>Changes in the global economic equilibrium after the crisis (NATIXIS)

The crisis is having very clear effects on the global economic equilibrium:
- fall in domestic demand in OECD countries due to private-sector deleveraging;

- continuing rapid increase in the supply of goods and services in emerging countries, especially in China, due to the high level of investment and the improvement in human capital;

- real undervaluation of the currencies of emerging countries (China), in order to sustain demand even though production capacity is excessive.

These changes are resulting in:
- a situation of huge excess global production capacity and underemployment, hence disinflation and a slowdown in wage growth;

- an increase in the surpluses of emerging countries (China) with OECD countries if the excess supply and the currency undervaluation in emerging countries outweigh the fall in demand in OECD countries, thereby aggravating "global imbalances";

- in addition, a fall in relative prices in emerging countries, due to excess supply which prevents cost convergence between emerging countries and OECD countries;

- a sharp decline in employment in OECD countries, where there is both a fall in demand and market share losses.

To read the full report: ECONOMIC EQUILIBRIUM