The only thing we have to fear is fear itself.
Gone, it seems, are the days of the statesmen.
Speaking of fear...
The big picture is unforgiving
The U.S. economy faces problems that are much deeper than a shortfall in GDP here or a monthly job number there. Gross indebtedness in the U.S. is now well beyond its prior 1929 peak. Equally important, the dependence of the U.S. on massive and continued inflows of foreign capital – simply to finance existing levels of economic activity – can't be overstated. Foreign investors (particularly Japan and China) now own more than half the float in U.S. Treasuries.
In my view, it is nearly certain that the U.S. economy will experience a deleveraging cycle in the coming years (flat or declining gross domestic investment, tepid growth in consumption, and probably substantial dollar weakness as a result of excessive debt loads and foreign capital reliance).
I've made this argument enough times that I'll let somebody else make it. Stephen Roach of Morgan Stanley recently made these remarks:
“America's $531 billion current account deficit in 2003 absorbed a record 79% of the world's surplus saving. Saving is the sustenance of long-term growth for any economy. And yet America is lacking in saving as never before. It has finessed that shortfall by consuming the wealth generated by asset appreciation and by drawing heavily on the world's pool of surplus saving. In my view, there is nothing stable about this arrangement. In fact, there is a growing risk that America's saving shortfall will only intensify in the years ahead -- especially given Washington's total lack of fiscal integrity. As always, the flows will give the impression that this outcome is sustainable. In the end, nothing could be further from the truth.”
More...
No comments:
Post a Comment