The former longtime Chairman of Morgan Stanley Asia, Stephen Roach has said that the negative economic growth which the United States has endured in the first half of the year will likely continue, and that a much deeper recession could last until 2024. He added that the US would need a “miracle,” to avoid a recession.

In an interview with CNBC, Roach went on to warn, “We’ll definitely have a recession as the lagged impacts of this major monetary tightening start to kick in. They haven’t kicked in at all right now.”

Formerly an economist with the Federal Reserve, Roach noted that Fed Chair Jerome Powell will have no alternative but to take a “Paul Volker” approach to tightening.

He explained, “Go back to the type of pain Paul Volcker had to impose on the US economy to ring out inflation. He had to take the unemployment rate above 10%. The only way we’re not going to get there is if the Fed under Jerome Powell sticks to his word, stays focused on discipline, and gets that real Federal funds rate into the restrictive zone. And, the restrictive zone is a long way away from where we are right now.”

Roach went on to describe how the unemployment rate in the US, which is currently 3.5%, is going to have to start rising soon. He went on, “The fact that it hasn’t happened and the Fed has done a significant monetary tightening to date shows you how much work they have to do. The unemployment rate is going to have to go up by one to two percentage points in a minimum. That would be a garden variety recession.”

Roach also said that he predicted that in the US there would be, “a cumulative drop in the economy [GDP] somewhere of around 1.5% to 2%.”

Photo of Stephen Roach courtesy of Wikipedia