Outlook: A jaw-dropping moment on business television here this week. Citigroup's director of economics and market analysis, Steve Wieting, was asked what an investor with a 20-year time horizon should put in her portfolio. His response: not shares, or even bonds, but cash.
Cash? That investors should just put their money under the mattress for two decades is a monumentally bearish call for anyone to make, let alone for someone at the top of a financial supermarket where commissions depend on getting clients into investments like stocks and shares. Forget inflation, this is a prediction of economic stagnation or even contraction.
I spoke to Mr Wieting after his appearance on CNBC to make sure I hadn't misheard. He said he was being a touch frivolous – a balanced portfolio should have a little of all sorts of assets – but my goodness, he is bearish on the long-term outlook for the US. Try as they might, the economics team at Citigroup cannot make the numbers add up. It has been warning about the looming impact of the baby boomer generation's retirement for several years, but with increasing shrillness now. The cost of caring for the elderly is exploding at 8 or 9 per cent a year, and healthcare bills are rising at twice the OECD average; it is "eating up the economy", Mr Wieting says.
The bailout and stimulus in 2008-9 means the country's finances are already ill-equipped to deal with the march of the boomers. Ben Bernanke, the chairman of the Federal Reserve, has taken to asking Congress, very politely, to make some difficult choices about health and pension entitlements, and sooner rather than later. The White House's last budget factored in heroic assumptions for growth this decade, and still couldn't project the deficit down to a safe level.
The focus may for now be on the eurozone PIGS, licked by the flames of the bond market, or the UK, whose new government is erecting a firebreak, but the US is slow-marching towards financial crisis, too. I suppose by now it really shouldn't be startling to hear it spoken out loud.Reuse content