Sep 29 2005
Who is to Blame?
Who is to blame for America’s negative personal saving rate? For its newfound asset-based saving strategies? For record levels of household sector indebtedness that are required to convert such saving into spendable purchasing power?
Who is to blame for open-ended federal budget deficits that have pushed government sector saving deeper and deeper into the red? For enacting multi-year tax cuts when private saving was at an all-time low? For embracing supply-side theories that presume such stimulus packages are self-financing?
Who is to blame for fostering a monetary policy that condones asset bubbles? For pushing the inflation-adjusted policy rate into negative territory for the longest period since the 1970s?
Who is to blame for America’s large bilateral trade deficit with China?
Unfortunately, the answers to the rhetorical questions posed above are painfully obvious,” says Morgan Stanley’s Stephen Roach, who posited each of these questions, and answered them in his most recent dispatch titled, “Who’s Blaming Whom?” Each question frames a serious structural problem that will inevitably be resolved, and perhaps not so gently as hoped given their severity.
This is a geo-political market as much as a global macro one. Know the details, and you’ll have a better chance at making smarter decisions.
If you also need more details on the seriousness of this problem, read our September 1, 2005 Commentary.)
