This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at https://www.theguardian.com/business/live/2019/feb/12/markets-boosted-by-us-government-shutdown-deal-and-trade-war-hopes-business-live

The article has changed 14 times. There is an RSS feed of changes available.

Version 9 Version 10
Mark Carney says Brexit is 'acid test', as world economy slows - business live Mark Carney says Brexit is 'acid test', as world economy slows - business live
(35 minutes later)
Back on Brexit, governor Carney is hammering home the need for certainty, warning that the situation could go “quite badly”.
.@ftlive Mark Carney 'there is a need for certainity in this world,' #FTMarkCarney #Brexit #globaleconomy pic.twitter.com/bJXSPRscsA
“You have to recognise that actually, this could go quite badly” Mark Carney discusses the prospect of a no-deal Brexit at a special event hosted by the FT @ftlive #FTMarkCarney
But he also agrees that the economy has strengths, such as the state of household and corporate balance sheers, readiness of financial sector for Brexit and the long-established strengths of the economy.
Carney also suggests that global conflicts could be the trigger that ends the global expansion.
Mark Carney is now taking some questions about his speech (highlights start here).
The FT’s Chris Giles whizzes a fast delivery at the governor:
Q: Are you saying that Britain is the canary in the coal mine for the new world order, and it’s not going very well….
Carney is tempted into playing the metaphor, joking that:
The bird may be towards the bottom of the cage, but it’s still fluttering.
He then explains that Brexit is a leading indicator - but the factors that led to the the Brexit vote are also building in other countries, and will create new challenges there too.
So policymakers need to rethink trade rules, and adjust the balance between rules made domestically and beyond.
As Carney puts it
The fundamental issue at the heart of the Brexit discussions - …. are ones which the global economy needs to grapple with.
Thus, it will be “a source of deep concern” if the Uk and EU can’t reach an agreement, as it won’t be a good leading indicator of how other countries will cope with similar challenges in the future.
This is why the Bank of England is concerned about China’s slowing economy:
Carney points to this chart and warns of a Chinese slowdown, adding: “The Bank of England estimates that a 3% drop in Chinese GDP would knock one per cent off global activity, including half a per cent off each of UK, US and euro area GDP” pic.twitter.com/5tOMnuRwtr
During his speech, Mark Carney also cites the idea that globalisation has created an impossible “political trilemma”. Basically, that we can’t have democratic accountability, national sovereignty AND be fully integrated in the global economy.During his speech, Mark Carney also cites the idea that globalisation has created an impossible “political trilemma”. Basically, that we can’t have democratic accountability, national sovereignty AND be fully integrated in the global economy.
Any two is fine, but the hat-trick is impossible (ie - a eurozone country surrenders some sovereignty when it joins the single currency, while any country loses democratic accountability if the IMF imposes bailout conditions).Any two is fine, but the hat-trick is impossible (ie - a eurozone country surrenders some sovereignty when it joins the single currency, while any country loses democratic accountability if the IMF imposes bailout conditions).
It’s an idea created by Harvard academic Dani Rodrik (see here).It’s an idea created by Harvard academic Dani Rodrik (see here).
As Carney puts it:As Carney puts it:
Globalisation leads to imbalances of democracy and sovereignty, leading many to lament a loss of control and to lose trust in the system. As Dani Rodrik has argued, there is a trilemma between economic integration, democracy and sovereignty.Globalisation leads to imbalances of democracy and sovereignty, leading many to lament a loss of control and to lose trust in the system. As Dani Rodrik has argued, there is a trilemma between economic integration, democracy and sovereignty.
Common rules and standards are required for trade in goods, services and capital, but those rules cede or, at best pool, sovereignty. To maintain legitimacy, the process of agreeing those standards needs to be rooted in democratic accountability.Common rules and standards are required for trade in goods, services and capital, but those rules cede or, at best pool, sovereignty. To maintain legitimacy, the process of agreeing those standards needs to be rooted in democratic accountability.
Much will be required to create a more inclusive, sustainable globalisation but part of the solution is a more flexible and open trading system for services and for small and medium enterprises.Much will be required to create a more inclusive, sustainable globalisation but part of the solution is a more flexible and open trading system for services and for small and medium enterprises.
