Arends, Brett (2004) “Economic Armageddon predicted” BOSTONHERALD.COM,
11/23.

In a secret meeting of which notes were released to the reporter listed above, Stephen Roach, senior chief economist for Morgan Stanley, one of the most prominent financial institutions in the country, predicts a major economic downturn.

Roach was dead serious and many at the meeting were stunned. President Bush has spent too much money and has created the largest debt in recent American history. We have borrowed to the point that paying back investors (half which is China and Japan) we need to net 2.6 billion a day. Americans personally are deeply in debt. Those that hold long term variable loans are in trouble. So, the treasury needs to borrow even more so interest rates go up in this fragile economy. Thus with higher interest rates comes a depression or a recession.

The other option is to let the dollar slump and let inflation or stagflation emerge. Those with fixed rate mortgages will find that paying off their mortgage on the house will be easier. However, that assumes that they get raises.

The big losers will be long term lenders of fixed rate mortgages and those consumers now deeply in debt. Inflation is preferable to depression to protect domestic tranquility.