Bill Gross takes a shot at America, but misses

Interesting read from the Washing Post written by the most important man in the bond market, Bill Gross of PIMCO: http://www.washingtonpost.com/opinions/americas-debt-is-not-its-biggest-problem/2011/08/10/gIQAgYvE7I_story.html.  He makes a good point that Washington is focused on deficits when they should be worried about demand growth.  He asserts the U.S. economy could be constrained by nearsighted politicians, entitlements and deleveraging baby boomers.  As is to be expected of an ENORMOUS bond investor, he quietly pushes his agenda of long-term interest rates slowly moving to zero.  Bill Gross’ take on the stock market hasn’t been particularly prescient.  He misses the mark by failing to note the importance of thousands of thriving corporations catering to growing demand outside our small nation relative to the globe as a whole. 
 
If we take a break as consumers along with our Western European and Japanese counterparts, it may permit emerging economies to leap ahead with infrastructure projects and education.  This can in turn raise billions of human beings’ standard of living. 
 
It would behoove the developed countries to let the emerging world catch up a little to make the race to the economic top more fun.  This is not a zero sum game.  As the competition catches up, their ascent may offset a lot of populist hatred that gets easily converted to terror by despots and dictators.
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2 thoughts on “Bill Gross takes a shot at America, but misses

  1. I remember Ross Perot in the 1992 presidential election talking about the giant sucking sound of jobs leaving America with more trade agreements. Seems like it has happened but even worse the global job competition thanks to technology has encouraged our corporations to pay less here. Jeremy Grantham wrote about real wages have declined in the last 40 years while credit has dried up for American consumers. Do you really think the Chinese are going to come to the rescue and provide the demand needed for our products?

    • Thank you for your post.

      I believe this is a mercantilist/isolationist view that won’t stop the powerful economic forces at work around the globe. We can try to push the rest of the world off from improving its lot in life another 50 or 100 years, but satellite TV and the internet have made the globe very small. Standards of living remain at extremes which breeds hate and envy – we can stand to take a haircut in relative terms. The global economy is not a zero sum game.

      The easiest way to stop a teenager from strapping on a bomb is to give him a job with the possibility of higher wages in the future. He can take that money and go to an internet cafe to watch a Jay-Z video with a Rolls Royce Phantom in it. If he saves enough, he will buy his own cheap, small car someday and he can put the Rolls Royce logo on its hood if he so chooses.

      As far as the Chinese go, I see plenty of new immigrants in the various California cities I visit. Do you want to move to China? Probably not any time soon. As long as we keep it that way, America will be ok. If the Chinese become the creative industrial engine of the world, well shame on us. But that will be an outcome that can’t be negated today by some trade barrier or government policy. As my grandfather says, empires fall – doubtful you and I need worry about this in our life times.