Government attempts to artificially boost consumer demand through deficit spending are a waste of time, says Bill Gross, chief investment officer at Pimco.
Actually he put it stronger than that in his latest monthly commentary on the firm’s website.
“Current deficit spending that seeks to maintain an artificially high percentage of consumer spending can be compared to flushing money down an economic toilet,” Gross wrote.
The Obama administration forecasts a deficit of $1.47 trillion for this year.
Gross and his Pimco colleague Mohamed El-Erian have said repeatedly that we are in a “New Normal,” where U.S. economic growth and financial market returns are substandard.
“The New Normal will not be aided nor abetted by ... cyclical policy errors that thrust Keynesian consumption remedies on a declining consumer base,” Gross wrote.
“Far better to create and mimic other government industrial policies aimed at infrastructure, clean energy, more relevant education and less costly healthcare services.”
The alternative is equivalent to waiting for a malfunctioning automated toilet to flush, Gross says.
“Policymakers (would) continue to wave their hands in front of the electronic eye – waiting for the flush with very little success. Try another way, Washington.”
Gross is one of many experts worried about the budget deficit.
Nassim Taleb, renowned author of “The Black Swan,” says budget deficits represent the next source of danger for the financial markets.
“The massive (threat) is government deficits,” he told Bloomberg Businessweek.
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