Roach on recession.

March 6, 2008


Op-ed, New York Times

Stephen Roach, chairman of Morgan Stanley Asia, thinks there’s ‘Double Bubble Trouble’ in the air.  In an op-ed today he argues that the situation in the U.S. looks a lot like Japan in the 1990’s.  Commenting on Washington’s recent manoeuvres to mitigate the onset of a recession – aggressively lowering interest rates, negotiating relief for homeowners, OFHEO’s uncapping Freddie and Fannie – he observes that:  “If the American economy were entering a standard cyclical downturn, there would be good reason to believe that a timely countercyclical stimulus like that devised by Washington would be effective. But this is not a standard cyclical downturn. It is a post-bubble recession.”  His frank assessment?  For asset-dependent, bubble-prone economies, a cyclical recovery — even when assisted by aggressive monetary and fiscal accommodation — isn’t a given.”  Gulp!