Direct from Davos, the bubbles and risks that
worry top bankers and CEOs
Rana ForooharJan
Who says nothing gets done at the World
Economic Forum in Davos, Switzerland? As the weeklong winter fest, which costs
tens of thousands of dollars to attend, has grown over the past decade, it has
become as much about dealmaking as about brainstorming solutions to the world’s
problems. In fact, gray-suited consultants slipping around the Magic Mountain
in their city loafers now seem to outnumber genuine thought leaders (to use a
very WEF term) by about 2 to 1. Still, the elite haven’t abandoned Davos. This
year’s shindig drew several heads of state, the world’s top bankers and a good
helping of Fortune 500 CEOs, Nobel laureates and rock-star entrepreneurs
(though, for once, no rock stars). Davos remains, as Foreign Policy Group CEO
David Rothkopf put it, “the factory in which conventional wisdom is
manufactured.” And so it is in that spirit that we offer this year’s best
takeaways, factory-direct.
A New Bubble?
We are now in historically uncharted territory
in terms of how much central bankers are doing, in lieu of real political
action, to try to boost the global economy. They are buying up trillions of
dollars’ worth of bonds and buoying world markets in the process. Apart from a
few worried Germans, nobody was talking about this last year. Now everyone is
fretting about how the Fed, the European Central Bank (until recently), the
Bank of Japan and even Chinese authorities have distorted the prices of assets
from stocks to bonds to real estate, quite possibly laying the foundation for a
market crash or, in the longer term, hyperinflation. “Central bankers can buy
time, but they can’t fix the world’s underlying economic problems,” said UBS
chairman and former Bundesbank head Axel Weber, who worries that easy money and
low interest rates are covering up the fact that most rich countries still need
to pay down debt and create a lot more jobs. “We’re buying short-term fixes at
the expense of future generations.”
