YouSaid · the spoken record

Stephen Roach

lines on the record: 87
first: 2015-12-21
most recent: 2015-12-21
sittings or episodes: 1
sources: podcast

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“I took personal exception of that as a young kid. And it's been my goal ever since. I'm no longer a young kid to make this connection between markets and macro because I think if you get that connection right and it's rare the macro thinker that can do it, you can really add value to the process. And I wish I understood that better 35, 40 years ago than I did today. It takes a long time to understand and accept that.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“About he didn't who called him fortunately, he didn't mention me by name, but he said, you know, if he has a line with something, you know, if you're spending 10 minutes a year thinking about economics, you've wasted nine of them.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Knew you were going to do that. And, you know, he was very polite. I remember someone gave me a list of people to call. So I call, you know, I called him up and I introduced myself. He asked me, he said, you know, what do I do? And I said, well, I'm recently on Wall Street. I came from the Federal Reserve. I forecast the economy. He says, so you do economics. And I said, yeah, I do. He says, well, do me a favor. He says, I really enjoyed talking again, but don't ever call me again because I don't really have any use for economists. He was very polite. And then he wrote about this in one of his books. Oh, really?”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think the most important thing is going back to this discipline of having an enormous respect for the markets to anticipate these seemingly brilliant macroeconomic insights that I and others can come up with. And connecting To the discernment, the understanding of macro trends, that's a big challenge. A lot of investors, I remember when I first started out in the business, I met this guy at Fidelity. I had no idea who he was. I was so green. His name was Peter Lynch.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“That Wall Street or Finance is your future. It still pays very well. There's great opportunity there. But there's more, as millennials will tell you, and I actually study millennials a lot in my coursework. Millennials are very non-conforming. They want something else out of life than what you and I did when we were first starting out. And so life satisfaction is really important to them. They need to challenge those aspirations with the actual experiences that they're getting rather than what something looks good on paper.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Go to work for a Goldman Sachs Morgan Stanley or whatever for a few years. And then after two to three years, take stock. You've been on a trading desk, you've been an analyst. Does this give you the satisfaction you want going forward? And then take a pause, take a break, do something else after two to three years after you've done your first stint in Wall Street. And that's something else could be going back to grad school or getting a job in an industry that actually makes things as opposed to promotes ideas. And then compare those next two to three years with your first two to three years, and you'll have a better judgment as to what you want to do in the future. But don't just monolithically get your degree from a great school like Yale where I teach, and then just assume that you figured out”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I get a lot of those students all the time. And despite the post-crisis shake out of Wall Street, I'm still shocked about a large number of students who want to go down that road. And I always tell them, look, try it out for a few years. You know, you're going to get, if you're an undergrad,”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, this goes back to the Barton Biggs insight that you need to really focus most of all on what the market is discounting and to be able to identify those anomalies, those trends, those opportunities, those risks that are not in the price. And when you can do that, you really add value to the thought process that guides and shapes markets prospectively rather than looking back through that rear view mirror.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, but it's the same concept. And I agree. I spent 21 years with Byron. We traveled the world together. I was as close with him as I was with my own siblings or I spent more time with him and he spent more time with me than we did with our own spouses. And so I would be shoulder to shoulder with him as he would articulate his 10 surprises and I would lay out some macro views that were either consistent or inconsistent with that. Sometimes we agreed, sometimes we didn't. We debated a lot. We challenged each other a lot. But his focus, again, was in maintaining the view that I make big money as an investor when I bet against something that is not in the market rather than when I bet on something that's in the market.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of sense. And Byron, to his credit, understood that through his contrarian ten surprises approach. He also felt, I think, heavily influenced by Barton, although Byron would never want to admit that publicly, that it was really important to understand what was in the market before you made an out-of-consensus bet for the future.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Think that's absolutely right. Barton's greatest gift, I think, was this uncanny sense of knowing when the market was discounting a macro trend. And as soon as that he concluded that the trend was in the market, he wanted to move on to something else.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And the perspective has shortened. Like I look at what happened in the markets this week. I mean, the only issue people cared about was whether the Fed was going to finally end the zero interest rate regime and move by 25 basis points. I think it's a very myopic view of the world. I think there's very little that's done right now in developing these deeper thematic insights that's really going to guide shape and reshape the investment climate, the economic climate, and the policy regime over longer periods of time. So I think we were lucky to be able to focus on some of these long-term themes and debate them sometimes seemingly endlessly. And I think the sell side is now drawn into a much more short-term time horizon that moves away from these broader themes”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, you know, we started out this conversation by saying I was just lucky to be in the right place at the right time. It was the golden age of Wall Street research, especially at Morgan Stanley. We could be very entrepreneurial in the way we developed research products. We really had a clean slate. And, you know, 35, 40 years later, there's a lot of people out there competing for sort of airspace and time and you have these internet enabled distribution systems that... Push research out 24 7 to everybody. I think the marketplace for ideas has become much more commoditized.