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CEOs' thoughts on the debt crisis
Posted on 6/26/12 at 1:30 pm
Posted on 6/26/12 at 1:30 pm
Today I had the pleasure of speaking with PwC's CEO of Central/Eastern Europe (30 countries in his region) and he shared many things, but one thing struck me.
When asked about his view on the looming debt crisis he said "The US is not Greece until it is Greece, and by that time it's too late."
Later we asked him to expound on what he meant by his previous statement. He said that "With the sorry state of politics in the US these days there is no way the debt can be repaid, the only way to get out of the hole will be to hope for economic growth and increase inflation of the dollar to 5-6% instead of 1%."
Hearing this come from one of the most high ranking members of the largest accounting firm in the world was a little unsettling. What says the money board? Is the hole too deep?
When asked about his view on the looming debt crisis he said "The US is not Greece until it is Greece, and by that time it's too late."
Later we asked him to expound on what he meant by his previous statement. He said that "With the sorry state of politics in the US these days there is no way the debt can be repaid, the only way to get out of the hole will be to hope for economic growth and increase inflation of the dollar to 5-6% instead of 1%."
Hearing this come from one of the most high ranking members of the largest accounting firm in the world was a little unsettling. What says the money board? Is the hole too deep?
2
Posted on 6/26/12 at 1:33 pm to Beerinthepocket
quote:
Is the hole too deep?
Not yet.
Posted on 6/26/12 at 1:36 pm to Beerinthepocket
quote:
Is the hole too deep?
Not for the inflation scenario.
to dig ourselves out without devaluation is going to be a tough path that no politician will ever have the balls to implement.
We are heading to inflationville and it's a nonstop flight.
Posted on 6/26/12 at 1:38 pm to Doc Fenton
quote:
Not yet.
But I see no reason to believe that we won't get there given our political parties and our voters.
Posted on 6/26/12 at 4:27 pm to TheHiddenFlask
quote:
We are heading to inflationville and it's a nonstop flight.
There is but no doubt about that. Its not a question of IF but when and for how long.
When inflation does start it will be hard to stop and will get very ugly IMO. Will we see double digit interest rates? i think so.
Posted on 6/26/12 at 4:37 pm to MoreOrLes
quote:It will hammer bluecollar workers and fixed income folks. The fact that message is not aired by any supposedly pro-workingclass media outlets or politicians is sad.
When inflation does start it will be hard to stop and will get very ugly IMO
Posted on 6/26/12 at 4:44 pm to MoreOrLes
quote:
Will we see double digit interest rates? i think so.
This is the only part that worries me since my wife's student loans are variable to the LIBOR right now.
I need her to finish school next year and consolidate before SHTF.
Posted on 6/26/12 at 4:54 pm to TheHiddenFlask
quote:
We are heading to inflationville and it's a nonstop flight.
If all the liquidity that had been pumped into the system actually made it into the economy I would full heartedly agree with you. However, the largest bulk of this is sitting on bank's balance sheets, and if we see a secenario where the velocity of money is about to take off the Fed can just reverse repo the shite out of the banks in one night. The only way extreme inflation takes hold is if capital makes its way into the system slow enough that the Fed has to stay in easing mode, and then velocity spikes.
The Fed would absolutely love to have this problem because that would mean the deflationary boogie man that haunts Ben's dreams wouldn't be hanging out in the economy's anymore. Long-term inflation will pick up eventually, but it won't solve our fiscal problem. The only way we solve our fiscal problem is if we find one politician that accepts career suicide and changes the payout assumptions in Medicare and Medicaid. He would be the hero we need, not the one we want. He'd be our Dark Knight.
This post was edited on 6/26/12 at 4:56 pm
Posted on 6/26/12 at 4:55 pm to Golfer
quote:
I need her to finish school next year and consolidate before SHTF.
I think the Ben Bernanke can hold course until then, but I would definitely go to fixed rates ASAP.
Posted on 6/26/12 at 4:56 pm to TheHiddenFlask
quote:
I think the Ben Bernanke can hold course until then, but I would definitely go to fixed rates ASAP.
I won't be able to do so until she's done and I can consolidate them all into one fixed rate. 14 months and 15 until she's employed.
Posted on 6/26/12 at 5:00 pm to NC_Tigah
quote:You think Obama is starting the class warfare rhetoric in a vacuum? Progressives know that our current path is unsustainable, but they can't admit that the benefits they have promised are the problem. Thus they have begun to demonize the "rich" for not paying their fair share. When it becomes necessary to take measures that reduce the standards of living the Progressives will be telling voters that they have to inflict pain on everyone because the rich did not pay their fair share all these years.
It will hammer bluecollar workers and fixed income folks. The fact that message is not aired by any supposedly pro-workingclass media outlets or politicians is sad.
Posted on 6/26/12 at 6:05 pm to Golfer
I think he's got it on lock for 18-24 months.
Source: Nothing.
Source: Nothing.
Posted on 6/26/12 at 6:46 pm to TheHiddenFlask
quote:
I think he's got it on lock for 18-24 months.
Lemme ask you this...what if we're in another recession at that point or have no growth in GDP and the current administration gets another 4 years. Do you still see the devaluation scenario happening?
Posted on 6/26/12 at 6:54 pm to TheHiddenFlask
quote:What is the best way to prepare for inflation? Is there really anything a middle class person can do to ease the pain when inflation hits?
We are heading to inflationville and it's a nonstop flight.
Posted on 6/26/12 at 6:55 pm to ZereauxSum
quote:
Lemme ask you this...what if we're in another recession at that point or have no growth in GDP and the current administration gets another 4 years. Do you still see the devaluation scenario happening?
The administration has nothing to do with it.
An extended or worsened recession would certainly slow America in the race to debase, but I don't think there's much that's going to stop it in the long run. There will never be the dark knight that B&tIJ referred to (great reference, btw) unless the government takes away voting rights from a large portion of Americans, which isn't going to happen.
Posted on 6/26/12 at 7:05 pm to TigerTatorTots
quote:
What is the best way to prepare for inflation? Is there really anything a middle class person can do to ease the pain when inflation hits?
Although the media would have you think that inflation crushes the middle class the hardest, this is not true (from a high level). Inflation hits those who hold assets (the rich) the hardest, because the value of their dollars is worth less. Most of the upper class don't have the majority of their wealth tied up in real assets (rea estate, commodities, etc.), but rather have a lot invested (fixed income portfolios get smoked, equities don't keep up with inflation shocks, etc.).
The majority of the pain that the middle class feels is due to sticky wages, but wages aren't that sticky in the US. The real people it's going to screw over are those who are overpaid for what they do and won't get raises comensurate to the levels of inflation.
Posted on 6/26/12 at 7:08 pm to TheHiddenFlask
So a middle class, 1 year out of college person such as myself, should just carry on living my life (responsibly of course)? Any specific investment changes other than the obvious of zombie ammo ( 
)?
)?Posted on 6/26/12 at 7:22 pm to TigerTatorTots
quote:
Any specific investment changes other than the obvious of zombie ammo
Any company that produces real assets (E&P companies, Miners, etc.)
Really, at your age, just go ahead and do MPT and hope DCA works out for you.
Posted on 6/26/12 at 7:26 pm to TheHiddenFlask
Forgive my lack of knowledge on this subject, but you are going to have to type out the acronyms
Posted on 6/26/12 at 7:28 pm to TigerTatorTots
E&P = Exploration and Production ex. APC
MPT = Modern Portfolio Theory
DCA = Dollar Cost Averaging
MPT = Modern Portfolio Theory
DCA = Dollar Cost Averaging
This post was edited on 6/26/12 at 7:28 pm
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