Stephen Roach on US, the Fed, China, and Europe

Stephen Roach says the Fed is going all in in support of QE and I agree. But what else are they going to do? Look at Europe, for example. The ECB there has a hydra-headed problem with sovereigns and banks on the brink of insolvency and they too have expanded the balance sheet like mad. China faces many of the same challenges with excess credit growth and fragile financial firms in the face of asset price deflation

Roach Sees ‘Relatively Contained’ Recession in Europe

Stephen Roach told Bloomberg television earlier today that he does not expect the recession in Europe to be severe. Therefore, he believes the impact on other economies, particularly in Asia that depends on Europe for external demand for exports, will be limited. Video below

Stephen Roach on the IMF bailout, Chinese banks and US consumers

Here’s a good all-encompassing Bloomberg TV video with Morgan Stanley’s Stephen Roach from Friday. He is not impressed with the IMF plans that the Europeans are working on, calling the numbers “chump change”. Roach also talks about the US and Chinese economies as well.

The video is below followed by the copy from Bloomberg

Andy Xie: Europe’s is a money distribution problem

Europe has an enormous productive capacity, Greece included. Debt introduces a money distribution problem that becomes a flashpoint during periods of economic weakness because the inability of large debtors to pay imperils both the debtor, the creditor and everyone whose income is derived from those sources. If the debtors are large enough as in the sovereign debt crisis in the euro zone, you get a systemic crisis that often leads to depression.

The European sovereign debt crisis is all about apportioning losses between debtors, creditors, and taxpayers from debts that simply cannot be repaid in real terms

Stephen Roach on America’s other 87 deficits

Here are a few excerpts from Stephen Roach’s latest at Project Syndicate

China will retaliate if US imposes sanctions

Professor Professor Xiang Songzuo from the Centre for International Monetary Research at Renmin University in Beijing told the BBC yesterday there would definitely be retaliation if the US moves to sanctions against China. If this scenario occurs, wouldn’t this be similar to the trade dynamic from the 1930s

Roach on the Zombie American Consumer and Debt Forgiveness

I doubt we are going to see wide scale debt forgiveness until defaults and debt deflation have taken center stage. But this is something to consider as it was an approach used during the Great Depression

Stephen Roach: Consumers need debt jubilee

The over-indebted American consumer will be hard pressed to simultaneously reduce debt and maintain levels of consumption that support economic growth. On CNBC today, Stephen Roach of Morgan Stanley says, we need a debt jubilee for consumers

Roach and Roubini: Chinese have lost confidence in America’s ‘dysfunctional economic stewardship’

Separately, both Nouriel Roubini and Stephen Roach, two leading American economists with differing views on the Chinese domestic economy have pointed out the concern China has with the dysfunctional US political system. Increasingly, the Chinese are showing signs that they are not pleased with tying up so much of their wealth in US dollars. How the Chinese plan to act upon their concerns is another matter, however

Roach: Return of the Living Dead

Rather than adding stimulus with the aim of goosing demand to help the economy reach escape velocity, I would say that the central objective of economic policy is to help the economy reach full employment. Doing so will increase demand, increase output, and cut budget deficits tremendously. Policy makers should do this while aiding the economy in reallocating scarce resources to areas that will sustain longer-term productivity growth. In America, that means less resources in finance and housing and perhaps more in technology and infrastructure

Stephen Roach: Economy Must Get Off ‘Steroids’

Roach talks to Bloomberg’s Carol Massar about the risks to an economy operating at stall speed as well as Federal Reserve monetary policy and economic lessons from Japan’s lost decades. He thinks a recessionary relapse is more likely than most, but still recommends reducing monetary liquidity and fiscal stimulus. “You can’t stand in the way of balance sheet repair,” Roach says

Has Anyone Noticed The Mammoth Shifts in Chinese Economic Policy?

I don’t think people realize that the Chinese have just made a rather sizable shift in economic policy. The Chinese are moving on multiple fronts now toward a new economic paradigm that includes slower growth but more domestic consumption. And this will have major implications for the rest of the world