Nobert Walter, Chief Economist, Deutsche Bank Group, was ridiculed by the government of Germany when, at the peak of the financial crisis last year, he proposed a series of temporary but coordinated cuts on value-added tax. He believes not too many understand the crisis. He spoke to BT on the recession. Excerpts:
On oil prices: Due to the Asian recovery and the postponement of investment in the sector, oil prices are going to remain at higher levels. Walter expects them to be in the $60-90 range by 2010-end. “Overall, the world will suffer from higher oil prices in 2010-2011,” he says.
On the dollar: “The euro will become to the dollar what Airbus is to Boeing,” he says. What it means is that the dollar will get some serious competition. And it may slip to 1.60 to a euro rather than the widely expected value of 1.20 to a euro by 2010.
On inflation: Does not believe that the coming years will be the age of hyperinflation. Global inflation, which is closer to zero right now, may inch up to 2 per cent next year due to the impact of rising commodity prices, he feels.
On government strategies: The way-out for governments from current levels of spending include inflation, government defaults and fiscal orthodoxy. Walter believes the last option is the most viable. His forecast: in 2011, we will all bitterly complain about fiscal orthodoxy.