Superb speech by the Governor on the Global Outlook @ftlive @MarkCarney_BOE pic.twitter.com/2oP5924bXgSuperb speech by the Governor on the Global Outlook @ftlive @MarkCarney_BOE pic.twitter.com/2oP5924bXg
From Mark Carneys' conclusion to his speech at the Barbican, which he's currently giving: "Risks from China and from de-globalisation are significant and growing. Could they be how the expansion ends?"From Mark Carneys' conclusion to his speech at the Barbican, which he's currently giving: "Risks from China and from de-globalisation are significant and growing. Could they be how the expansion ends?"
Mark Carney also warns that Brexit has hurt the UK economy - and is a warning of the damage that global trade uncertainty can cause.Mark Carney also warns that Brexit has hurt the UK economy - and is a warning of the damage that global trade uncertainty can cause.
Citing yesterday’s weak UK GDP report, he says:Citing yesterday’s weak UK GDP report, he says:
UK business investment has fallen 3.7% over the past year despite the ongoing expansion, high business profitability and accommodative financial conditions.UK business investment has fallen 3.7% over the past year despite the ongoing expansion, high business profitability and accommodative financial conditions.
With fundamental uncertainty about future market access, UK investment hasn’t grown since the referendum was called and has dramatically underperformed both history and peersWith fundamental uncertainty about future market access, UK investment hasn’t grown since the referendum was called and has dramatically underperformed both history and peers
Mark Carney rounds off his speech with a pop at Donald Trump, telling his audience at the Barbican that “Contrary to what you might have heard, it isn’t easy to win a trade war.”Mark Carney rounds off his speech with a pop at Donald Trump, telling his audience at the Barbican that “Contrary to what you might have heard, it isn’t easy to win a trade war.”
And he concludes with some eye-catching comments on Brexit, saying it’s important to reach a “solution” in the coming weeks.And he concludes with some eye-catching comments on Brexit, saying it’s important to reach a “solution” in the coming weeks.
Britain’s departure from the EU, he says, will be an ‘acid test’ of whether politicians can achieve a new form of international co-operation, while respecting democratic accountability.Britain’s departure from the EU, he says, will be an ‘acid test’ of whether politicians can achieve a new form of international co-operation, while respecting democratic accountability.
As the governor puts it:As the governor puts it:
If the UK has been somewhat more inwardly focused of late, it has been for good reason.If the UK has been somewhat more inwardly focused of late, it has been for good reason.
In many respects, Brexit is the first test of a new global order and could prove the acid test of whether a way can be found to broaden the benefits of openness while enhancing democratic accountability. Brexit can lead to a new form of international cooperation and cross-border commerce built on a better balance of local and supranational authorities. In these respects, Brexit could affect both the short and long-term global outlooks.In many respects, Brexit is the first test of a new global order and could prove the acid test of whether a way can be found to broaden the benefits of openness while enhancing democratic accountability. Brexit can lead to a new form of international cooperation and cross-border commerce built on a better balance of local and supranational authorities. In these respects, Brexit could affect both the short and long-term global outlooks.
And finally, he returns to that old explorer, Sir Martin Frobisher, who we heard about a few minutes ago.And finally, he returns to that old explorer, Sir Martin Frobisher, who we heard about a few minutes ago.
It is in the interests of everyone, arguably everywhere – from Frobisher’s grave to Frobisher’s Bay - that a Brexit solution that works for all is found in the weeks ahead.It is in the interests of everyone, arguably everywhere – from Frobisher’s grave to Frobisher’s Bay - that a Brexit solution that works for all is found in the weeks ahead.
Some tweets from Mark Carney’s speech:Some tweets from Mark Carney’s speech:
Mark Carney takes the stage @ftlive #FTMarkCarney pic.twitter.com/2ZU5DPL4WeMark Carney takes the stage @ftlive #FTMarkCarney pic.twitter.com/2ZU5DPL4We
Mark Carney 'a year ago 4/5 of the world was growing above trend and now it's only 1/3' #FTMarkCarneyMark Carney 'a year ago 4/5 of the world was growing above trend and now it's only 1/3' #FTMarkCarney
Turning to globalisation, Carney says it has brought “widespread prosperity”, but it has also created external imbalances — with large trade surpluses in some countries (eg the UK), and deficits in others (eg Germany).Turning to globalisation, Carney says it has brought “widespread prosperity”, but it has also created external imbalances — with large trade surpluses in some countries (eg the UK), and deficits in others (eg Germany).
