You have to have a lot of disposable income to sustain that kind of economy. Maintaining a consumption economy can be expensive to governments at all levels, and the money either has to be borrowed or quantitatively eased into the system. Fiscal discipline is next to impossible to impose in such a system, and is usually only the result of conditions that follow a national credit default.
Re: Re : Pimco's Gross: Welcome to 'Financial Repression'
Broadway
6/11/2011 11:01:15 AM
Wait, I thought we're a consumption-based economy? So then all we need to do is invent more stuff for people to buy, preferably stuff that can be cheaply manufactured in the us by the bottom 90 percent and sold for huge markup as a luxury item to the top 10 percent.
"Scott, heres a stupid question, but what actions would improve bond fundamentals?"
Not a stupid question. A good question, in fact. And I'm afraid I don't know the answer. We could cut the debt, I suppose. But paradoxically, if the economy improved over time, the bond market might sell off because of rising inflation expectations.
Re: Re : Pimco's Gross: Welcome to 'Financial Repression'
Scott Raynovich
6/10/2011 3:20:08 PM
"Scott, If asset-based economy is over, then what will be the nature of this new economy that is emerging ?"
Good question. I guess people have to get back to real work, innovation, and things that create value rather than just trying to flip houses!
Re : Pimco's Gross: Welcome to 'Financial Repression'
yalanand
6/10/2011 12:31:08 AM
"This dynamic means that the developed G7 economies will transition to a different sort of economy than we've experienced since 1981"
Scott, If asset-based economy is over, then what will be the nature of this new economy that is emerging ?
Re: Pocket picker and bubble maker
Broadway
6/9/2011 10:02:15 PM
Scott, heres a stupid question, but what actions would improve bond fundamentals?
Scott, Value Hiker,
I think "Financial Repression" is part of the explanation for the fact that developed countries have been lagging the rest-of-the-world in economic growth for the past decade.
Here's date from the IMF website showing this continues as the non-devloped world is pulling out of the global crisis faster than the US + Europe etc. -
http://www.imf.org/external/datamapper/index.php
VH,
Indeed, the Feds are serial bubble blowers.
Here is the paradox of the bonds/debt: As the economy weakens, everybody piles bank into bonds, the yield goes down, then there is the movement to create more debt to "fix the economy," which doesn't make the fundamentals of bonds any better. Yet people still buy them. This is the downward spiral of Japan. Can we avoid it?
--Scott
Re: He might be right
Phoenix
6/9/2011 9:24:36 AM
Yes I agree. He has a point there. Emerging markets are doing really well and the growth rate of some of the Asian economies are really high in comparison to the more established developed European economies. Although the risk factor may be high they might give a better on your investments. What is your opinion?
I see how you can think there is a bubble of cheap money, but I can not believe there will not be a price to pay later. The cheap funds do help the federal debt, but as in Japan, it can only go on so long. When rates start to rise I expect we will see some market dislocations.
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