Bond guru Bill Gross writes about the shift of the US economy from producing things to consuming things on credit that other people finance, and why this is unsustainable in the long run. The latter he calls a “finance-based economy”. The characteristic of such an economy is that it is dependent on continuous credit expansion to keep the supply of credit plentiful and cheap:
But folks, all blame aside, I must tell you in advance that this story or movie does not have a happy ending. In terms of timing it may not be high noon, but High Noon it will be in terms of an ultimate outcome. Because in a finance-based economy that depends on more and more low cost money in order to thrive, the game ends when either the “more and more” or the “low cost” modifiers are replaced with “less” or “higher cost.”
