Tags: Pimco | Gross | Eurozone | tumor

Pimco’s Gross: Eurozone Crisis Is a 'Localized Tumor'

Tuesday, 15 May 2012 08:16 AM

Europe's economic problems are only part of a much bigger whole, says Bill Gross, head of Pimco, the world's largest bond fund.

"The world’s financial markets seem obsessed with daily monetary and fiscal policy evolutions in euroland which form the basis for risk on/risk off days in the marketplace and the overall successful deployment of carry strategies so important to asset market total returns," Gross writes in the Financial Times.

"Euroland is just a localized tumor, however."

Editor's Note: The Final Turning Predicted for America. See Proof.

The developing credit cancer may be metastasized, and the global monetary system fatally flawed by increasingly risky and unacceptably low yields, produced by the debt crisis and policy responses to it, says Gross.

The global monetary system, which has evolved and morphed over the past century – but always in the direction of easier, cheaper and more abundant credit – may have reached a point at which it can no longer operate in the same way, Gross notes.

Gross says there is the potential for both public and private market creditors to effect a change in how credit is funded and dispersed – our global monetary system.

“What that will look like is a conjecture, but it is likely to be more hard money as opposed to fiat-based, or if still fiat centric, less oriented to a dollar-based reserve currency,” he says.

“The great white whale lies on the horizon. Investors should sail carefully."

Futures magazine reports that the recent anti-austerity election results in France and Greece strengthened the U.S. dollar.

However, the risks of a Greek exit from the eurozone could include a spiral downward for the bloc that will include financial turmoil spreading to the rest of the euro zone’s peripheral economies, the chief investment officer of Citi Private Bank said. 

“If Greece defaults and leaves the euro, what rational person will keep their money in a peripheral European bank account? At that point the whole thing kicks off again,” Richard Cookson told CNBC.

Editor's Note: The Final Turning Predicted for America. See Proof.

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