With half of Europe already committed to some degree of budgetary belt tightening and our own so-called ''Super Committee" mulling ways to slice a trillion dollars out of the federal budget, you'd think the argument for austerity would be a slamdunk, but nothing could be further from the truth.
"In general, I think austerity is a big mistake," says Barton Biggs, founder and managing partner of New York-based hedge fund Traxis Partners. Biggs supports a stimulate and stabilize approach first, followed by austerity once things have leveled off. To do otherwise, he argues in the attached clip, risks triggering a global recession again, which he says would be "catastrophic for the world" as well as social order as we know it.
With the benefit of 50 years of global investment experience, Biggs thinks the time has come to embrace what he calls the "grand bargain." It's a sweeping package of social policy reform that would raise the U.S. retirement age to 70, boost taxes on the top 1% of earners, and cut military spending in half to no more than 2.5% of GDP.
While he dismisses the idea of a flat tax as ''appealing but crazy,'' Biggs wants to see FDR-like infrastructure spending programs. He calls this "important stimulus" to help get our economy growing, and also to offset the impact of expiring Bush-era Federal programs.
For a man who spent 50 years on Wall Street --the majority of them at Morgan Stanley and more recently running a hedge fund-- he is extremely bearish on the outlook for fees and compensation in the financial services sector.
"I've advised my grandchildren to be engineers," Biggs announces. "If they want to get rich that's the place to do it, not fussing around with the stock market."