When you manage over $776 billion in global fixed-income, you pay attention to what is concerning your institutional clients. These days, according to Nathan Sheets, chief economist and head of global macroeconomic research at PGIM Fixed Income, that is primarily debt and demographics. There is growing concern over the potential problem Chinese debt might create, as well as the more traditional concerns about U.S. government entitlement commitments that will be due 20 to 30 years down the road.
The demographics of both superpowers are not especially attractive either. Each suffers from a low birth rate, and both have an elderly and fast aging populations.
In our wide-ranging Masters in Business conversation, Sheets mentioned why he believes 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 supports 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.
You can stream/download the full conversation, including the podcast extras on Apple iTunes, Bloomberg, Spotify, Google Podcasts, Overcast, Castbox, and Stitcher. All of our earlier podcasts on your favorite hosts can be found here.
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.