Tags: Pimco | Debt | Symptom | Disease

Pimco’s Gross: Debt Is a Symptom, Not the Disease

Friday, 12 Aug 2011 07:55 AM

Pimco co-CIO Bill Gross says the level of U.S. debt isn't the real problem.

"While our debt crisis is real and promises to grow to Frankenstein proportions in future years, debt is not the disease — it is a symptom," Gross writes in The Washington Post — insufficient consumption and investment is the disease.

"Debt has been simply an abused sovereign and private market antidote to sustain it," says Gross. "We and our global market competitors are and have been experiencing a lack of aggregate demand for several decades."

"It is now only visibly coming to a head, as the magic elixir of leverage is drained and exhausted."

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Bill Gross
(Pimco file photo)
Gross says this potentially fatal disease of capitalism is a result of the long-term secular phenomena of aging demographics, globalization and technological innovation.

“The president and Congress must recognize that an AA-plus country, to remain AA-plus, must focus on growth, not debt reduction, in the short term,” Gross says.

“A 21st-century Keynes would have recognized this and sounded the alarm, pointing out that policymakers from a fiscal perspective are pointing us toward recession and the destructive 1930s instead of a low-growth but still breathing U.S. economy of the 21st century.”

The Financial Times reports that a survey by the Association for Financial Professionals showed that two out of five finance executives said they expected debt financing and bank credit to become more expensive or harder to secure in the wake of Standard & Poor’s U.S. downgrade.


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Pimco co-CIO Bill Gross says the level of U.S. debt isn't the real problem. While our debt crisis is real and promises to grow to Frankenstein proportions in future years, debt is not the disease it is a symptom, Gross writes in The Washington Post insufficient...
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Friday, 12 Aug 2011 07:55 AM
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