The rule of three
It is beginning to look like financial markets cannot handle more than three risks. First we have, as MacroScope reported earlier, Barclays Wealth worrying about U.S. consumers, euro zone debt and Asian overheating.
Now comes Jim O’Neill and his economic team at Goldman Sachs, with three slightly different notions about risks in the second half, this time in the form of questions. To whit:
1) How deep will the U.S. economic slowdown be and what will the policy response be? (That’s two questions, actually, but let’s not nitpick).
2) How much decoupling is possible between the U.S. economy and others, notably China?
3) Will sovereign and systemic risks intensify again or settle?
For what it is worth, Goldman reckons none of the three should be too damaging:
“Our own forecasts envisage a period of some muddiness in the near-term that ultimately resolves towards a more positive global view. But given the fragilities in the system, we will be watching our various proprietary tooks … and trying to stay open-minded.”
What is interesting in both the Goldman and Barclays Wealth lists of three, is that they see a tri-polar world — one in which the United States goes one way, China and the big emerging markets another, and Europe struggles with its debt hydra.
It all runs rather contrary to the globalisation story. So is there really a rule of three — or is it just three legs on a wobbly stool?