Tags: Morgan Stanley’s Roach Americans Need to Save More

Morgan Stanley’s Roach: Americans Need to Save More

Friday, 28 Oct 2011 12:56 PM

Today's government-fueled economic policies are not going to push the U.S. economy out of the doldrums until consumers pay down the debts they've run up for years, says Stephen Roach, Morgan Stanley Asia non-executive Chairman.

"We are so fixated on traditional Keynesian stimulus packages or the creative, unconventional monetary policy of the Fed or the so-called jobs bill," Roach tells CNBC.

"Until we address the debt overhang of the American consumers, especially mortgage debt, until we address the deficiency of their saving position, which really damages their sense of financial security, this consumer recovery is going to be anemic and continue to hobble U.S. economic growth and U.S. employment growth."
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In fact, the Federal Reserve is punishing consumers by keeping interest rates near zero, Roach adds.

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(Getty Images photo)
While such policy aims to induce spending and ultimately, economic growth and hiring, in reality, it threatens long-term savings.

"How else are we going to fund economic growth?" Roach asks.

"Right now we’re borrowing surplus savings from abroad because we don’t save a nickel at home, and we have to wean ourselves from that," he said.

"We've got to get together and get real on policy debate here. We're not doing it at all."

Consumers spending made somewhat of a recovery in the third quarter of this year, helping to push the U.S. gross domestic product up 2.5 percent during the period, the Commerce Department reports.

"The bottom line is that the third quarter turned out to be a period of underlying strength," says Stephen Stanley, chief economist for Pierpont Securities, according to the AFP newswire.

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Today's government-fueled economic policies are not going to push the U.S. economy out of the doldrums until consumers pay down the debts they've run up for years, says Stephen Roach, Morgan Stanley Asia non-executive Chairman. We are so fixated on traditional Keynesian...
Morgan Stanley’s Roach Americans Need to Save More
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Friday, 28 Oct 2011 12:56 PM
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