The Global Economy Is Set for a Hard Landing

The Global Economy Is Set for a Hard Landing - at www.moneyweek.com - the best of the international financial media

It never fails. Every presentation or speech I have made on global rebalancing over the past three and a half years always ends with the same question: When will these global adjustments ever occur? This, of course, is a polite way of re-phrasing the toughest critique of the rebalancing call: The history of the last couple of years is littered with false alarms over the coming US current account adjustment. Call it the "boy-cries-wolf syndrome." The longer the world endures mounting imbalances without suffering any serious consequences, the more the financial-market consensus believes this disequilibrium is sustainable.

I can certainly understand the frustration. After all, in investor circles, being early is the same as being wrong. In my view, the outcome underscores one of the greatest shortcomings of macro-economics the ability to identify the tensions of disequilibria but the failure to depict the conditions that lead to the restoration of a new equilibrium.

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