Consumers have stagnant real wages and they are getting hit with the shocks of higher energy prices. This is not a good combination for the overstretched consumer.
More Quotes from Stephen Roach:
Today's German angst has much in common with the experience of the American worker in the early 1980s and again the early 1990s. For both cases in the U.S., there was no gain without pain. Germany is certainly going through the pain phase, but the gains cannot be minimized.Stephen Roach
The risk is that he will be blind-sided, as his predecessors were, very early in his tenure by something he is not all that well prepared for and by something that the markets do not have confidence in him for.
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The case for a classic U.S. current account adjustment grows more compelling. This could lead to renewed weakening of the dollar and higher long- term real interest rates.
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For all of China's efforts to create a vibrant domestic market, its economy is highly dependent on exports. China's economic model these days is very much a levered play on the staying power of the overly extended American consumer, ... That's a tough place to be for any economy in an energy shock - even China.
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There is a dangerous degree of complacency, and out of that comes a surprise that does the most damage to the global economy.
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Without the consumer, revival remains all too dependent on tenuous support from China and business investment.
Stephen Roach
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