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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Perspective who wrote (238199)5/1/2003 11:01:29 PM
From: Perspective  Read Replies (1) of 436258
 
I was asked for a brief summary of this article:

pimco.com

so here 'tis.

Paul McCulley at PIMCO is interviewed, and posits that the 1980s-1990s was not just a bull market in stocks, but a bull market in capitalism in general. The 2000 bubble peak was the blowoff top of that, and now he thinks we've entered a bull market in government - obviously non-bullish for equities. The *unbelievable* thing in the interview is that he comes out *encouraging* the Fed to inflate, effectively to pay PIMCO's customers back in dollars worth far less than what they put in. Amazing! This is such a blatant breach of fiduciary duty for him to be speaking like that.

He makes a solid argument - I'd encourage you to follow the link and see the graphs. If your goal is to sustain aggregate demand at present levels (ie ward off recession/depression), he makes a pretty solid argument that Greenspan should quit encouraging the private sector to load up on increasing mortgage debt, reverse course on the public sector, and encourage the federal government to begin levering up.

If you believe that maintaining aggregate demand at these levels is the best thing for the economy, it's probably the right way to go about it. It says to stop lowering rates, and for the government to start borrowing money. My comment - this does nothing to solve the enormous trade imbalance, and the dollar collapse that is looming. If you could figure out a way to fix the trade imbalance without cratering demand, you might actually have a reasonable way out of this whole mess. But I haven't seen anything remotely like that.

Have a peek at the graphs - they speak for themselves.

BC
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