David Malpass, chief international economist at Bear
Stearns, in a speech last month to the National Economists Club in
Washington outlines the view that the world economy is entering a
long, "saucer-shaped" slowdown. The nub of the problem is
deflation, reckons Malpass. The flip side of the greenback's
repeated 10% year-on-year gains is a drop in commodity prices of
roughly the same amount. That's going to result in hard knocks for
many economies.
The US share of world GDP has been going up rapidly and it's
higher now than in the first years of the Reagan administration in
the early 1980s. "That feels good in the short term," says Malpass.
"It means that the US economy is the engine of growth for the
world, but I also think that it's a big liability." ...
