One of the better reads from Roach.
investorshub.com
Excerpts:
that dollar depreciation was a necessary but not sufficient condition for global rebalancing (see my 14 January dispatch, “The Dollar Can’t Do It Alone”). With America’s import volumes currently running more than 50% larger than exports, I view the trade gap as, first and foremost, a problem of excess domestic demand. And barring a credible program of deficit reduction from Washington -- unfortunately, an entirely reasonable assumption -- the only way to temper America’s consumption binge, in my view, is through higher real interest rates. The combination of a weaker dollar and higher real rates fits the global rebalancing script to a tee.
and...
As one senior mining executive said, “We are at the beginning of a structural bull market in materials and energy like the 1950s and 1960s.” The point was made repeatedly that the mix of global demand was shifting increasingly to the energy- and materials-intensive Chinas and Indias of the world
Countered with...
My challenge to this conclusion came on the point as to whether China, India, and others in the developing world should truly be considered an autonomous source of incremental demand in the global economy. To the extent that these economies remain wedded largely to export-led growth models, they may be nothing more than a levered play on the American consumer -- the principal engine on the demand side of the global economy. Should US private consumption ever falter -- admittedly, a long-standing concern of mine -- then the so-called “natural demand” for energy and other raw materials might mysteriously vanish into thin air.
---------------
The last point is HUGE. I tend to think the truth lies somewhere in the middle, but I have no doubts that if the USA slows down at least initially everyone will feel the bite. In the previous slow down (2001-2002) the consumer continued to spend and housing prices kept going up. Let's see what happens these two inevitably reverse. |
