PIMCO’s Bill Gross: New Normal Has U.S. ‘Living Here in Allentown’

When Chinese labor costs 10% of U.S. labor and the Chinese have also learned to copy and innovate like us, those jobs are not coming back to Allentown. While Gross grants that Fed chairman Ben Bernanke has correctly called for fiscal reform, Gross mocks a monetary policy that “takes Charles Ponzi one step further by purchasing the government’s own paper in a last gasp effort to support asset prices.”

Gross’ concluding point is that capital will increasingly flow to developing economies until developed nations return to the old-fashioned practices of improving the quantity and quality of goods produced. His imagery here is particularly stark, saying “the United States needs to make things not paper, but that is not likely unless we see a policy revolution in Washington, D.C.”

Gross has a proven knack for sparking debate with just the right metaphor. His “new normal” coinage has become a household word since the famed bond fund manager’s Morningstar address in June 2009. And the Allentown image is sure to resonate given today’s 9.8% unemployment rate.

His sharp points at times softened to more conventional rhetoric about “investments in infrastructure and 21^st century education and research.” This, combined with criticisms of the policy responses of both Republicans and Democrats, was redolent of Ross Perot and had a bit of the whiff of a 2012 Gross presidential campaign. Nevertheless, even should he remain in the comfortable precincts of Newport Beach’s Harbor Island, his client letter furthers an important public debate for a nation increasingly anxious about the prospect of “killing time, filling out forms, standing in line.”