Morgan Stanley's Stephen Roach was right to warn of the global impact of a bursting US housing bubble before the crash. Today, he's still pretty gloomy. The developed world is in a "Japanese-like" situation, he says on Businessinsider.com.
It has become clear since 2008/2009 that "aggressive monetary and fiscal stimulus can stop the crisis but it can't spark a sustainable recoverydebt loads are too high". American consumers are focused on repaying debt and rebuilding savings. That's why real consumption growth has averaged 0.4% in the past four years, compared to a typical rate of 3% before the crash.
This "zombie-like behaviour" could go on for another three to five years. As for America's spiralling public debt, "how long can we stay in the good graces of our foreign creditors, especially if we're aggressive in our trade policies against China"?
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Note, too, that since the Latin debt crisis in the 1980s, there has been a crisis of some kind every three years or so. Another one is likely now, given the "excess liquidity" and "reckless" fiscal policies we've seen. "I just don't know exactly where and when."
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