Plus, the benefits haven’t been shared evenly:Plus, the benefits haven’t been shared evenly:
Rather, the benefits from trade are unequally spread across individuals and time. Consumers get lower prices and new products, and further benefits from higher productivity over time.Rather, the benefits from trade are unequally spread across individuals and time. Consumers get lower prices and new products, and further benefits from higher productivity over time.
Some workers, however, lose their jobs and the dignity of work, or see their “factor prices equalised.” In plain English, their wages fall.Some workers, however, lose their jobs and the dignity of work, or see their “factor prices equalised.” In plain English, their wages fall.
Mark Carney cites the risk of China’s slowing economy, the push for “de-globalisation”, and rising protectionism as key threats.Mark Carney cites the risk of China’s slowing economy, the push for “de-globalisation”, and rising protectionism as key threats.
He also warns that policymakers may struggle to spot a recession, until it happens:He also warns that policymakers may struggle to spot a recession, until it happens:
Given the confluence of the current broad-based slowdown and outstanding downside risks, some are beginning to wonder whether the global expansion, begun in 2010, could be starting to end.Given the confluence of the current broad-based slowdown and outstanding downside risks, some are beginning to wonder whether the global expansion, begun in 2010, could be starting to end.
Recessions are notoriously difficult to predict. The IMF has anticipated only a sixth of the over 300 recessions in member countries since 1991. Financial markets are more likely to cry wolf, making Paul Samuelson’s observation fifty years ago that “the stock market has predicted nine of the past five recessions” as relevant today as it was then.Recessions are notoriously difficult to predict. The IMF has anticipated only a sixth of the over 300 recessions in member countries since 1991. Financial markets are more likely to cry wolf, making Paul Samuelson’s observation fifty years ago that “the stock market has predicted nine of the past five recessions” as relevant today as it was then.
For what it is worth, market-implied probabilities of a recession in the US are around 20%, nearly three times higher relative to this time a year ago.For what it is worth, market-implied probabilities of a recession in the US are around 20%, nearly three times higher relative to this time a year ago.
Mark Carney says the deceleration in the world economy is partly because central bankers have begun tightening monetary policy (through higher interest rates), as they (slowly) unwind the stimulus packages created after the financial crisis.Mark Carney says the deceleration in the world economy is partly because central bankers have begun tightening monetary policy (through higher interest rates), as they (slowly) unwind the stimulus packages created after the financial crisis.
But there is another culprit -- trade wars.But there is another culprit -- trade wars.
The BoE governor says:The BoE governor says:
Potentially more seriously, the slowing in global momentum may also be the product of rising trade tensions and growing policy uncertainty.Potentially more seriously, the slowing in global momentum may also be the product of rising trade tensions and growing policy uncertainty.
Over in the Frobisher Hall at London’s Barbican, Mark Carney is delivering his speech on the global economy.Over in the Frobisher Hall at London’s Barbican, Mark Carney is delivering his speech on the global economy.
The Bank of England governor begins with a nod to his Canadian homeland, telling his audience that their location is named after Sir Martin Frobisher, an English navigator who scoured Canada’s eastern arctic coast in the 16th century looking for new trade routes.The Bank of England governor begins with a nod to his Canadian homeland, telling his audience that their location is named after Sir Martin Frobisher, an English navigator who scoured Canada’s eastern arctic coast in the 16th century looking for new trade routes.
(apparently most of Sir Martin’s remains are buried in the St Giles-in-the-Fields churchyard, although St Andrew’s Church in Plymouth snaffled his heart and entrails).(apparently most of Sir Martin’s remains are buried in the St Giles-in-the-Fields churchyard, although St Andrew’s Church in Plymouth snaffled his heart and entrails).
Carney says there is a link between Sir Martin and the world economy:Carney says there is a link between Sir Martin and the world economy:
Martin Frobisher is perhaps more famous in Canada than in his native land. One of the great bays in the eastern arctic is named after him. The capital of Nunavut, Iqaluit, lies at the innermost end of Frobisher Bay.Martin Frobisher is perhaps more famous in Canada than in his native land. One of the great bays in the eastern arctic is named after him. The capital of Nunavut, Iqaluit, lies at the innermost end of Frobisher Bay.