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“discounting mechanism and that's not something that you learn in a PhD program in grad school it's something you learn really by living and breathing the markets and Barton was absolutely superb at that”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I look back on all the individuals that influence me the most, I'd have to say it was my dear and sadly departed friend Barton Biggs. Barton was not only, I think, a great investor, but he was able to marry his macro insights with his views on markets. And we work closely together, and he was tough. He was a gentle soul in many respects, but he was also intellectually rigorous and tough in always demanding that when I came out with some crazy theory on productivity or debt or China or whatever it was, that I market to market, try to understand what the market was discounting with respect to my trends and then to be strong or weak in emphasizing my trend not on the basis of my quote brilliant unquote analysis, but on the basis of how far the market was willing to go in believing or disbelieving. And so he connected me as a macro thinker to the market's discount.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“In the 1970s, and God rests his soul, did a terrible job as a central banker and really failed to appreciate the role that monetary policy could play in fostering high inflation. So I learned a lot from that experience, which I subsequently would refer to as a politicization of the Fed. And I think there's some of that that is very much present in the greenspan and Bernanke eras and hopefully will be dealt with effectively by Janet Yellen, who I have enormous respect for. I also learned a lot from Paul Volcker, who basically came in and said, here's why Arthur Burns is wrong, and here's what it's going to take to ring inflation out of the system. They were both very formative in my early experience. When I went into Wall Street,”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, you know, that's a good question. As I look back on mentorship, I mean, certainly when I was at the Fed, I was intimidated and ultimately influenced by two major figures. One, Arthur Burns. He was the chairman of the Fed.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, and then you have to have enough humility to know that you may have a brilliant idea or insight, but many times you're just going to fall in your face and be proven dead wrong. If you don't have the framework and the knowledge of what's on the other side of it, you don't know how to pick yourself back up and go back as a credible analyst, economist, or strategist again.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so, you know, we had this big fight. A lot of students thought that it was cool to see this new guy fighting with one of their theoretical giants. And so we turned it into a course in the university supported, and we've taught this course. Now, for five years, and it's possibly the highest ranked undergraduate econ course at Yale, because we've taught the students that not, you don't want to just go out with a stylized theoretically driven view of macro. You've got to debate both sides of these burning issues. And we do that in the classroom, and we give them a lot of assignments and exams to test them and their ability and the tools they develop to understand this. And so I think that has got to be an important feature of the Wall Street debate as well.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Alec Sabinsky. He's Russian. He's brilliant. He's a great friend of mine. But he's the theorist. I'm the market practitioner. And we debate everything. And when I first hit him with this idea, you know, we had a huge fight in one of the Yale sort of college dining rooms because I challenged him on the other side of one of his theoretical models. And he was just not used to being challenged and thinking about the other side of the debate.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“That pressure repeatedly in my cell side years on Wall Street. And I think it's a great question. You've got to own both sides of the debate. In fact, the most successful course that I teach at Yale right now is called the macro debate. Where I co teach it with a theoretical economist from the Yale Econ Department who has never been in the real world.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think that's a fair point. But, you know, I was amazed. I mean, maybe I just, David had a more sheltered life when he was toiling at Maryland. But when I first started going out in the road, Morgan Stanley in the 1980s. I would go into these conference rooms, these legendary investors. And I'd give them my baseline case. And one guy actually had a sign in the middle of his conference room where we listened to sell side presentations, get to your point within five minutes. If you don't, this meeting is over. So within five minutes, I had to lay out my base case. And then I would stop and he and others would say, okay, good case. How could you be wrong? And when I first heard that question, I go like, you got to be kidding me. You know, I can't be wrong. I came from the Fed. And then I realized, you know, that's exactly what, you know, they wanted to test. They want to test your conviction. And so I got that.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Producers, a couple of them like China and India were commodity consumers. There are different points in their development journey. They have different political systems, they have different needs, different strategies. Maybe this shakeout in EM that's been going on for several years is about moving away from this single-minded sort of homogenization of emerging markets and getting back to the fundamentals of really being able to understand individual economies and companies, whether they're in emerging markets or developed markets and what their opportunities are.