Friday, February 11, 2011

So are we going the way of Greece? An Interview with Robert Rodriguez

Invigorated after a year-long sabbatical, renowned fund manager Robert Rodriguez, CEO of First Pacific Advisors, sternly warns that markets and the economy are threatened by the government's tardiness in addressing fiscal reform. Unless restructuring begins within seven months, he says, a new financial meltdown will likely befall us in a few years.

What is your most pressing concern?

When I left, I informed clients that if present trends continue, we'd face another financial crisis of equal or greater magnitude within three to seven years. Many of the questionable practices that were being employed are back in the game. Banks and investment firms that fed at the public trough — none of that's changed. Too big to fail is still operating.

There are shifts that are positive, the question is: Will we proceed at a fast enough rate?

So are we going the way of Greece?

Yes. If we continue to grow our debt at a rate of more than double our GDP growth. We have a $15 trillion Treasury debt and a budget deficit of 9% of the economy. From June 2003 through December 2010, debt in the U.S. has grown 10.26% [per year], whereas nominal GDP has grown at 4.5%. That's a non-sustainable trend.

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