Presentation on theme: "Great Disappointment or Sustained Recovery? Economic Trends and Outlook Michael J. Parks, editor emeritus Marple's Northwest Business Letter michaeljparks.com."— Presentation transcript:
Human behavior cannot be predicted. Distrust anyone who claims to know the future, however dimly. The Zurich Axioms
Key Washington plusses Boeing backlog; up part of the cycle. Export orientation/weak dollar. Strong/broad portfolio in high technology (software, biotechnology/medical, entertainment, communications, the cloud). Above-average population growth.
Perspective on the times Not so fast! Just a little off the top. Many happy returns.
Key takeaways The financial crisis changed everything. A new, vastly different, era has begun. High oil prices and the threat of inflation elevate risk of recession or stagflation. Washington, helped by technology, weak $ and Boeings backlog, should outperform.
Key takeaways (continued) Two-speed global recovery. Developing/ emerging fast, advanced economies slow. U.S. recovery has reached Wall Street, banking, corporations. Not Main Street. Policy uncertainty – health care, energy, taxes – keeps corporations hoarding cash.
Normal, old and new Globalization Laissez faire banking Debt-led consumption Shrinking role for govt Worry about deflation US GDP growth > 3% Modest tax burden Protectionism Banking reregulation Fear-based savings Larger government role High risk of inflation US GDP growth ~ 2% Higher tax burden Mohamed El-Erian, Bill Gross, PIMCO, Spring 2009
Why PIMCO dumped Treasuries Medicare, Medicaid and Social Security = 44% of federal spending; rising steadily. We have relied on the assumption that we can grow our way out of the resulting debt. Unless entitlements are reformed, the U.S. will likely default -- via inflation, currency devaluation, and/or low returns to savers. Bill Gross, Pacific Investment Management Co. April 2011