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, absolutely. I mean, you know, with all due respect for Goldman Sachs and I have great respect for them as a very powerful financial institution. But BRICS was hype. It was marketing. You know, they came up with a clever acronym at a time when four large emerging economies were seemingly on the cusp of a major breakthrough. If you pick apart the BRICS, the only real growth that came, of course, was”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Ultimately, squander the seed corn of economic growth. Maybe we don't need to boost our savings rate immediately and sharply, but we need to think about a long-term strategy of having the wherewithal to fund what we need for our competitive survival.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“By illustrious luminaries, some who have Nobel Prizes, who even have beards, who write for the New York Times. And they say, don't listen to him. We should never save. You know, saving is what got us into trouble in the 1930s. And I beg to differ, I think. If a nation that doesn't save,”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, no, we're at about 3%, which is well below our long-term average, which is closer to eight. And so when you don't save, where do you get the wherewithal to invest in the infrastructure and even invest in human capital, let alone the new capacity we will need to compete in this globalized world? And no one focuses on the saving imperatives of the United States. And I would write about it from my Wall Street days or even in my Yale days. And I get attacked”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Look, I'm an economist. I actually have a PhD in economics. And one of the things you're taught way back even when I studied it is if you don't save, you can't invest. Our national savings rate, which is the sum total of savings of our businesses, our households in the government sector, which is always in deficit. If you strip out the depreciation that needs to be funded through our gross savings, Replace our Warnout Capital stock, there basically isn't any barrier.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And they've got just years of decades to go in terms of cement intensive infrastructure construction to provide the shelter and the roads and the bridges and the facilities required of the prospective urbanization that is still out there.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's a double whammy because the production side, the supply side of commodity markets is in denial over this shortfall of Chinese demand and the shift to commodity-led services. And I think that's a huge factor that's really unappreciated.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“China has just ended a 30 year period or the most spectacular growth that a large developing economy has ever experienced. This was a manufacturing-led commodity intensive growth binge. China's primary fuel source is coal. But it's demand for oil accounted for 40% of the total growth in global oil demand over the last 10 years. Its share of base metals, China's the most metal intensive economy in the world. And China is moving right now, transitioning not just to slower GDP growth, but to commodity light services growth. So in making the move from commodity intensive manufacturing to commodity light services and taking the GDP down from 10 to pick your number, six or seven. Right.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, you know, the dollar obviously is a part of that, but I think the dollar may be a symptom rather than a real cause here. I look at this commodity cycle, the super cycle on the upside and the collapse on the downside as something that is largely made in China”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think that's what we're doing. I think we are definitely working longer and our productivity as a result is being overstated, not understated.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Calculus that you're working probably about 40 hours, maybe 35 hours a week. And that's certainly true of financial services an industry that I know a lot about. And nothing can be further from the truth. And what that says is by understating work time, you're overstating the amount of output per understated work time, and you're getting credit”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Maybe not 24 7 because you look like you're well rested. Maybe 23 7. Okay, but you're working, you're basically available all day long. The U.S. Bureau of Labor Statistics, when they report your workday, they're telling the productivity.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“All right. Well, think about it. You have a cell phone or a BlackBerry or whatever you have, a laptop And so, you know, you're probably online.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Was that just an aberration? Did we just move from one technology platform to another? We're now at this new platform and we're finding it just as hard to deliver on the productivity front going forward as we did in the two decades before that. You mentioned measurement problems. I'll tell you a big measurement problem that I continue to worry about, and that is not that we're understating output, but that we're really understating labor input. Courtesy of your...”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Look, it's a great issue, and actually, I'm proud to say that was one of the issues that I really was involved in as a Wall Street economist. There are very few in Wall Street, the economics profession was always looking at the next Fed move, the next tick in the market. So there was very little appreciation for these deeper themes. But I worked continuously on this theme in the late 90s and early 2000s. I think that the productivity mystique as we shifted more into the services-based knowledge economy became a really important issue. And eventually, we did move into a period where the gains picked up, but now they seem to have stalled out. And you have to ask yourself, was that period from the mid-90s to the mid-2000s?”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, you know, longstanding assessment of the cultural characteristics of a relatively closed Japanese society would argue against that. And so that is a disconcerting. Conclusion, but again, when you're working age population is shrinking, you either need more workers, i.e., you know, more women, more younger people, or foreign workers, or you need to squeeze more out of the current workforce through productivity when you rule those options out the implications become relatively dire.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Think in Tiller on West Japan really addresses this productivity issue. And by the way, productivity is now weak for most countries in the world, including our own in the United States. That you can't offset that through financial engineering sparked by quantitative easing or zero interest rates. That's such an important lesson and it's one that, again, we just don't have the discipline or the political stamina to address. We like to think of the Japanese as being long-term strategic thinkers, but by jumping on the QE bandwagon and really trying to do much more in terms of QE than even we did, you know, that tells me that they're even betting more on these untested, unconventional policies than the US did.