This guy's pretty sharp. I always try to listen when he's talking. He paints a picture that I'm not happy to hear.
People, both foreign and domestic, are in cash because of uncertainties and valuations that were artificially inflated by QE2 and don't reflect the realities.
Additionally, we are in a debt overhang that has the following characteristics:
1 - Unusually sluggish growth on advanced economies, partiularly those that rely on financial services industry
2 - persistently high unemployment that eventually becomes structural and embedded in the system
3 - Regulatory response that raises uncertainties.
4 - Recurrent balance sheet issues. Formerly clean balance sheets will become troublesome.
Possible solutions to debt-overhang for a government are:
1 - Impose austerity.
2 - restructure debt
3 - inflate their way out of the problem
4 - impose financial repression (tell creditors to go jump in a lake)
UK opted for austerity. US is using financial repression. Greece did almost all of the above.
An unusual convergence between emerging and developed markets. The wealth gap will narrow as they get richer and we get poorer.
Europe lurching from crisis to crisis. It has structural problems and problems with execution. Needs to be broken up or truly consolidated. They're in a 'tweener.
We need a sputnik moment in the US. There is currently no credible approach for removing structural impediments.