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The US Consumer

Just when we were trying to enjoy the weekend, Morgan Stanley’s Stephen Roach comes out with his latest commentary “The Mother of All Carry Trades“! Housing bubble anyone?

The problem with asset bubbles in an overly indebted economy is that they are a recipe for disaster.  Think back a mere four years ago — bubbles always pop.  But the real threat is the popping of the levered bubble.  Therein lies the biggest risk of all for today’s overly-indebted, income- and saving-short American consumers.  If they lose the asset-based underpinning of the carry trade, it could finally be game over.