Roach on Sustainability

Stephen Roach of Morgan Stanley is still worried about the sustainability of the recovery:

This global rebound is unlike any experienced in the past — it has been unusually dependent on policy stimulus. Can this nascent recovery in the world economy wean itself from these life-support measures and make the all-important transition to a self-sustaining upturn?

…Global policy levers are now fully engaged. The forces of private demand are not. To the extent that job creation in the developed world remains much tougher to come by in an increasingly integrated global economy, the conversion of policy stimulus into self-sustaining private consumption could continue to be impaired. Not only does that impede the standard “multiplier” effects that lie at the heart of enduring recoveries, but it leads to a build-up of ever-greater imbalances that ultimately pose the most serious threats of all. You’d never know that from the recent euphoria in world financial markets. That’s just the problem.

Since monetary and fiscal stimulus have both pretty much run their course by now, we’ll find out if he’s right within about 6-12 months.