“The US will be back in a big way”

Deutsche Bank Research CEO Norbert Walter talks about the recession and America’s place in the global order

Norbert Walter, chief economist of Deutsche Bank Group and CEO of Deutsche Bank Research, recently visited India. He spoke to Open about the recession and America’s place in the global order.

Q Stock markets are up everywhere and economic indicators worldwide are fairly encouraging. How real is the recovery?

A The stockmarket correction may be a bit misleading. There was a massive fall in orders and production at the end of 2008, and a similar fall is unlikely. Some people are mistaking the end of that de-stocking as ‘green shoots’. Because returns from other asset classes were so abysmal, equities presented a great opportunity, given the very attractive valuations of some companies and sectors. I’m not convinced of strong fundamental reasons for a prolonged rally.

Q Which countries do you think are best placed to cash in when things do indeed turn around?

A Democracies have an inherent problem because for everything you need to seek the approval of parliament, and people have varying degrees of freedom to question executive decisions. India has that problem, so does my country Germany, but China doesn’t. Investment spending in a country like China can be faster and a great deal more effective. For that reason, I think China is best placed to come out of this mess faster.

Q After the global financial meltdown, do you think the US can continue being the engine of the world economy?

A Most definitely. I’m convinced the downward trend in the US is not here to stay with us. The entrepreneurial spirit of its people is its biggest strength. Emerging markets will be a pillar of stability and strength, but that will not be at the cost of the US, as some are predicting today. After a correction of excesses, most notably in the real estate sector, and in conspicuous consumption, the US will be back very strong and will continue to be the superpower that it is today. The dollar will again be the strongest reserve currency. People around the world—here in India and China and back home in Germany—say that this crisis was made in the United States. Therefore, it’s a deep sentimental thing for the people of the US. It’s almost a fall from grace for them. They have a reform-minded president in Barack Obama, and they will most certainly be back.

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