Europe is "turning Japanese, they really think so."
Pershing, in collaboration with Roubini Global Economics, has issued a new report that claims Europe faces the threat of "Japanization" and a lost decade; increased savings levels in developed markets will depress investment returns; and developed markets face a 1% growth rate in 2012 and 2013.
The report, titled "Rebalancing and Recovery: The Slow, Risky Road to Global Growth," finds that "global deleveraging and balance sheet repair will depress worldwide economic growth," threatening a lost decade for developed markets.
It goes on to state that private and public deleveraging in developed markets will produce increased savings. A result of this "cash stashing" is that the Eurozone will become a net creditor to emerging-market nations—the opposite of the situation in the past decade, and to developed nations in deficit, such as the U.S. and U.K.
The glut of savings will push down investment returns in emerging-market nations and will cause asset bubbles to form, disrupting their economies. They will exacerbate the ultralow interest rate environments in developed countries, hurting savers, encouraging risky investment behavior and depressing demand.
