slog and more slog

Michael Pettis:

With all of the major economies facing banking crises, they must clean up the banks by forcing the household sector to pay the bill. This will put downward pressure on household disposable income and wealth for many years.

But we are all betting on the consumer – and inexplicably enough (to me, anyway) many of us are betting most heavily on the hapless Chinese consumer – to come surging back and bring us the growth that we so desperately need. I am pretty skeptical that this will happen.

There is an awful lot of banking mess that households are going to need to deal with first, and only after the mess is cleaned up will consumption come roaring back.