Home > Opinion > Hal Austin
Is it all doom and gloom?
Everyone knows there is a chill wind blowing the world of financial services, but just when the green shoots of recovery are proving not to be an optical illusion, out comes a report that, painting a worst-case scenario, shows a picture that most people are not familiar with.
In a 68-page paper, Worst-Case Debt Scenario, SocGen tells a terrifying narrative of world debt more than doubling in the next decade, urging investors to sell the dollar (which is good advice), buy government bonds and cherry pick equities and commodities.
Many people may say there is nothing alarming about this. Cautious and rational investors should always in when markets are about to take off and get out when they have clearly peaked.
But, even if the report is based on a "worst case scenario", that caveat is of little value when the body of the report is looking down a dungeon.
The report stated: "Our central economic scenario assumes a slow recovery for the global economy, but with government debt at all-time highs, in this report we spend some time taking a hard look at the downside risks."
But econometric models and the way they were used by marketing executives, are partly to blame for why we are in the mess we are in.
The problem that we blame on sub-prime borrowers is none of the sort. It is the ambition of the vast majority of people to provide for their families, including a decent home.
So, if in a low-cost, easy credit environment they borrowed more than they could afford, to buy homes that were far too big for them, although personal responsibility was one thing, the responsibility of the lender must be paramount.
This aside, the report contradicts one by the Organisation of Economic Cooperation and Development, the rich countries' club.
In its latest report, the OECD states that global growth should return by 2010 and it has since doubled its growth forecast. Maybe they are simply reading the runes differently.
