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Semi-Daily Journal

September 24th, 2002

Brad DeLong links to this piece from ultrabear Steven Roach, saying:
“Morgan Stanley’s Steven Roach lays out why he is so scared of the business cycle. He’s a lot more scared than I am–I am worried that deflation is a (relatively small) possibility two years hence, while he is worried that deflation is likely in the next year as what he sees as bubbles in housing prices and consumer spending pop. But he’s been consistent in his views over the past six months, while I have been moving in his direction… ”

I have a couple of observations. First, among the serious economists I know, Brad is the one I’d most readily describe as a natural optimist. When he starts getting worried, it’s time to start stocking up on gold bullion and tinned food (actually, if you buy a deflation scenario, you should start stuffing your mattress with dollar bills). Second, there’s some impressive irony in the fact that the most realistic analysis of the bursting bubble is coming from JP Morgan, which seems likely to be the epicentre of any really catastrophic collapse.

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