Posted on 02/03/2010 10:52:35 AM PST by blam
What Bill Gross Really Thinks: The US Economy Is Screwed
The Pragmatic Capitalist
Feb. 3, 2010, 12:45 PM
James Carville, the famed political strategist once said:
” I used to think if there was reincarnation, I wanted to come back as the President, or the pope, or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.”
In today’s world, the bond market runs through Bill Gross, the Founder and CEO of PIMCO. The soft spoken Californian, former professional blackjack player and billionaire, oversees over one trillion (with a T) dollars in assets under management. He has been referred to as the 4th branch of the U.S. government and with the bond market under his thumb it’s not a stretch to say that he is the most powerful man in the United States.
His current outlook for the U.S. economy is not particularly rosy (read his latest outlook here). Gross recently coined the term “the new normal” when talking about the post-crisis economy. He believes the global economy has been effectively reset as investors take on less risk, de-leverage the mountain of debt, regulation hampers growth and de-globalization takes hold. He believes this is best presented by the low expectations in the bond market where 10 year treasuries, at 3.5%, are still positioned for very meager economic growth. He says we are entering a sustained period of low growth and low inflation.
A year ago, Gross was seen as a co-conspirator of sorts in the government bailouts. As the U.S. government began to take stakes in financial institutions Gross jumped in head first with them. He piled his firm’s assets into the riskiest of risky assets in what turned out to be a brilliantly simple bet
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(Excerpt) Read more at businessinsider.com ...
Japan needed to, as we did/do, adjust prices to market. This it avoided to do, buy buying banks, keeping dead banks alive, and various methods that we are doing now.
So, it took its money, and re’invested’ it in unproductive things. Bad decision making banks( sound familiar? ), real estate prices, large un needed construction projects( high speed trains to Searchlight, Nevada? ).
Just like we are doing. There was no ‘deflation’, because they basicall bought everything. There is no inflation, because they managed the buying quite well....and the...(hint hint hint) the economy never took off. So, we don’t know if the Bank of Japan handled the inflation part, because the economy never took off. It’s just blah, stagnant. Paul Krugman says that the reason Japan has lost a generation is because they didn’t pour enough money, concrete, condo’s for sale.
This is what, to a bit, we are looking at. Although we are not Japanese, and will not be as politically nice, polite, or patient. So, my guess is the Fed get’s the riot act and Timmy Turbo and Obambi pours the money on. ( value, 2 cents )
(supply)x(demand)x(federal reserve)x(congress)x(president)x(creative destruction)/(taxes)
Find the values( good luck ), could be positive or negative. Multiply them and there’s is your course of action say if you want to as an example, make a four, five year out manufacturing decision.
And, of course the rise of derivatives, hedging, AIG insurance products was all the fault of the ‘free market’.
Tax cuts and supply side guy? Dem’s? Fugehdabou’it.
In Japan’s case it was young people not being able to have families, as housing/land prices were kept high by borrowing( a tax on the young ) and government buying banks and keeping land/buildings/homes off the market.
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I think the same thing has happened here. I read that in the past regular joes, the factory workers, had medical insurance, a house, retirement, and could put their kids through college. That’s not the case for regular joes anymore. Often they don’t have any of those things, even with both parents working.
Do you know of any conservative economic analysis of the Japanese stagnation? I’d like to learn more.
More.
http://search.mises.org/search?q=japan&site=default_collection
Awesome, thanks. I read Hayek’s “The Fatal Conceit,” only reading in the Austrian school I’ve done.
The site has a search feature. Pretty good to just research a subject. Also it and Econolog have downloadible mp3 files. I put them into a ipod and listen to them in the car, at work.
I read that essay. It was good; I think it’s the second time I’ve read it. The everything is about information aspect of the Austrian school seems like it should be part of the zeitgeist of these information age times.
I think it is also know as, ‘The knowledge Problem’.
The people best able to make the best decision are those closest to the problem.
This is why the Japanese corporation try to have as few management layers as possible, and push decision making as far down as possible, vs say the bloated, many layered labyrinthine of GM, or the Federal Government.
Another example was WWII submarine captains. German had to report in every day, where upon they were issued orders of where to go, and so forth. American captains were given an area, and then left to make decisions as they best saw fit.
Most politicians have no idea of any of this, and of course the bureaucracy is motivated, rewarded and likes more layers, more staff more opaque decision making and responsibility.
Liberty is open, decentralized, low layers. Tyranny is centralized, closed, opaque, layered.
We basically have the organization frame work now, for tyrannical government. We just need someone to seize it.
We basically have the organization frame work now, for tyrannical government. We just need someone to seize it.
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Very good post. Your last sentence rings true. Is it your idea/formulation? If it is, have you written a piece expanding on it?
Bbkmark
Thanks, I’ll check it out (literally!)
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