Morgan Stanley: Weak Global Recovery Ahead

Morgan Stanley: Weak Global Recovery Ahead

  • Posted Tuesday, January 05, 2010 -
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Morgan Stanley's Stephen Roach remains skeptical about the prospects for a robust global economy, writing Tuesday morning that he expects "the weakest recovery of the modern era." His reasoning:

  • There are still plenty of toxic assets out there that haven't been marked down. "That points to further earnings impairments for financial institutions and concomitant restraints on their lending capacity."
  • The breadth of the recession was worse than normal with more countries contracting that usually do during a global turndown. "This means it will be much harder to turn around this recession-torn world."
  • The ragged condition of U.S. consumers due to job losses and over-borrowing. "No other consumer in the world is capable of filling this void."
  • Though China's recovery appears strong, there are reasons to worry about its health, as much of its growth continues to come from adding industrial capacity rather than transforming to a more consumption geared economy. "By compounding its existing imbalances, to say nothing of funding this stimulus by a record surge of state-directed bank lending, China risks a serious misallocation of capital and a worrisome deterioration of bank loan quality."

Agree? Disagree? Fire back in the comments section.

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