Bond king Bill Gross, a self-made billionaire, is one of the most successful investors in the U.S. He co-founded the Pacific Investment Management Company (PIMCO) which manages nearly $2 trillion in assets. Gross has concerns about the long-term health of the U.S. economy.
His four main concerns are:
Debt: The world’s developed countries, including the U.S., simply have too much national debt relative to the size of their economies. Over the past 200 years, economies that have a debt-to-GDP ratio above 90 percent experience reduced growth for long periods of time. The U.S. ratio is now at 100 percent and growing.
Demographics: The U.S. population is getting older and we are having less children. As a population ages, consumption tends to decline as a 75-year-old is not going to spend like a 40-year-old. Without a larger, younger generation to replace the older folks, our long-term growth and investment prospects also look negative.
Globalization: The U.S. has benefited from several massive waves of globalization, such as the fall of the Iron Curtain and the Rise of China. Billions of new consumers for U.S. goods and services appeared. But these waves are now decades old and there are few large waves ready to replace them.
Technology: Technological advances lead to greater productivity which means you can accomplish more with less resources, including human resources. For decades, technology has been a powerful force of economic growth but now it may be that technology is turning against us, as many humans are not adapting or developing the skills necessary to secure high-paying jobs that have not been replaced by machines. This could lead to higher unemployment.
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