INTERVIEW-HSBC's Bootle sees risk of world slump
LONDON, Aug 28 (Reuters) - HSBC Group chief economist Roger Bootle said on Friday that he thought the risk of a
1930s-style global depression were definitely real, although he stopped short of actually predicting one.
Bootle, known in Britain as the author of a 1996 book ''The Death of Inflation,'' said the financial crisis that is raging around the
world is the worst in a quarter century.
''This is the most dangerous world crisis since the oil shocks of the 1970s,'' Bootle told Reuters. ''For the first time in my proefessional life the chances of a 1930s
style slump have to be taken seriously.''
From an investment point of view he said it was the threat to Western stock markets that was of immediate concern.
He added: ''We still are underestimating the size of those effects on economic performance. I think we're just at the beginning of the process. There are several
stages to be played.''
One of those stages, he said, would be the emergence of falling consumer prices, mainly in continental Europe but also in North America. The crisis was emanating
from Russia, where an economic crisis was intensifying almost by the hour, but the shockwaves outside Moscow were what were worrying economists.
''There are so many different elements to all this,'' Bootle said. These included:
-- the straightforward economic impact of diminished demand emanating from the Far East, as well as the potential for direct economic impacts on Latin America,
the Middle East and other parts of the world
-- the impact on price behaviour
-- the possibility of the rejection of free markets and so-called democratic principles in Russia, which could spread elsewhere around the world.
''The thing that really worries me is a really sharp slowdown in the U.S. economy,'' Bootle added. A key indicator of that, he said, would be the U.S. stock market.
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