Barron’s published its year-end roundtable discussion with 10 money managers and financial market experts on Saturday. The star investors voiced their concerns about three government-related problems that threaten economic growth and prosperity in this country.
1. Cumbersome government regulations are holding businesses back and discouraging investors from investing in American companies.
Mark Faber, editor and publisher of the Gloom, Boom, and Doom Report in Hong Kong, warns, “The regulatory environment is bad under the current administration. I don’t see a lot of people wanting to invest in the U.S. Statistics show that net capital formation is negative.”
2. Runaway government debt caused by foolish government spending is a “ticking time bomb” that already has caused entrepreneurial activity to stagnate.
Faber: “It would be best for all governments to cut spending by 50 percent. Then the private sector would expand again.”
Scott Black, founder and president of Delphi Management in Boston, adds:
The U.S. doesn’t have the same financial flexibility today that it had in 1979 and 1980. Government debt is 100% of GDP, compared with 32.6% then. The huge debt overhang is a ticking time bomb.… As Margaret Thatcher said, socialism is great until you run out of other people’s money. That’s what has happened here, and the imbalances of the past 40 or 50 years aren’t going to be rectified with a stroke of a pen.… We have to overhaul the tax code, and we should follow the path set by Simpson-Bowles [the National Commission on Fiscal Responsibility and Reform].
3. Money printing causes inflation in the prices of life’s necessities for the poor and for everyone else, but it increases the price of financial assets like stocks that the poor don’t own. This injects a class rift into society between rich and poor.
Felix Zulauf, president of Zulauf Asset Management in Switzerland, explains:
Money-printing is splitting society. It is only a question of time until there is a social backlash. It will result in dramatic changes in the political arena, the economic agenda and the tax agenda. Corporate profits might not look like what we’re expecting today.
The Barron’s roundtable describes a future that is bleak unless changes are made. Now is not the time for imposing record-breaking red tape on American businesses. Now is not the time to be “spending our way out of debt.”
Now is the time, however, for the Federal Reserve to turn off the gushing money printing spigots and for the government to start paying back its debt. For details on how the federal government could reduce its debt and support stronger economic activity, see Heritage’s fiscal plan, Saving the American Dream.