Economic armageddon

From the Boston Herald:

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 downtown 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.

I tend to agree with Roach. He’s one of the few mainsteam economists for whom I have any respect. Gold is very good, but likely will take one serious price hit before skyrocketing. Remember, cash in short-term interest-bearing instruments is king during credit crunches. The massive question is whether the Fed can out-inflate the debt load. Prechter argues this is impossible, to be honest, he is persuasive but I find that very, very hard to grasp.