Will U.S. fiscal policy play a role in determining the economic and financial outcomes?
McCulley: We don’t think the U.S. is going to get a new stimulus package, but there will be a hodgepodge of things that fit the description. In fact, that’s one of the reasons that the Treasury has been pushing so hard for the banks to pay back Troubled Asset Relief Program (TARP) money, because the president plans to ask to Congress to move TARP money into Cash for Caulkers and other job stimulus measures. So we will get fiscal stimulus, but it will not be as big or explicit as what we’ve had so far. The big unknown gets back to what we’ve already discussed: We’re probably going to have a $1.4 trillion deficit this year without the Fed on the buy side of the market for duration. There is major uncertainty about how the supply/demand equation for duration will resolve itself when the Fed is out of the picture. Q: With all these uncertainties, what is PIMCO’s global economic outlook for 2010? McCulley: Cyclical turning points in the context of secular turning points are devilishly diffi
