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Debt, Demographics and Destiny

Debt, Demographics and Destiny

(Bloomberg Opinion) -- When Nathan Sheets, chief economist and head of global macroeconomic research at PGIM Fixed Income and this week's guest on Masters in Business, tracks the themes that the firm’s clients express concerns about most often. These days, the leaders are debt and demographics, he said.

More specifically, concern is rising over the potential problem Chinese debt might create, as well as how the U.S. government will manage entitlement commitments that will be due in 20 to 30 years. The demographics of both the U.S. and China are not especially attractive, he said; both suffer from low birth rates, and both have an elderly and fast-aging population.

 In our wide-ranging conversation, Sheets, whose firm manages $776 billion in assets, also mentioned why he believes modern monetary theory is potentially dangerous. Borrowing to spend on infrastructure likely generates a positive return, and he supports deficit spending for that; Japan, for example, borrowed for infrastructure spending, and now has debt that exceeds 200% of gross domestic product – and so far has not experienced any major negative consequences. However, Sheets mentions that taking on the amount of debt that MMT proponents seem to favor could be problematic in the future.

His favorite books are here; a transcript of our conversation is here.

You can stream/download the full conversation, including the podcast extras on Apple iTunesBloombergSpotifyGoogle PodcastsOvercastCastbox and Stitcher. All of our earlier podcasts on your favorite hosts can be found here.

Next week, we speak with Rajiv Jain, founder and chief investment officer of GQG Partners LLC. The firm started three years ago and has $24 billion in assets under management.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Barry Ritholtz is a Bloomberg Opinion columnist. He founded Ritholtz Wealth Management and was chief executive and director of equity research at FusionIQ, a quantitative research firm. He is the author of “Bailout Nation.”

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