The US is facing a dollar collapse by the end of 2021 and an over 50% chance of a double-dip recession, economist Stephen Roach says
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The "seemingly crazed idea" that the US dollar will collapse against other major currencies in the post-pandemic global economy is not so crazy anymore, the economist Stephen Roach told CNBC's "Trading Nation" on Wednesday.
Roach, a former chairman of Morgan Stanley Asia, also said he sees a more than 50% probability of a double-dip recession in the United States.
He based that prediction on historical evidence, saying that in eight of the past 11 business-cycle recoveries economic output has risen briefly and then fallen.Roach last predicted a dollar crash in June, saying it would collapse 35% against other major currencies within the next couple of years. At the time, the dollar index traded at about 96. On Thursday, the index traded at about 94.41.
He said on Wednesday that he expected the collapse to happen by the end of 2021, but he did not say by how much."The current-account deficit in the United States, which is the broadest measure of our international imbalance with the rest of the world, suffered a record deterioration in the second quarter," he said.
"The so-called net national savings rate, which is the sum of savings of individuals, businesses, and the government sector, also recorded a record decline in the second quarter, going back into negative territory for the first time since the global financial crisis."
Read more: A Wall Street expert breaks down why these are the best 6 stocks to own for a second coronavirus wave in addition to the FAANMGsLingering vulnerability and the aftermath of the initial decline are two factors driving the dollar's ominous future, he said.
"Lacking in saving and wanting to grow, we run these current-account deficits to borrow surplus saving, and that always pushes the currencies lower," Roach said. "And the dollar is not immune to that time-honored adjustment."
Additionally, Roach said, newCopyright © 2021. Times Internet Limited. All rights reserved.For reprint rights. Times Syndication Service.
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