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And when your population, your working age population shrinks, your output is going to go down unless you can compensate for that with higher productivity. You need the structural reforms to do that. You know, there's a whole agenda of structural issues, especially in the labor market, the immigration policies that have not yet been dealt with because it's politically difficult to do in this still LDP one-party dominated system. That puts more onus on the fiscal and monetary arrows, the first two arrows, to offset the inability to really deliver on the structural reform front.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Japan Abe Nomics has three arrows recently. He's added a few more arrows because the first three weren't apparently strong enough or sharp enough. But the third arrow is the one that is ultimately going to hold the key to Japan, and that's the structural reform required to boost productivity. Japan has an aging population, and it's not just getting older, it's now shrinking.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, just one slight correction. You say U.S. QE is winding down. I mean, we're not, the Fed is not shrinking its balance sheet. It's moved the federal funds rate above zero by a measly 25 basis points, but the balance sheet, the size of the assets are still $4.5 trillion and unlike.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“But look, Japan had this interlocking Keretsu system. You're entirely right, but they made serious policy mistakes as well by believing that they could offset the yen appreciation that came out of the plaza accord with extraordinary monetary stimulus, and that created the bubbles property and equities that when they burst then brought this Coretzo system to its knees. And it was not until the late 1990s when they first started to recapitalize the banks and the Japanese corporations. Post World War II, 50s, 60s, 70s, and early 80s became a serious part of the problem. And that's certainly a lesson they ultimately had to face.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, you know, this is a great topic. Actually, I teach a course. I've been teaching it for five years. We'll teach it again next semester called The Lessons of Japan. That's what I'm asking. You're more than welcome to, again, apply to Yale, Barry, and we'll see, you know, I can get you an accelerated. A process to examine your credentials, and you could take the course next. I'll send my”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Who looked at the aftermath of the balance sheet recession in Japan and came up with a very similar but also a very provocative analytical construct of this debt rejection syndrome that falls in the aftermath of this debt-induced crisis that Japan went through. And I think it's very appropriate to analyze the US and other debt induced crises with that same type of approach”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think I couldn't have said it better, Barry. There's nothing normal about what we're going through right now. Normal means, you know, relax, this is the way it's going to be, and it sort of has a connotation of tranquility, acceptance. This is the way. Are supposed to go when you nearly blow up the system and you then spend a seemingly inordinate amount of time in repairing the damage that was done when the system was being blown up, that is much more consistent with the post-crisis payback of the work of Reinhardt and Goff and others. And I give Carmen Reinhardt and Kener Rogoff a huge amount of credit for assembling it, but by no means is this a unique theory that should just be associated with their own work. There are plenty of other people that have looked at this. One of my favorites is actually a Nemuro economist, Richard Koo.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure. And that individuals would accept some responsibility for their own reckless borrowing by moving from non-recourse to recourse lending. So if you reset their mortgage at a market clearing rate and they fail to make good on that payment, they wouldn't just lose the house. They'd lose all their other assets. So we needed a political consensus to go about addressing this excess debt problem. And of course, political consensus is an oxymoron in a system that is so dysfunctional as the Great American democracy is.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, two things I would say to that point. Number one, what we learned from Japan is really relevant to the US consumer. Japanese corporates were kept on artificial life support When they should have been allowed to go under, and that clogged the system. And so the zombies, the walking dead, ended up creating a massive congestion throughout the entire system of viable companies as well as failed companies. We've had a similar zombie congestion in the United States where the homeowners were underwater. That excess supply of homes and overhang of debt created price destruction for all the homeowners in general. So we had a nationwide collapse in our housing market sparked by one small piece of it, the subprime piece. Secondly, I reject the notion that we could not have dealt with debt forgiveness. We just needed a more reasonable approach where everybody's skin was in the game, that the government provided some subsidy to overextended Americans, that banks took write-offs. They didn't want to do that because it would hurt their earnings.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Where American homeowners, whether they were subprime or prime or not, levered their biggest asset and used the proceeds of that bet to fund both current consumption and saving. And they made, in general, a huge mistake. And so when that asset went underwater relative to the liabilities, they were stuck with a huge hole in their balance sheet and they needed to pay down debt and rebuild their saving. And all the infrastructure spending in the world would not have repaired these bruised and battered balance sheets. We needed policies aimed at taking the excess debt off the system and providing some long-term incentives for individuals to save. Instead, we got the opposite. Zero interest rates. There's no incentive to save. And debt forgiveness is a political... Incorrect argument.”
2015-12-21 · Masters in Business · Interview With Stephen Roach: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source