Stephen Roach is without a doubt the most iconoclastic of Wall Street Economists. He has been alone among major investment house economists in calling attention to the stock bubble, the bond bubble, the housing bubble, and in questioning the sustainability of the recovery. He has arrived at some of the same conclusions as many Austrians without an explicit formulation of the Austrian Theory of the Business Cycle. He is one of the few mainstream thinkers to correctly identify the Fed’s inflationist policies as the source of asset bubbles and mal-investment.
Low interest-rate policies in the loanable funds market reduce incentives to save. Perhaps it is not surprising, therefore, that bankruptcy filings for older wage earners is at an all-time high, according to a front-page article in today’s Wall Street Journal (registration required).
Recent events such as the “deflationary boom” in China have led a few mainstream macroeconomists to re-examine and revise their views on the phenomenon of deflation, conventionally defined as a general and persistent decline in prices. The long-held view that a general fall in prices, or increase in the value of money, whatever its origin spells unmitigated disaster for overall economic activity and social welfare has begun slowly to give way to attempts to distinguish between “good” and “bad” deflation.
You heard the warnings that terrorists could attack specific sites in Washington, Manhattan, and Newark. We are talking the stock exchange, Citigroup, the World Bank, and the IMF. Had it never occurred to anyone that these might be targets? No, we had to find that out by discovering secret memos. Thank goodness for our intelligence services! What attracted far less attention was the news that came out two days later: these warnings about specific attacks were years old.