Nine years ago this month Iqaluit hosted the G7 meeting that marked the start of the euro crisis. Events that still reverberate today including in the environs of the Barbican.Nine years ago this month Iqaluit hosted the G7 meeting that marked the start of the euro crisis. Events that still reverberate today including in the environs of the Barbican.
That G7 meeting also treated us to the sight of Carney’s predecessor, Mervyn King, taking a somewhat undignified trip on a dog sled.That G7 meeting also treated us to the sight of Carney’s predecessor, Mervyn King, taking a somewhat undignified trip on a dog sled.
Mervyn King goes dog sledding but all avoid seal meat at G7 summit in CanadaMervyn King goes dog sledding but all avoid seal meat at G7 summit in Canada
Conditions today may look better than in 2010, when the world was struggling back from the financial crisis. Carney, though, sees problems ahead....Conditions today may look better than in 2010, when the world was struggling back from the financial crisis. Carney, though, sees problems ahead....
While the debate in the United Kingdom has been understandably dominated by Brexit, the world has been otherwise engaged.While the debate in the United Kingdom has been understandably dominated by Brexit, the world has been otherwise engaged.
When the Referendum was being held, the global economy was emerging from a long period of financial repair and lacklustre growth. Over the subsequent two years, a widespread and increasingly vigorous global expansion took hold. For the first time since the financial crisis, business investment and foreign trade grew strongly across all major regions. Economic uncertainty diminished, and consumer and business confidence firmed. In economies close to full employment, real wages finally began to grow.When the Referendum was being held, the global economy was emerging from a long period of financial repair and lacklustre growth. Over the subsequent two years, a widespread and increasingly vigorous global expansion took hold. For the first time since the financial crisis, business investment and foreign trade grew strongly across all major regions. Economic uncertainty diminished, and consumer and business confidence firmed. In economies close to full employment, real wages finally began to grow.
A new beginning seemed possible.A new beginning seemed possible.
In the past few quarters, however, these trends have largely reversed. After peaking a year ago around 4%, global momentum is now weakening in all major regions and downside risks have intensified. The proportion of the global economy growing above trend has fallen from four-fifths to one-third. Trade growth has slowed and the export outlook has dimmed. Capital goods orders are stagnating, investment growth has become more tepid, and business confidence is diminished.In the past few quarters, however, these trends have largely reversed. After peaking a year ago around 4%, global momentum is now weakening in all major regions and downside risks have intensified. The proportion of the global economy growing above trend has fallen from four-fifths to one-third. Trade growth has slowed and the export outlook has dimmed. Capital goods orders are stagnating, investment growth has become more tepid, and business confidence is diminished.
Heads-up. Bank of England governor Mark Carney will be speaking in London shortly, about the world economy, and key risks to the global outlook.Heads-up. Bank of England governor Mark Carney will be speaking in London shortly, about the world economy, and key risks to the global outlook.
We’re gathering the City of London's senior executives to hear Mark Carney speech and Q&A with @ChrisGiles_ in a few minutes... #FTMarkCarney pic.twitter.com/REaRQ8b66QWe’re gathering the City of London's senior executives to hear Mark Carney speech and Q&A with @ChrisGiles_ in a few minutes... #FTMarkCarney pic.twitter.com/REaRQ8b66Q
The oil price has also risen today, on hopes of a trade breakthrough in Beijing. US crude is up almost 2% at $53.37 per barrel.The oil price has also risen today, on hopes of a trade breakthrough in Beijing. US crude is up almost 2% at $53.37 per barrel.
US index futures and WTI crude taking some solace in positive noises by officials arriving in Bejing for trade talks. Usually trump deals a tough hand heading into top-level negotiations but hasn't happened yet, will history repeat itself and we get a WSJ source this afternoon?US index futures and WTI crude taking some solace in positive noises by officials arriving in Bejing for trade talks. Usually trump deals a tough hand heading into top-level negotiations but hasn't happened yet, will history repeat itself and we get a WSJ source this afternoon?