Showing posts with label Stephen Roach. Show all posts
Showing posts with label Stephen Roach. Show all posts

Tuesday, July 31, 2018

Despite Fed interventions we are still left with the foregone output

Stephen Roach, here, one of the few who openly acknowledges the still-shrunken economy:

The Fed mistakenly believed that what worked during the crisis would work equally well afterwards. 

An unprecedentedly weak economic recovery – roughly 2% annual growth over the past nine-plus years, versus a 4% norm in earlier cycles – says otherwise. ...

Do we want a reactive central bank that focuses on cleaning up the mess after a crisis erupts, or a pro-active central bank that leans against excesses before they spark crises?

That question – whether to “lean or clean” – has fueled a raging debate in policy and academic circles. It has an important political economy component: Are independent central banks willing to force society to sacrifice growth in order to preserve financial stability? It also bears on the bubble-spotting debate. Yet as difficult as these problems are, they pale in comparison to the foregone output of America’s anemic post-crisis recovery.


Tuesday, January 28, 2014

Balance Sheet Recession Continues To Restrain Aggregate Demand: US Halfway Through Its First Lost Decade

So says Stephen Roach for Project Syndicate, here:

As research by the economists Richard Caballero, Takeo Hoshi, and Anil Kashyap has shown, Japan’s corporate “zombies” – rendered essentially lifeless by their balance-sheet problems – ended up damaging the healthier parts of the economy. Until balance sheets are repaired, such “zombie congestion” restrains aggregate demand. Japan’s lost decades are an outgrowth of this phenomenon; the US is now halfway through the first lost decade of its own.

Wednesday, June 5, 2013

Honest Liberal Calls This The Worst Consumer Recession In Modern History

Stephen Roach of Yale University, here, points out that the rate of growth in personal consumption is just 25% of what it used to be:


Over the 21 quarters since the beginning of 2008, real (inflation-adjusted) personal consumption has risen at an average annual rate of just 0.9%. That is by far the most protracted period of weakness in real US consumer demand since the end of World War II – and a massive slowdown from the pre-crisis pace of 3.6% annual real consumption growth from 1996 to 2007. ...


[T]he release of pent-up demand in the current cycle amounted to just 3% annualized growth in the five quarters from early 2010 to early 2011. Moreover, the strongest quarterly gain was a 4.1% increase in the fourth quarter of 2010.

This is a stunning result. The worst consumer recession in modern history, featuring a record collapse in durable-goods expenditures in 2008-2009, should have triggered an outsize surge of pent-up demand. Yet it did anything but that. Instead, the release of pent-up consumer demand was literally half that of previous business cycles.

Tuesday, July 31, 2012

"Never Has The American Consumer Been This Weak For This Long"

So says Stephen Roach of Yale University, here:


Over the last 18 quarters, annualized growth in real consumer demand has averaged a mere 0.7 percent. This compares with a 3.6 percent growth trend in the decade before the crisis erupted. Never before has the American consumer been this weak for this long.

Monday, October 31, 2011

Morgan Stanley's Stephen Roach Ridicules Fed's War on Savers, Who Are Indispensable to Future Growth

He is quoted here at CNBC.com, identifying zero interest rate policy as


"financial repression practiced by your favorite central bank, the Federal Reserve. The idea that we can run zero interest rates in perpetuity and penalize savers is absurd."

"Do you know that half of American workers have no retirement fund?"

"How else are we going to fund economic growth?"

"Right now we’re borrowing surplus savings from abroad because we don’t save a nickel at home, and we have to wean ourselves from that."

Last week's GDP release indicated a precipitous fall in the personal savings rate of 20 percent in the third quarter to 4.1 percent annualized as Americans spent all their minor wage gains and diverted monies from savings just to keep up with rising prices for food, energy and healthcare, among other things.

They are not buying major appliances with the money, as Whirlpool is set to lay off 5,000 in coming months due to rapidly falling sales.

Thursday, August 25, 2011

Unprecedented Weakness in Consumer Spending Growth in Post WWII Period

So says Stephen Roach of Yale, here, who can't call this is a depression evidently because such anemic growth is, afterall, growth. He must not dwell on the overall negative back to back GDP prints for 2008 and 2009.

He prefers "Great Crisis" and the term "unprecedented" to describe what many others have rightly identified as a balance sheet recession. He does not see this being repaired any time soon, however, because we're nowhere near the needed savings rate of 8 percent nor the 75 percent level of debt to disposable personal income:

The number is 0.2%. It is the average annualized growth of US consumer spending over the past 14 quarters – calculated in inflation-adjusted terms from the first quarter of 2008 to the second quarter of 2011. Never before in the post-World War II era have American consumers been so weak for so long. This one number encapsulates much of what is wrong today in the US – and in the global economy.

There's hardly a more succinct and elegant framing of the issue to be found in what follows after that.