Bill Gross: Economy needs a better seventh inning stretch

They say that reality is whatever you wish it to be and I suppose that could be true. Just wish it, as Jiminy Cricket used to say, and it will come true. Reality’s relativity came to mind the other day as I was opening a box of Cracker Jacks for an afternoon snack. That’s right – I said Cracker Jacks! I can’t count the number of people who have told me during the seventh inning stretch at a baseball game to make sure I sing Cracker Jack (without the S) because that’s what the song says. I care not. No one ever says buy me some “potato chip” or some “peanut.” How about a burger and some “french fry?” In all cases, the “s” just makes it flow better. My reality is a box of Cracker Jacks, and I think little sailor Jack on the outside of the box would be nodding his approval if he could ever come to life, which maybe he can if the stars are aligned and reality is whatever we wish it to be.

Having mentioned Jack and the game of baseball, let me give you some opinions that come close to being hard cold facts, not wishes. First of all, baseball is the most boring game in the world next to cricket. I don’t know how to play cricket, which is the only reason I rank it second. CNN Sports did an actual survey of how much time during an average two hour and 39 minute game that baseball players are actually moving – you know, swinging a bat or running to first base. Five minutes and 13 seconds! The rest of the time the boys of summer are actually just standing around, scratching you know where, and spitting tobacco juice onto the nice green grass. Most disgusting, I’d say. And why, I wonder, does a baseball “season” consist of 162 individually boring games? In football you only need 16 or so to declare a champion, in boxing sometimes three minutes or less.

Now for some controversy: Steroids, HGH and juicin’? I say, why not. They can’t be cheating if they’re all cheating together. And as a matter of fact, management and owners “cheat” all the time. If they have a lineup heavy with left-handed hitters, they will shorten the right field fence. The Yankees and now the Dodgers just “buy” championships with money from the game’s most gargantuan TV rights (who’s watching?). That’s playing by the rules? If your counterpoint on drugs is that it’s unnatural and harmful to the body, I wonder what’s so healthy about the way they conduct spring training or do their pregame warm-ups. Two or three half-hearted sprints in the outfield and they’re done. If baseball was concerned about health or addiction, they’d be testing for lip cancer or diabetes. Modern day relief pitchers, who now “exercise” for two innings or less on the mound, have pot bellies that would make a sumo wrestler proud. Why, the Babe was so fat he could hardly waddle back around to home plate 60 times in one season.

Last point, because I know you’re dying to hear my opinion on Pete Rose and the Hall of Fame. I say anyone as ugly as Pete deserves a free pass to Cooperstown or any town for that matter, maybe the same free pass that you’d have to give me to go to a baseball game again. Take me anywhere, but don’t take me out to the ball game and make me stretch during the seventh inning while I’m eating my Cracker Jacks. Reality can smack you in the face sometimes, like it did Pete Rose, but if I’m gonna be smacked it’ll have to be on the gridiron or the hardwood, not Yankee Stadium.

Life’s ballgame ended several decades ago for Hyman Minsky, author of “Stabilizing an Unstable Economy” and proponent of the notion that capitalism is inherently unstable, in part because of the short term financing of long term capital assets such as bonds, buildings, plant and equipment. His stabilizing solution was for Big Bank and Big Government to intercede with monetary and fiscal pump priming, confident in the notion that if the priming was large enough and the pumping fast enough, that stability could at least be temporarily achieved. Yet Minsky played ball in another era, before steroids and corked bats. He legitimately could not foresee the time when what he labeled “Big Bank” and “Big Government” became so large and stimulation so excessive that even temporary stability of a closed or an evolving global economy would be difficult to attain.

Over these five post-Lehman years, financial markets have grown leery of the medicine Dr. Minsky recommended to calm the symptoms, if not the disease, of capitalistic excess. During a crisis, Minsky’s solution was for Big Government to generate substantial fiscal deficits which in turn would stabilize corporate profits, financial asset prices and ultimately the real economy. In turn, and concurrently, he advocated the growth of Big Bank, by which he meant the ability of a central bank to lower interest rates and reserve requirements in order to stimulate private lending via the monetary channel. In combination, and if large enough, the two could stabilize asset prices and eventually produce an “old normal” 3%–4% real growth rate in developed and presumably developing economies too. We have lived in a Minsky-based policy world for some time now, but unfortunately in a “New Normal” world of lower economic growth.

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