NOTE: this blog is no longer active as of 12/07. New one: http://blog.kirchhof.com
Quidquid latine dictum sit, altum viditur.
Wed, 24 Nov 2004
Economic Armageddon?
As reported in The Herald:
Stephen Roach, the chief economist at investment banking giant Morgan Stanley, has a public reputation for being bearish.
But you should hear what he's saying in private.
Roach met select groups of fund managers downtown last week, including a group at Fidelity.
His prediction: America has no better than a 10 percent chance of avoiding economic ``armageddon.''
Press were not allowed into the meetings. But the Herald has obtained a copy of Roach's presentation. A stunned source who was at one meeting said, ``it struck me how extreme he was - much more, it seemed to me, than in public.''
Roach sees a 30 percent chance of a slump soon and a 60 percent chance that ``we'll muddle through for a while and delay the eventual armageddon.''
The chance we'll get through OK: one in 10. Maybe.
In a nutshell, Roach's argument is that America's record trade deficit means the dollar will keep falling. To keep foreigners buying T-bills and prevent a resulting rise in inflation, Federal Reserve Chairman Alan Greenspan will be forced to raise interest rates further and faster than he wants.
The result: U.S. consumers, who are in debt up to their eyeballs, will get pounded.
Less a case of ``Armageddon,'' maybe, than of a ``Perfect Storm.''
Roach marshalled alarming facts to support his argument.
To finance its current account deficit with the rest of the world, he said, America has to import $2.6 billion in cash. Every working day.
That is an amazing 80 percent of the entire world's net savings.
Sustainable? Hardly.
Meanwhile, he notes that household debt is at record levels.
Twenty years ago the total debt of U.S. households was equal to half the size of the economy.
Today the figure is 85 percent.
Nearly half of new mortgage borrowing is at flexible interest rates, leaving borrowers much more vulnerable to rate hikes.
Americans are already spending a record share of disposable income paying their interest bills. And interest rates haven't even risen much yet.
But nevertheless, we're going to 'privatize' Social Security and lower taxes further. There's some real economic stewardship for you. From paying our bills and having a surplus to "Economic Armageddon" in less than four years.
Posted at 15:35 by Randy Kirchhof [Permalink]
[Reload all]
[E-mail]
him name is hopkin green frog
Help in the massive effort to find hopkin. Just click on each picture.
the web was created for this...
Posted at 09:28 by Randy Kirchhof [Permalink]
[Reload all]
[E-mail]
Oh Goody
According to Gallup,
we have a problem here. Apparently, 30 years of evangelicals taking
over our school boards and textbook selection committees has paid
off nicely:
Only about a third of Americans believe
that Charles Darwin's theory of evolution is a scientific theory
that has been well supported by the evidence, while just as many
say that it is just one of many theories and has not been supported
by the evidence. The rest say they don't know enough to say.
Forty-five percent of Americans also believe that God created human
beings pretty much in their present form about 10,000 years ago. A
third of Americans are biblical literalists who believe that the
Bible is the actual word of God and is to be taken literally, word
for word.
Posted at 09:16 by Randy Kirchhof [Permalink]
[Reload all]
[E-mail]
