In the face of a stagnant US job market, falling real estate prices in America, and an unprecedented crisis in Europe which could cause huge losses for regional banks, St Louis Fed Chief Jame Bullard made audacious comments about what he sees as a surging global economy. He did so during a speech in Tokyo.
Bullard hung almost all of his hope on the strong economies of Asia.The Fed official said:
China has in the past year simply returned to its rapid growth path and is likely to remain on that path for a considerable period of time.
He added that he believes that the US economy is doing better than many experts expect.
The macroeconomic recovery in the U.S. remains on track and may be complete in the third quarter.
Bullard admitted that Europe is the potential spoiler in the world economy.
The odds against Bullard’s predictions are huge. He tip toes around the issues of a potential double dip recession that was raised again recently by poor May retail sales. And, Europe may still fall apart. The euro has recovered to $1.22, but most economists are still betting that Greece cannot repay its obligations. And, that still may mean that the capital markets will abandon Spain and Portugal, which in turn could cause sovereign defaults as well–and a collapse of US and China exports to the region.
Douglas A. McIntyre
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