More Money Flushed Away

From Bloomberg:

Gross Equates Spending to Lift Consumption With Flushing Money Down Toilet

Pacific Investment Management Co.’s Bill Gross said deficit spending by governments that seek to maintain artificial levels of consumption “can be compared to flushing money down an economic toilet.”

Without acceleration in population growth, developed countries finance more consumption to maintain economic growth, the world’s biggest bond-fund manager wrote in his August commentary today on Newport Beach, California-based Pimco’s website. Leveraged spending, he said, is not a substitute for demand created by people.

“I will go so far as to say that not only growth but capitalism itself may be in part dependent on a growing population,” Gross wrote. “Production depends upon people, not only in the actual process, but because of the final demand that justifies its existence.”


Interesting economic and demographic comments from Bill Gross. Governments can not continue to maintain gigantic budget deficits to the tune of 7 to 10% of GDP for much longer as the bond market will not allow it.
As Japan is experiencing, an aging, stagnant or shrinking population results in a deflationary process in the economy. Deficits just compound the problem as interest cost consume larger amounts of the total budget.
I find it unbelievable that public officials can continue to think this deficit issue will somehow go away. Are their any grown ups in congress? Or are the decision makers spoiled children in adults bodies?
One idea that has yet to appear on the agenda in western democracies, is that of the use of eugenics on the elderly, or to use the modern term population control. This is an area that we need to watch for, as many in the economics fields are Keynesian by training and may try to implement mad ideas in the face of increasingly difficult economic circumstances. To quote Keynes, a member of the British Eugenics Society eugenics is "the most important, significant and, I would add, genuine branch of sociology which exists."