Tuesday, July 26, 2011

The Bond Market is More Worried About Economic Growth Than Deficits

link here to article

Pimco is the largest bond fund in America. It's CEO assesses the unemployment problem in the US that is being ignored by Washington as our politicians position themselves for the 2012 election cycle. Ironically, both parties are focused on the budget deficit under the pretense that it is necessary to build confidence in the bond market. If Pimco is any example, the bond market is more concerned about the structural problems in the economy that have produced the unemployment. It is also concerned about our dysfunctional political system. The economic problems that need to be addressed are serious, and it looks as though they are invisible to the folks that we elected to run the government. They are doing what they do best, that is electioneering, while "Rome" burns.

One of the points that is made in the article is worth repeating. The financial crisis precipitated the Great Recession, but the recovery has been weak because our economic problems were masked by the unsustainable boom in debt induced spending. We have restored the financial system but growth and employment will not return until we fix the structural problems that have been ignored. I wish, however, that he would have addressed the more important structural problems in the economy. A better education system would be nice but jobs are not leaving the US in order to source more skilled workers overseas.

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