Debt Threatens Economic Recovery

March 8, 2011
U.S. exceeds World War II debt levels; rising oil prices a concern, say experts at energy conference.

The global economic recovery shows signs of resiliency but faces pressures from historically high debt levels, rising oil prices and inflation in China, said panelists making opening remarks for the IHS CERAWeek energy conference March 7 in Houston.

Debt poses a major threat to the recovery process, particularly in the United States where it has surpassed World War II levels, said Kenneth Rogoff, Thomas D. Cabot professor of public policy at Harvard University.

Rogoff was one of two speakers to open the CERAWeek international energy summit taking place at Houston's Hilton Americas hotel and convention center through March 11, which is expected to attract more than 2,200 attendees from more than 55 countries.

Rogoff also cited rising oil prices as a potential issue if they reach the $140- to $160-a-barrel range.

Meanwhile, China will continue to invest heavily in infrastructure, including high-speed rail, which will fuel strong demand for raw materials, said Jing Ulrich, managing director and chairman of J.P Morgan's China Equities and Commodities practice.

China's leaders will try to control food price inflation and seek ways to curb bank lending, Ulrich said.

Oil prices also are a concern in China where approximately 9 million barrels per day are consumed, Ulrich noted.

Ulrich projects China will allow its currency to appreciate 5% to 6% in 2011.

Rogoff said he's skeptical that China's latest five-year economic growth plan will run smoothly. The country is too heavily dependent on exports and a state-controlled economic system, he said.

Beyond 2015 China could struggle with a talent gap as younger workers seek jobs outside manufacturing, Ulrich said.

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