and continents on both a personal and corporate level, using new tools to form new alliances and expand their reach.
The Summit has also welcomed memb
Giving consideration to how these major markets can get out of the 'current economic mess and onto firmer footing', Lubochinsky said that the role of finance has to be revisited. "It's too big for the real economy," she cautioned. "Finance can destabilize the real economy."
The real economy, she explained, has to do with productivity and employment. And we haven't seen much of those lately.
There's ample evidence of the outsized influence of financial markets and the disconnect between finance and the real economy.
In 2010, for instance, the value of bonds, equities and bank assets in the US exceeded 431% of Gross Domestic Product (GDP). In the euro zone, it was 533%. In the UK, the figure was 850%.
"It's very easy for China to influence the price of public debt, whether US or Europe," Lubochinsky said. "They both want China to buy their bonds."
The US and Europe face a conundrum: Governments need to increase spending to spur growth, but they also need to reduce deficits. "If anyone has the answer to this, please let me know," she joked.
Concerning tax, she said: "We need taxes because we need to invest in infrastructure, research and education. Sorry for the bad news."
After her remarks, she opened up the dialogue to a panel that included Michael (Mike) Zamora, MCR, Senior Manager Asia & Pacific Regions, Cisco Systems; NLB Capital's Nigel Baker, Past President, CoreNet Global UK Chapter; Ryan Eargle, Director of Real Estate Services, MassMutual Financial Group; and Sanjay Dutt, CEO Business, Jones Lang LaSalle (India).
"Fifteen years ago, Asia was viewed as a place for back-office operations. Now, these economies have grown tremendously and are large consumer markets in their own right," Zamora reasoned.
"India has a tremendous opportunity," agreed Dutt. "India's macro-fundamentals are very strong. Companies can have a bigger work force in India than they do in the US."
"But the big challenge for emerging markets is distribution of income," cautioned Lubochinsky.
"In the US, you do have a certain disconnect," Eargle pointed out. "Corporate profits have been extraordinary, and corporate balance sheets are strong, yet the economy is weak."
This year's Summit has taken the theme 'Social Dynamics: Connectivity, Creativity, Relationships', exploring the global social change that has led people to connect across cultures and continents on both a personal and corporate level, using new tools to form new alliances and expand their reach.
The Summit has also welcomed memb
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