Bill Gross Speaks Gibberish on Global Economy and It Makes Surprising Sense

December 4, 2012 10:31 AM EST Send to a Friend
Bill Gross put pen to paper again this month with the release of his December 2012 investment outlook. Previous topics included rapper Flavor Flav, amnesia, and the ocean's ecosystem. True to form, the Bond King began his discussion of the economy with a rambling introduction that relates the recent presidential election to lyrics from John Lennon's song Strawberry Fields Forever. Here is an expert:

"Well, I guess that settles it: you didn’t build that after all. Or maybe you did, but not all of it. Or maybe like the convoluted John Lennon above 'you think you know a yes, but it’s all wrong. That is you think you disagree.' Whatever."

Needless to say, the first paragraph of Gross's December investment outlook is pure gibberish, and that appears to be the point. In other words, in order to understand the economy, one needs the intellect of a genius, a brain full of LCD, or a Bond King to interpret the nonsense.

Gross continued his rant by saying "Developed global economies have too much debt – pure and simple – and as we attempt to resolve the dilemma, the resultant austerity should lower real growth for years to come."

Put another way, Gross said "the real cause of slower economic growth lies hidden in a number of structural as opposed to cyclical headwinds that may be hard to reverse."

To support his argument, Gross cites a paper by Carmen Reinhart and Ken Rogoff titled "Growth in a Time of Debt."

"They conclude that for the past 200 years, once a country exceeded a 90% debt/GDP ratio, economic growth slowed by nearly 2% for both developed and developing nations for an average duration of nearly a decade," pointed out Gross.

"The biblical metaphor of seven years of fat leading to seven years of lean may be quite apropos in the current case with the observation that the developed world's growth binge has been decades in the making. We may need at least a decade for the healing," wrote Gross.

This bottom line is the U.S. is likely to be grappling with a slow growth economy for many years to come, regardless of outcome from the fiscal cliff debate. Strawberry fields, it seems, don't last forever.

On a side note, Bill Gross has an unusually large head, which may house a giant-sized brain.


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