This week, we speak with Nathan Sheets, chief economist and head of global macroeconomic research at PGIM Fixed Income, which manages over $776 billion in global fixed-income managers. Prior to joining PGIM, Sheets held positions with the U.S. Treasury, Citigroup and the Federal Reserve.
Sheets discusses that his institutional clients are concerned over two primary issues: debt and demographics. Chinese debt is a growing potential problem area, as is U.S. government commitments to entitlements 20 to 30 years down the road.
Sheets explains why most economists are looking at the wrong data set when considering the past decade. It is not a normal recession recovery, but rather a post-banking crisis recovery. Following those sorts of financial crises, economic recoveries tend to be much shallower (e.g., sub 2%) but longer lived then the typical recession recoveries.
He believes that Modern Monetary Theory is potentially dangerous, but also notes that we have no idea what the upper limits of GDP actually is. Spending money on infrastructure likely generates a positive return on borrowed money, and he sup[ports deficit spending for that; Japan has over 200% Deficit to GDP ratio without any negative consequences. However, Sheets mentions he thinks its economically dangerous to allow the country to run deficits that are too high.
His favorite books are here; A transcript of our conversation will be available here.
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Next week, we speak with Rajiv Jain, Founder and CIO of GQG Partners. The firm started 3 years ago, and has $24 billion in assets under management. Jain was the 2012 Morningstar International Manager of the Year. Previously, he served as a Co-CEO and CIO at Vontobel Asset Management.
Nathan Sheets Favorite Books
Alexander Hamilton by Ron Chernow
The Rough Riders by Theodore Roosevelt
Outliers: The Story of Success by Malcolm Gladwell
The Wright Brothers by David McCullough