Stephen Roach, the chief economist at investment banking giant Morgan Stanley, has a public reputation for being bearish.
But you should hear what he's saying in private.
Roach met select groups of fund managers downtown last week, including a group at Fidelity.
His prediction: America has no better than a 10 percent chance of avoiding economic ``armageddon.''
Press were not allowed into the meetings. But the Herald has obtained a copy of Roach's presentation. A stunned source who was at one meeting said, ``it struck me how extreme he was - much more, it seemed to me, than in public.''
Roach sees a 30 percent chance of a slump soon and a 60 percent chance that ``we'll muddle through for a while and delay the eventual armageddon.''
The chance we'll get through OK: one in 10. Maybe.
In a nutshell, Roach's argument is that America's record trade deficit means the dollar will keep falling. To keep foreigners buying T-bills and prevent a resulting rise in inflation, Federal Reserve Chairman Alan Greenspan will be forced to raise interest rates further and faster than he wants.
The result: U.S. consumers, who are in debt up to their eyeballs, will get pounded.
As if on cue:
The U.S. dollar slid to yet another new low Tuesday against the euro which edged close to $1.31 after a weekend meeting of the world's top finance officials failed to send any signal that governments were preparing action to stop the dollar's slide.
The European currency rose to a new peak of $1.3093 in afternoon trading, breaking the previous record of $1.3074, set Thursday.
The dollar also was lower against the Japanese yen, falling to 102.93 yen compared with 103.15 yen late Monday. It has been trading at four-and-a-half year lows against the yen.
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