PIMCO’s Bill Gross says the debt-fuelled global economy faces a big shift, in a new FT column. The always poetic Gross makes this argument with two metaphors.First, cancer:
The world’s financial markets seem obsessed with daily monetary and fiscal policy evolutions in euroland which form the basis for risk on/risk off days in the marketplace and the overall successful deployment of carry strategies so important to asset market total returns. Euroland is just a localised tumour, however. The developing credit cancer may be metastasised, and the global monetary system fatally flawed by increasingly risky and unacceptably low yields, produced by the debt crisis and policy responses to it.
Second, whales (oddly appropriate this week, notes @peter_tl):
In nature, the mighty whale depends upon the lowly plankton for its survival and the same analogy rightly applies to global developed economies, which have dominated trade and finance at the expense of developing nations. Now the tides may be turning as once minuscule global economies find themselves in possession of a plethora of reserves. The hunted may be turning into the hunter and the global monetary system, which has evolved and morphed over the past century – but always in the direction of easier, cheaper and more abundant credit – may have reached a point at which it can no longer operate in the same way.
Gross doesn’t specify what change lies ahead, but he says it may involve a shift away from the dollar and toward hard assets.
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