The world’s apparently insatiable appetite for the safety of U.S. government bonds may be helping to keep America’s borrowing rates down, but at the cost of a stronger global recovery, cautions HSBC in a new research note.
The firm says it is “unfair to blame the euro zone entirely for faltering global growth,” given that the world’s savers — that is, the major oil exporters and surplus nations across Asia — aren’t pulling their weight on the demand front.
China may be the obvious offender, but HSBC is quick to note that the nation is one of the few that is actually changing its ways; the same isn’t true, it says, for Japan or members of the Organization of Petroleum Exporting Nations. HSBC also lays some of the blame on Germany, saying it is one of the countries over-relying on a business model of export-driven growth.
“This is a collective failure, and explains why a sustainable recovery in the global economy is proving elusive,” the firm notes. It isn’t for nothing that the term “currency wars” has entered the lexicon as nations battle to use a weaker currency to their exporting advantage.
It shouldn’t be the fast-growing emerging markets, but rather the heavily indebted Western nations that ought to be seeing a boom in exports, says HSBC. This would help narrow the imbalances that prior to the 2008 financial crisis saw debtor nations like the U.S. running too-large deficits, while others accumulated surpluses.
Those imbalances have corrected somewhat, but for the wrong reason, the firm says: It is because the indebted nations have seen their imports weaken along with their economies (think Britain, Spain, and even the U.S.), not because their exports are booming. Meanwhile, although high oil prices have helped fill the coffers of OPEC member nations, that hasn’t translated into materially higher demand for imports, the firm notes.
The one nation that does appear to be changing its ways? China, whose exports are up 50 percent since 2007.
Meanwhile, “with wages picking up in Germany and modest house price inflation, the German consumer might spring to life. But we have been waiting for this for some time,” HSBC cautions. And, for now, surpluses are being used to buy “Treasurys, Gilts, and other ‘liquid’ assets,” thus allowing global imbalances to be “sustained rather than removed,” the report notes.
It is one thing, then, for Europe’s policymakers to band together with a resolution for the region’s current crisis. That shouldn’t distract from the broader reforms that need to take place, however. Unless the world’s savers let go of their export myopia and let domestic consumption assert itself, a self-sustaining global recovery is unlikely to take place.
—By CNBC’s Kelly Evans
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