“Prolonged Period of Stagnant Growth”
By Mark Noonan on Obama Depression
Not what anyone wants to hear, but it is the case:
<<< Pimco, the world’s biggest bond fund manager, has warned the US faces a prolonged period of stagnant growth and a real risk of outright deflation, similar to what Japan experienced in 1990s.
Echoing a warning by M&G’s bond team on Monday, Pimco portfolio manager Scott Mather says if a Japan-like deflationary scenario becomes the baseline for the US, it would have “profound implications for asset prices”… >>>
Yeah, no kidding. Others – such as Mish - have been warning about this for some time. I believe we are in a deflationary spiral – and debt is the ultimate culprit as it prevents us from building wealth.
All the government spending done over the past two years – here and around the world – was intended to spark inflation (which, by the way, is the financial system and government picking your pocket, but that’s an issue for another day) and thus get the easy money, get-richer-quick (for some) economy rolling again. It didn’t work – and as noted in the article, Japan has already tried this for 20 years and it never worked – in fact, the effort exacerbates the problem because when government “stimulates”, it builds more debt.
To get out of this there are a whole list of things which must be done – but first and foremost is balancing the budget. Until government stops spending more than it takes in, there sinews of economic growth simply won’t exist in sufficient force. We also need a host of regulatory and tax changes – but even cutting taxes won’t be sufficient if government spending is not balanced.
The debt is the problem, my friends – until we fix that, we fix nothing.
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