Quote from Bill Gross at Pimco:
The problem I have with free market capitalism…the apparent exhaustion in the face of three equally dynamic economic influences. Globalization has weakened American economies by siphoning off investments and jobs to emerging nations at 1/10 the wage cost. Take China, for example. Free market capitalism, in other words, is working for China and Brazil, but it’s not working for America or Euro land. Secondly, and just briefly, free market capitalism depends on a balanced market between labor and capital. And clearly we’re reaching a point where impoverished main street cannot afford to buy the goods that capitalism so magnificently produces. So I think there’s an exhaustion here in terms of free market capitalism that has worked so well for 20 to 30 to 40, 50 years, but now is reaching structural impediments that prevent, you know, strong growth that we’re used to.
If unemployment stays at 9% plus and if real wage gains are non-existent, then where is the spending power coming from? It has to come from a consumer as opposed to businesses. Businesses are waiting on the consumer. The consumer is waiting on business.