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New Book Unpicks Everyday Signs Of A Turbulent Economy - And How To Navigate Through It

Tom Burroughes, Group Editor, August 23, 2016

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What sort of signals should we heed in navigating through the turbulence of the present age? A book suggests some ideas.

The financial crisis that blew up spectacularly almost eight years ago (it seems like yesterday to this reviewer) with the bankruptcy of Lehman Brothers has thrown all kinds of assumptions into the air. The collapse of financial institutions has spread mistrust of bankers and policymakers and we have seen the rise of populist parties on the Right and Left.

The UK has voted to leave the European Union. There has been unprecedented printing of money by central banks in a bid to push up asset prices - with effects not everyone can foresee and which may yet spawn new problems. Ageing populations, the surge of public sector debt and private sector borrowing mean the very "social contract", to use a term, between present and future generations comes under considerable strain. Amid this, what sort of signals can we ordinary mortals tune into to ensure we are as flexible as possible and can adjust to any problems or opportunities that come our way?

Signals is in fact the title of a new book by a prominent figure in the world of policymaking and business, Dr Pippa Malmgren. Her 334-page book takes the reader through many of the controversies of our age, finding signals that people should attend to that vary from the design of fashion magazines and the rising price of basic foodstuffs in Egypt, to Russian incursions into the Crimea and Chinese muscle-flexing in the South China Sea. Dr Malmgren argues that there was a relatively benign and brief period after the fall of the Berlin Wall, when geopolitical risk appeared to take a backseat and academics pronounced on the “end of history”, but that since 9/11, the financial crash and turmoil in regions such as the Middle East, talk of history ending seems hubristic, at least.

Hubris and nemesis, in fact, make an appearance at the start of Dr Malmgren’s book, when she writes of how so much of economic behavior is a tug of war between hope and fear. Just as one can have too much optimism and confidence (remember when former US Federal Reserve chairman Dr Alan Greenspan spoke of “irrational exuberance” in 1996?) there can be excessive gloom, as well. (Arguably, this is our current position.) The 11-chapter book whirls the reader through issues such as how mounting debt, and the threat that Western countries may seek forms of default on it via inflation, could sour already-strained relations with countries such as China; it shows, for example, how and why Russia and China, among others, are seeking to change their trading and financial positions to reduce reliance on a dollar that has been losing trust as a global reserve currency.

Dr Malmgren also pulls no punches in her discussion of the eurozone and how the huge imbalances in the single currency region raise awkward questions around the social contracts that have underpinned governments of Europe. While no narrow nationalist, her comments on the euro, and the mentality of much of the European ruling class, leave one in little doubt that she is comfortable with the UK’s vote to leave the EU. (Her book had been released prior to that historic vote.)

The themes are connected intelligently in this book; it is deliberately written for the intelligent layperson and there is a merciful lack of charts and graphs. Dr Malmgren understands that economics is the study of human action, not robots. And one of the most interesting and optimistic parts of the book is when, just after discussing potentially alarming developments around Russia, she shifts neatly into how innovation, and new business models and ways of producing goods and services, could help lift us out of some of our financial predicaments.

As a quick read - your reviewer polished off the book in three days - Signals covers a broad range of issues that anyone concerned about the times in which we live should engage with. The book is well placed and gets the balance absolutely right - there is no “dumbing down” and yet it avoids some of the tedious jargon of modern business writing.

As a former US presidential advisor, currency strategist at Bankers Trust and deputy head of global strategy at UBS, Dr Malmgren brings plenty of policy and intellectual firepower to this book. And what is equally impressive is her willingness to get her hands dirty in starting her own businesses - she co-founded H Robotics, a manufacturing firm, and DRPM, the consultancy.

Signals is published by Weidenfeld & Nicholson.

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