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Bear on the prowl

David Malpass

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."

It's a big liability indeed. The latest official statistics show that the US is in hock to the rest of the world to the tune of $2.1

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