Once upon a time, I was told there was no such thing as a stupid question. So I’ve been asking CEOs my stupid question this earnings season: will there be a double dip or not? The answer has been an emphatic ‘no’, though they add the caveat of a soft patch in the second half of this year. A CNBC interview with the world’s most powerful man also got the same response. Barack Obama is confident that we’ll avoid a double dip.
So how much stock do we put in Greenspan’s doom and gloom? And should we worry Mohamed El-Erian, chief executive of Pacific Investment Management Company (PIMCO), the world’s biggest bond fund, thinks while deflation and double dip is not the baseline scenario, it is a risk? Therein lies the Russian roulette game being played by the austerity and stimulus camps and their influence on global interest rates.
I’d probably worry a little about the last. But that worry is still an inconvenience to my life, riddled with bill payments and investments that bring little or no return in a volatile market – a market which gets the jitters every time someone influencing monetary or fiscal policy decides to use the dreaded “DD” words.
This is a world where the ‘new normal’ is a jobless recovery. Firms have perfected the art of increased productivity and low capacity utilisation. So while the private sector is hiring, we have to accept they’re just not hiring a lot. May I also point to the fact that a weak labour and housing market hasn’t stopped the US economy from expanding for four straight quarters? We are seeing economic growth; it’s just not as much as we’re used to.
Asia is what’s propping us up, so any little policy move by China sends us into a hysteria-ridden downward spiral. But, the ‘new normal’ also means we have to get used to the idea that China may not want to implode just to make it convenient for us to grow.
So, I’ve decided to live by Naomi’s motto and tell the next person who fear-mongers about a double dip: “You’re inconveniencing my life”.
Maithreyi Seetharaman is a CNBC anchor