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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Knighty Tin who wrote (22936)12/6/2004 12:06:19 PM
From: John Vosilla  Read Replies (1) of 110194
 
Maybe Roach was told to put wording out that hedges both ways to cover their ass in either way kind of like comments made lately from Greenspan lately from the other side. These comments from Roach sound like financial armageddon is inevitable. Just a question of timing.

<The most serious downside risk to our new baseline forecast remains concentrated in the US, in my view -- where we have raised our 2005 growth estimate to 3.7% (from 3.3%) and look for further acceleration to 4.3% in 2006. The US, in my view, remains on a dangerous and reckless course -- consuming out of asset-based saving at a point in its demographic life-cycle when it should be building up income-based saving to fund the looming retirement of 77 million baby-boomers. Record lows in the personal saving rate and the current account deficit, to say nothing of record highs in household sector indebtedness, all speak of a US that is living dangerously beyond its means. Subsidized by unusually low interest rates, in large part underwritten by equally myopic foreign investors and governments, America has managed to keep the magic alive. But there’s nothing sustainable about that arrangement.

If America stays this course, the endgame will not be pretty. The day will come when US interest rates rise -- driven by either domestic or foreign developments. That would undoubtedly spark a painful unwinding of the Asset Economy -- all the more conceivable now that the US housing market is firmly in bubble territory (see my 2 December dispatch, “Bubble Day”). Equally worrisome is America’s anemic job creation and the related shortfall of organic income generation. November’s disappointing employment report was hardly an aberration; it marked the 31st month in this now 36-month old recovery, when job growth failed to live up to cyclical standards of the past. So much for the timeworn consensus view that the Great American Job Machine is finally on the mend. Like it or not, the United States remains mired in the mother of all jobless recoveries -- making the perils of excess consumption all the more worrisome. >
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