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Shock May Put Global Relapse Odds As High As 1-in-3

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By Bloomberg News

Sept. 11 (Bloomberg) -- Odds of a U.S.-led “relapse†into global recession may be as high as one-in-three if any shock to the world’s biggest economy adds to depressed consumer demand, according to Stephen Roach of Morgan Stanley.

Economies emerging from recession need a “growth cushion†to avoid the possibility of a repeated slump, Roach, chairman of Morgan Stanley Asia, said in an interview in Dalian, China, yesterday, where he was attending a World Economic Forum event.

“The consumer is still dead money, the consumer is not coming back,†Roach said. “I’d put the relapse odds one in four, maybe as high as one in three,†he said, referring to the danger of a renewed global slowdown stemming from a shock to the U.S. economy...../

“Over the next three to five years, given the savings imperatives of the American household sector, I think that the growth rate is going to be cut in half,†Roach said, referring to U.S. consumption. “For export-led economies in China and elsewhere in the region, the biggest source of external demand is going to be growing at best, half the clip.â€

Treasury Secretary Timothy Geithner on Sept. 9 said the U.S. savings rate climbed to an average of 5 percent during the second quarter of this year from 1.2 percent at the beginning of 2008.

The U.S. has a “fair chance†of becoming a net saver as households are saving more, Gail Fosler, president of New York- based research group Conference Board, said in a speech in Singapore today.


IMO a relapse is 100% certain, guaranteed. If the US stop buying German-Chinese exports the recovery elsewhere will not happen at anything like the exuberance we have today is leading some to believe.

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