Tags: gross | budgetary | Crystal | Meth

Pimco's Gross: ‘Budgetary Crystal Meth’ Risks US Haven Status

Tuesday, 02 Oct 2012 08:11 AM

Pacific Investment Management Co.’s Bill Gross said the U.S. will no longer be first destination of global capital in search of safe returns unless the gap between spending and debt is addressed.

Major non-political organizations agree that “when it comes to debt and to the prospects for future debt, the U.S. is no ’clean dirty shirt,’” Gross wrote in his monthly investment outlook posted on the Newport Beach, California-based Pimco’s website.

“The U.S., in fact, is a serial offender, an addict whose habit extends beyond weed or cocaine and who frequently pleasures itself with budgetary crystal meth.”

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

The International Monetary Fund, the Congressional Budget Office and the Bank of International Settlements compute a ’fiscal gap,’ which is a deficit that must be closed either with spending cuts, tax hikes or a combination of both which keeps a country’s debt/GDP ratio under control, wrote Gross, the manager of the world’s biggest bond fund.

“Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow and the dollar would inevitably decline,” Gross wrote. “Bonds would be burned to a crisp and stocks would certainly be singed; only gold and real assets would thrive within the “Ring of Fire.”

Gross cut the proportion of U.S. government and Treasury debt in Pimco’s $272 billion Total Return Fund to 21 percent of assets in August, from 33 percent the previous month, according to a report on the company’s website. He cut mortgages to 50 percent, from 51 percent. Pimco doesn’t comment directly on monthly changes in its portfolio holdings.

Pimco, a unit of the Munich-based insurer Allianz SE, managed $1.82 trillion of assets as of June 30.

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

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Pacific Investment Management Co.’s Bill Gross said the U.S. will no longer be first destination of global capital in search of safe returns unless the gap between spending and debt is addressed.
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2012-11-02
Tuesday, 02 Oct 2012 08:11 AM
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