A senior Morgan Stanley has joined the chorus in warning that tough economic times lie ahead for the U.S. economy. Steven Roach, Morgan Stanley’s Asian Chairman, told Bloomberg Television that “We’re in the early stages of a downturn in the U.S. and global business cycles.” According to Roach, “There’s more to this macro event than just the credit-market contagion itself…Maybe two thirds of that is behind us, but the impacts on the real side of the U.S. economy and global economy are at an early stage.”
Roach’s warnings are consistent with harsh forecasts recently issued by an array of highly regarded economists. For example, Nobel Prize-winning Economist Myron Scholes announced that the credit crisis “is not over and I’m not exactly sure when it is going to end,” while Daniel McFadden, another Nobel Prize-winning Economist, stated that “as the crisis continues, you will see a lot of business failures.” Kenneth Rogoff, former chief economist at the International Monetary Fund and a professor at Harvard, has been particularly negative. Rogoff projects that “the worst is yet to come in the U.S. The financial sector needs to shrink; I don’t think that simply having a couple of medium sized banks and a couple of small banks going under is going to do the job.” Rogoff expects that “we’re not just going to see mid-sized bank go under in the next few months, we’re going to see a whopper, we’re going to see a big one, one of the big investment banks or big banks.”