BILL GROSS: The economy is ‘a Monopoly board’ and everybody is losing
Bob Bryan
BusinessInsider.com
July 6, 2016
Bill Gross thinks the world economy is playing a losing game.
In his latest investment outlook on Wednesday, Gross said that credit creation has reached its limits and there’s nothing central banks can do about it. This means that the global economy, which Gross said is based on credit creation, is in turn slowly grinding to a halt.
In order to illustrate his point, Gross compared the world economy to the board game Monopoly. Here’s how it’s supposed to work, according to Gross:
“But all of these elements are but properties on a larger economic landscape best typified by a Monopoly board. In that game, capitalists travel around the board, buying up properties, paying rent, and importantly passing “Go” and collecting $200 each and every time. And it’s the $200 of cash (which in the economic scheme of things represents new “credit”) that is responsible for the ongoing health of our finance-based economy. Without new credit, economic growth moves in reverse and individual player “bankruptcies” become more probable.”
The rub is, according to Gross, in order to sustain economic growth in the real world the amount of credit extended by private banks — the $200 in the analogy — must continue to increase to fund new projects. If that doesn’t happen then you end up with the classic ending to a game of Monopoly: frustration, bankruptcies for players, and as Gross puts it “dog eat dog with the survival of many of the players on the board at risk.”
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