Doug wrote:
> [As I just wrote Loren: "I've been wondering sometimes if we're in
> the early stages of some sort of stagflation. One difference: the
> inflation of the 70s was very political - wildcat strikes in the US,
> Third World demands for a new order, etc. Don't see much of that now,
> except maybe for Hugo Chavez."]
the most sensible establishment analyst, Stephen Roach, is bullish(joke) -- but ONLY about the ability of the "managers" of the Chinese economy to turn successfully to domestic consumption led growth from the excesses of export led growth. <http://www.morganstanley.com/GEFdata/digests/20060327-mon.html>
as for the global economy he is reliably permabearish, focused on the impossibility of the current US deficit financing model going on much longer (expecially if Chinese savings now going into treasuries go elsewhere - like domestic consumption) <http://www.morganstanley.com/GEFdata/digests/20060313-mon.html>
as for markets, he almost calls this conjuncture a top: "Even the big equity markets in the US, Europe, and Japan have looked a bit toppy in recent days as yields on long-dated US Treasuries close in on the 5% threshold. The global economy has just come off a very hot and increasingly synchronous burst of growth. Momentum-driven financial markets are betting this trend will continue. However, there is good reason to suspect that the ever-fickle pendulum of global growth is now about to swing the other way. If that turns out to be the case, increasingly myopic markets could reverse course in a flash." <http://www.morganstanley.com/GEFdata/digests/20060403-mon.html>
on inflation, he argues that there are now global costraints on inflation in any domestic economy (explicitly the US -the run up of interest rates in the US are totally an increase in real rates, no inflation premium) in the form of vast global overcapacity - and what he calls labor arbitrage (mainly that seems to be Chinese wage goods produced at very low cost). [certainly inflationary pressure from wages is zilch, but you're not going to see the words "class struggle" coming from Morgan Stanley, even when their side is winning it]. so if all monetary authorities start pushing real rates up at once the results could be very destabilizing... <http://www.morganstanley.com/GEFdata/digests/20060410-mon.html>
john mage