Economic ‘Armageddon’ predicted

This is, um, promising…. NOT!

Stephen Roach, the chief economist at investment banking giant Morgan Stanley, has a public reputation for being bearish.

But you should hear what he’s saying in private.

Roach met select groups of fund managers [in Boston] last week, including a group at Fidelity.

His prediction: America has no better than a 10 percent chance of avoiding economic ‘armageddon.’

Press were not allowed into the meetings. But the Herald has obtained a copy of Roach’s presentation. A stunned source who was at one meeting said, ‘it struck me how extreme he was – much more, it seemed to me, than in public.’

Roach sees a 30 percent chance of a slump soon and a 60 percent chance that ‘we’ll muddle through for a while and delay the eventual armageddon.’

The chance we’ll get through OK: one in 10. Maybe.

In a nutshell, Roach’s argument is that America’s record trade deficit means the dollar will keep falling. To keep foreigners buying T-bills and prevent a resulting rise in inflation, Federal Reserve Chairman Alan Greenspan will be forced to raise interest rates further and faster than he wants.

The result: U.S. consumers, who are in debt up to their eyeballs, will get pounded.

Less a case of ‘Armageddon,” maybe, than of a ‘Perfect Storm.’

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