The U.S. economy grew at roughly 3% in the fourth quarter of 2010, the stock market is in the midst of a massive two-year rally and, while still high, the unemployment rate is at its lowest level since April 2009.
Testifying on Capitol Hill last week, Federal Reserve Chairman Ben Bernanke said there's "increasing evidence that a self sustaining recovery in consumer and business spending may be taking hold."
PIMCO's Bill Gross isn't convinced. The so-called Bond King, whose firm manages more than $1.2 trillion in assets, is concerned the economy will stagger when the Fed pulls the plug on its QE2 program at the end of June. (See: Bond clip)
"I suspect that it's not as self-sustaining as they think," he tells Aaron Task in this clip. "I suspect at we're not standing firmly on our own two legs and that ultimately we're going to continue to need some stimulation from the government."
What other threats are lurking?
Rising oil prices are also a threat to the recovery, he says. The national average price for a gallon of gas now stands at $3.51, up from $3.18 a month ago and $2.73 a year ago. If oil remains at current levels above $100 per barrel, Gross estimates it will sap $700 billion of consumer purchasing power; that could strip the economy of a half percentage point of GDP.
However, Gross says the biggest long-term threat to the economy is not one often mentioned: it's America's negative net savings rate of 1-2%. "Basically the U.S. is not saving enough money to replace its own capital from the standpoint of depreciation and potential investment," he says.
If it continues, this is a recipe for disaster, he concludes: "Ultimately a country can't grow that way going forward."