A bit more hope and change for you all – from Bloomberg:
Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., eliminated government-related debt from his flagship fund last month as the U.S. projected record budget deficits…
…Gains in so-called headline inflation matter more for the U.S. economy than Fed Chairman Ben S. Bernanke suggests and rising oil prices may cut U.S. gross domestic product by a quarter to half a percentage point, Gross said March 4 in a radio interview on “Bloomberg Surveillance” with Tom Keene.
“Bernanke tends to think this doesn’t matter — at least in terms of headline versus the core — we do,” Gross said…
It is rather absurd to hold any government debt, at the moment – and even someone like Gross is still doing that; he just doesn’t want to hold our debt because returns are too low and risks are too high. But even the allegedly strong economies out there really aren’t. Its all a bubble – fueled by central banks around the world printing money like mad.
But here’s the thing – US debt was once upon a time the most secure investment anyone could make. You could absolutely bank on it that you’d get your money back with interest. Now, no one is really sure that you will. Buy a ten year bond today and you can’t really assert that by 2021 the United States will be in a position to pay principal and interest. There is just too much debt and while Obama is in the White House and Reid is running the Senate there is no chance for any of the structural reforms necessary to get it under control – let alone get us to a position where we’ll actually have less debt at the end of the year than when we started.
And the window of opportunity for us to fix this short of default is rapidly closing. I figure we’ve got, at the outside, until FY 2015 (which starts October 1st, 2014) to start debt reduction in the United States. If we don’t get to that point by that time we’ll probably have to go through some form of default by 2016 or 2017…and the longer we hold off making the hard choices, the worse it will get when the default happens. Learn this lesson – do lay this to heart – you cannot borrow and print yourself to wealth…only hard work, savings and careful investment can do that. In the end, debt is an economic killer.
This action by Gross is just a shot across our bow. We ignore it at our peril.
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