Felix Zulauf: Eurozone on Track to Be the Shortest Currency Union in History
Crushing any residual optimism amongst delegates after Wolfgang Münchau’s cautionary forecast at the Fifth Annual European Investment Conference, Felix Zulauf, president of Zulauf Asset Management AG, highlighted slowing growth in China as a portent to a global economic crisis that will strike every single region. Zulauf indicated that “excessive” booms always lead to a bust, and China’s will be no exception. He stated that recent Chinese growth was actually far closer to 3% than official reports of nearly triple that level. In his view, market commentators underestimate the problems in China; consequently, public growth forecasts for Australia, Latin America, and other natural resource countries are too high. He also believes that the Chinese authorities could implement “timid stimulus” after the coming leadership change but without much effect; in short, a “credit boom in reverse” seems imminent.
Zulauf argued that the U.S. government will find further fiscal stimulus unaffordable, as debt has risen from $10 trillion to $16 trillion and $25 trillion is in sight within four years at this pace. He argued that fiscal restraint is needed, even if at a short-term cost in growth, and added that “Obama has no plan” and that Republican vice presidential candidate Paul Ryan’s plan is “implausible.” Minor fixes are the likeliest case, resulting in economic stagnation. Zulauf’s only good news was that households appear to have completed deleveraging.