Investing: The view from Pimco

Posted: May 29, 2013 in economy
Tags: , ,

MIKE Amey and Andrew Balls of the European arm of Pimco, the fixed income fund managers, held a seminar this morning on the outcome of the group’s secular forum, and it was such a good survey of the current situation that it seemed worth passing on.Their four key points were a variant on this blog’s theme of “inflate, stagnate or default”. They worry thatArtificially assisted growth and purchased financial stability may breed shortfalls and asset bubblesInternational and regional systems may fragment, and growing income inequality may destabilise geopoliticsSupply shocks and currency debasements may lead to higher and less stable inflationAbsent a growth revolution, haircuts may increase over the secular horizonThe fundamental problem, in their view, is that the global economy has been maintained in a “stable disequilibrium” by central bank policy. there is too much debt and not enough growth to erode it; the policy response has resulted in a period of stagnation, which is fuelling social tensions. Central banks have done what they can butmost asset prices are artificially high and dependent on ongoing policy support.This has helped the economy avoid the worst excesses of the cycle but there is a secular problem of slow growth potential and monetary policy isineffective in delivering longer term real growthA related problem is that, by propping up asset prices, the net …

via Economic Crisis http://www.economist.com/blogs/buttonwood/2013/05/investing-0?fsrc=rss

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