Chris Hart: Chief Strategist
17 April 2013
Universal economic access
Grassroots Growth for Poverty Reduction
QE: Short Term and Long Term
QE Costs
Short termStabilization
Long TermDebt escalation
Debt:Systemic Ponzi
Smallvs
Large
QE escalation shortens the long term timeline
QE: Central Banks starting to compete?
Source: Federal Reserve of St Louis
Global debt levels are acceleratingMay well be developing into a systemic PONZI scheme
Systemic collapse
Time
Debt needed to sustain the systemBCA: the debt super cycle
Systemic instability
Credit worthy capacity
Deb
t
Dynamics at the 11th hour, as governments compensate
Excessive debt levels mean financial repression is returningA concept widely understood in the 1970’s
Coined in 1973 by Shaw & McKinnon
Described EMs financial systems over 1960s-80s.
Same for developed economies
(WWII to the 1980s)Why is it important?
liquidating debt!!!
How is Repression achieved?
Tools ofRepression
Inflation/Deflation
Fiscal & MonetaryPolicy
Red TapeCorruption
Market Dominance
Tax(Especially Wealth)
…But SA is in a good neighborhood!!African investment risk declining
Jurisdiction risk is changing....butNeither Africa nor Europe completely homogeneous
Solvency
Europe Africa
Taxes
Solvency
Tax Burden
Macro-economic outcomesProof of the pudding
Improving economic management
Inflation
Growth3.5%
1995
40.1%
2011
5.1%
8.2%
2000
15.0%
3.6%
Understanding the growth model:Credit & consumption …or…savings & investment
GrowthEssentials
Investment Savings
Red TapeProperty RightsRule of Law
Investment timelines are important
Source: INet
Unemployment | 2001 – 2011 Proof of the Pudding!!
• Brazil unemployment: The Enigma
• Brazil Unemployment • South Africa Unemployment
2001
2002
2003
2003
2004
2005
2005
2006
2007
2007
2008
2009
2009
2010
2011
2011
4.5
5.5
6.5
7.5
8.5
9.5
10.5
11.5
12.5
2001
2002
2003
2003
2004
2005
2005
2006
2007
2007
2008
2009
2009
2010
2011
2011
20
22
24
26
28
30
32
Brazil & SA | Corporate Development
Hyperinflation
DivergentOutcomes Co
rpor
ate
Conc
entra
tion
GDP St
ock
Mar
ket
Ca
pitali
zatio
nBu
sines
sPe
rspe
ctive
Small
Bus
iness
BRIC
S an
d
Busin
ess
Stra
tegy
1986 1990 1994 1998 2002
Isolation
Indian Business Conditions | In spite of unfavorable macros: complex but thriving
IMPROVINGBUSINESS
CONDITIONS
Global VisionCompetitive
State & Private Sector
Entrepreneurship
Conglomerate
2
4
1
3Corporates & SMME mix
5
Job creation means employer creation…the scale needs to be understood
JobsEssentials
EntrepreneurshipSMME’s
HouseholdSavings
AppropriateRegulation
IncentivesRent Seeking
Job creation must be the most important priorityPoverty and inequality are consequences of unemployment
Jobs, minimum wage and global competitionAll variables are relevant
EmploymentVision Price & Value
ChinaGermany
Japan
Wages/JobsTradeoff
TechnologyMachinery
Skills
Poverty | Slums a manifestation
People work where they live
Lowers living costs 1
Govt provision of water and electricity
Crime rate low 2
Very little town planning
Regulatory restrictions low 3
Economy must be accessible at grassroots level…avoid ‘doing things for the poor’
LocalEnablers
TownPlanning
MicroeconomicReform
Policy PrioritiesService Delivery
Productivity
Cost burden must be competitive
EducationalInstitutions
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