This is the first in a series (I hope) of three-question interviews from Davos. I’ve been stationed on the same sofa in the Davos Kongresszentrum all day writing an article for the magazine, but I did manage to have a chat this morning with the guy on the next sofa over, Federico Sturzenegger. Sturzenegger is a former Argentine economic official and dean of the business school at Universidad Torcuato Di Tella who after a couple years of visiting-professoring at Harvard was asked a year ago to take over as president of the state-owned Banco de la Ciudad de Buenos Aires.
What has surprised you most during the past year?
Perhaps how quickly the crisis emerged from being a financial crisis into the real economy. Last year at this time there was a financial crisis, but it had very little effect on the economy. Suddenly, after Lehman, it made a big impact in the real economy.
What are your biggest concerns looking forward?
How quickly the consumers can regain confidence. There’s ample liquidity in the world, but everyone’s hoarding it. As soon as consumers regain confidence I believe the rebound will be relatively strong, but the question is how long it will be before that confidence is regained.
Who’s going to fix this mess?
The guy who’s gonna fix that is time. No multilateral institutions, no governments. Central banks being able to provide liquidity is important. I believe [the impact of] fiscal stimulus is gonna be very limited. Providing liquidity is a key part of solution, but then it’s just the passage of time.
I make a big emphasis on liquidity because if you go back to two biggest crises in 20th century, in the years after 1929 and in 1982, both had extremely tight monetary conditions. In the early 1980s in U.S., interest rates hit 20%. We’re nowhere near that now.