Pacific Investment Management Co., which manages the world’s biggest bond fund, is raising its forecast for U.S. growth next year as policy makers pump a “massive amount” of stimulus into the economy, Chief Executive Officer Mohamed El-Erian said, reports Bloomberg.
Pimco sees the economy growing 3 percent to 3.5 percent in the fourth quarter of next year from the same period of this year. That compares with its previous estimate for 2 percent to 2.5 percent
“The U.S. is using fiscal and monetary policy to try to attain escape velocity for the economy,” El-Erian said in a telephone interview with Bloomberg. “What we don’t know yet is whether that will be enough not just to change the economy’s trajectory for one year but to place it on a medium-term sustainable path.”
Of course, the part to focus on is the monetary policy. Fiscal policy shifts and distorts, but monetary policy is the elephant in the room.
PIMCO could very likely be low on the growth in 4Q next year, but notice there is no mention of price inflation. This Bernanke money manipulated growth will come with strong inflation.
The amount of money printing going on is simply too strong not to result in price inflation, especially with the fact that the demand to hold cash is starting to lighten and that money is hitting the economy.
As for trajectory, the only thing that is likely to have trajectory is inflation. The economy is likely to look strong in 2011, but somewhere down the road stagflation will kick in.
With over a TRILLION dollars in deficit each year, I do not wonder why the economy is in tatters. The Government is sucking in all the investment money the world has to offer, but not for long (hence QE2). Between that and costly regulations (get your 1099's ready), I don't see an end to this depression anytime soon. I see financial collapse, preceded by massive inflation.
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