Morgan Stanley economist Stephen Roach basically recaps his previous statements about the real estate bubble and the unsustainable levels of consumer spending and imports:
Speaking at the Morgan Stanley Asia-Pacific Summit in Singapore, Stephen Roach said, "America is in trouble. We are in the midst of a post-bubble business cycle. Many of the imbalances built during the last bubble are still with us."
Roach says Bush will feel pressure to use devaluation of the dollar as a tool to reduce deflationary pressures. A US current accounts deficit which is headed for 6 percent is just not sustainable:
The dollar could fall more than 15-20 percent in the next two years against the euro and the yen, Morgan Stanley's chief economist Stephen Roach said on Tuesday.
Will the Chinese be able to maintain their peg of the dollar against the renminbi? If the dollar drops and the renminbi remains pegged to it then the renminbi effectively drops with it. If the head of the Bank of Canada gets his way the US dollar will drop against the Canadian dollar. That would affect a large chunk of US imports.
|Share |||By Randall Parker at 2002 October 24 03:31 PM Economics Political|