The “New Normal”= a lower standard of living

Excepts from Bill Gross at PIMCO.  Full article here.

Bill says: “The New Normal has a new set of rules. What once pumped asset prices and favored the production of paper, as opposed to things, is now in retrograde.”

Translation: The FIRE  economy (finance, insurance, and real-estate) is dead. Better get your hands on tangible wealth: food, commodities, gold, oil. Nothing phony or speculative.

Bill says: “The hard cold reality from Stan Druckenmiller’s “old normal” is that prosperity and overconsumption was driven by asset inflation that in turn was leverage and interest rate correlated.”

Translation:  The old normal was just a ginormous bubble.

Bill says: “Investors are faced with 2.5% yielding bonds and stocks staring straight into new normal real growth rates of 2% or less. There is no 8% there for pension funds. There are no stocks for the long run at 12% returns”

Translation: If you’re a fixed-income saver, consider going back to work.  Pension plans are in serious trouble.  Nary a yield to be found – anywhere.

I  agree with Bill’s conclusion, “…the most likely consequence of stimulative government policies that strain to get us there will be a declining dollar and a lower standard of living.”

Translation: The “New Normal”= a lower standard of living.


One response to this post.

  1. Posted by M. Winston Egan on October 30, 2010 at 10:07 am

    The new normal is full of challenges particularly for persons like myself–the newly retired.


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