Why does the assassination of Archduke Franz Ferdinand — the event that lit the fuse of World War One 100 years ago Saturday — still resonate so powerfully? Virtually nobody believes World War Three will be triggered by recent the military conflicts in Ukraine, Iraq or the China seas, yet many factors today mirror those that led to the catastrophe in Sarajevo on June 28, 1914.
As Russian President Vladimir Putin signed Russia’s historic $400 billion gas-supply agreement with China, he must have felt the satisfaction of a chess grandmaster revealing the inexorable outcome of a complicated endgame.
A severe slowdown in China is viewed as among the greatest risks facing the world economy this year, and Thursday’s dismal news on Chinese manufacturing output exacerbated these fears. But the really important news from Beijing pointed in the opposite direction: Bank lending in China, instead of slowing dramatically as many economists had expected, accelerated in January to its fastest growth in four years.
The ponderously named Third Plenary Session of the 18th Central Committee of the Chinese Communist Party, which takes place this weekend, is a more important event for the world economy and for global geopolitics than the budget battles, central bank meetings and elections that attract infinitely more attention in the media and financial markets.
The Davos economic forum, held every winter in the Swiss Alps, allows its participants to look down at the world from above: topographically because of the high-altitude location, but also symbolically, because of the high incomes, high status or high-minded rhetoric that characterize the jet-setting global elite dubbed “Davos Man” by the American political scientist, Samuel Huntington. This week, however, I discovered a sub-species of Davos Man with a very different perspective. At the “summer Davos” that the World Economic Forum now organizes every year in China, participants look at the world sideways, from the East instead of down. The shift in viewpoint is striking, even for people who travel frequently to Asia, as I do, but rarely experience such total immersion in the eastern elite’s hopes and fears.
Whenever Alan Greenspan was praised for delivering a clear message on U.S. monetary policy, he liked to reply something along the lines of: “If you think that, you have misunderstood what I said.” Ben Bernanke prefers the opposite approach. On May 22, he triggered one of biggest financial panics since 2008 by raising the possibility of reducing the Fed’s record-breaking monetary stimulus, while admitting that he had no idea when to start this process. He spent the subsequent six weeks trying to clear up the mess that he had created by explaining in painstaking detail the precise timing and conditions under which “tapering” might or might not take place. In the process he created even greater confusion and financial volatility. It now appears that he would have done much better for the world economy — and for his own reputation — by saving his breath and imitating Greenspan’s obfuscation.
The North Atlantic hurricane season runs from mid-August to October, with a strong peak in storm activity around the middle of September. A less familiar but even more destructive pattern of disturbances is the financial hurricane season, which coincides with the meteorological one almost to the day.