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Bill Gross: "Ultimately Creditors And Investors Are At The Behest Of A Central Bank And Policymakers That Will Rob Them Of Their Money"
Bill Gross had a great sound bite at Forbes' annual investing roundtable:
I
don't know if the U.S. has reached a desperate point, but it is
employing instruments and vehicles and policies that smack of
desperation. We are not looking at a default here, but at years of
accelerating inflation, which basically robs investors and labor of
their real wages and earnings. We are looking at a currency that almost
certainly will depreciate relative to other, stronger currencies in
developing countries that have lower levels of debt and higher growth
potential. And, on the short end of the yield curve, we are looking at
creditors receiving negative real interest rates for a long, long time.
That, in effect, is a default. Ultimately creditors and investors are
at the behest of a central bank and policymakers that will rob them of
their money.
Gross' statement came right after the following zinger from Marc Faber:
Janet
Yellen, vice chair of the Federal Reserve, said about a year ago that
if it were possible to push interest rates into negative territory, she
would vote for that. This is a very important statement because it
implies that the Fed will keep real interest rates negative as far as
the eye can see. Negative real rates amount to expropriation and destroy
one function of money: to be a store of value and a unit of account. If
you measure the stock market not in dollars but gold, it is down 80%
since 1999. I no longer regard the U.S. dollar as a valid unit of
account. People shouldn't value their wealth in dollars because one day,
in dollars, everyone will be a billionaire.
Of course, Gross and Faber are forecasting high inflation. If deflation or "MixedFlation" prevail instead, things might look very different.
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http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/1/22_Jim_Rickards%3A.html
he has a crackhead hooker voice
but he makes good calls about high yield and munis so far
pttrx kicked ass during the meltdown
The folks at PIMCO are at the top of the fiat money heap. They are so very conflicted! It is becoming easier and easier to see that they really understand what a fraud fiat money is. Now that they are admitting what the rest of us already knew, will they take steps to stop what is the grandest, most wide ranging, scheme of theft of wealth in the history of humanity? Certainly not.
The article headline just begs reposting the timeless and succinct words of truth and wisdom from that sage of a FedHead, Alan Greenspan:
"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
"This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."
From the last two paragraphs of Gold and Economic Freedom by Alan Greenspan. 1966.
see: http://www.constitution.org/mon/greenspan_gold.htm
I still think DEFLATION:
http://www.youtube.com/watch?v=a7bJxtvCaPg
Economists want a weaker dollar, why does Gross sound surprised?
inflation is a tame word for going hungry, check this out. There are 43 million people on food stamps in "countries" within the US with similar metrics, plus those jut barely kweeping their head above water before food price hikes in the supermarket pipeline.
http://www.bondvigilantes.co.uk/blog/UserFiles/Image/em%20inflation2.jpg
Oh so happy that Gross is confirming what i said years ago :-/
How a country became a bank.
http://thecivillibertarian.blogspot.com/2011/01/how-country-became-bank-...
http://www.youtube.com/watch?v=aYVlHqCC4Qo
Children's Story
http://www.youtube.com/watch?v=Z19zFlPah-o
Inspired Bicycles - Danny MacAskill April 2009
It's not necessary to psychoanalyze Bill. First he says it's not a default, then he says it is. For all practical purposes, Faber seems to agree.
Who are we to tell these guys?
all attempts to manipulate time or accelerate its passage
must fail and that is what the globalists are up to. or,
you could call it stealing, dressed up with lipstick, the natural
qualities, endowments and perspectives of those who respect
and admire natures rhythms as they are.
money has become that which steals your time, debt. fiat going
exponential and virtual. = slavery. a viral psychological menace
infecting the mind of man based on the federal reserve note and
insane supporting system of mass usury.
all this system has done re progress of man is accelerate and compound
waste and malinvestment. the real important and great developments
could have occurred without it and perhaps much better conditions would
presently exist had the big lie never been bought.
default or inflate? default would require compromise and honesty
and high degree of applied intelligence and intellect to address reality
in a humane and compassionate manner. inflate creates opportunity
and nothing extraordinary other than the capacity to suffer lies,
starvation, murder and ignorance on a daily basis until you can no
longer watch your neighbors eating one another to survive. imo
you found the lyrics from that lost track on Dark Side of the Moon - very nice
thanks, it is a constant struggle to recognize what is
going on and where it came from, harder still to have
a direction or concrete path to pursue.
as you can tell the drummer and bass player have left
town.
"If you measure the stock market not in dollars but gold, it is down 80% since 1999. I no longer regard the U.S. dollar as a valid unit of account. People shouldn't value their wealth in dollars because one day, in dollars, everyone will be a billionaire."
Gold is as close as possible to a true-value indicator only because it is a yardstick in the most limited supply. Unlike of course USD. If you measured the stock market in granite countertops or (identical) cell phone production, you'd find the market doing much better.
Wonder how the market has done in rhodium, or silver, or neodymium?
LSD might be a good medium for measure
Bill "the insider" Gross is pointing the finger away from himself
This is a default and will continue. Does Gross trade Munis?
"Ultimately creditors and investors are at the behest of a central bank and policymakers that will rob them of their money."
Well, I'll go along with the reference to "creditors" but the smart investors are not going to be investing in bonds where inflation will rob those suckers of their money.Anyone who can fog a mirror knows the history of inflation in the U.S. as Marc Faber reiterated with his re-statement of the Dow's trajectory denominated in gold. Smart investors will take advantage of inflation and put their money into PM mining companies, oil companies, etc.
we are the world... (sing) we are the children...
PIMCO is going to get pimp smacked...
the little people dont get it and the top thinks its not going to happen... everyone is fucked! everyone.
Just ask yourself..."Who is the biggest debtor (prime beneficiary from inflation) and who controls the $$$ spigot?"
posted on an other thread
LondonBanker blog is back - the best of the best
http://londonbanker.blogspot.com/
http://londonbanker.blogspot.com/2010/12/return-of-london-banker.html
"Creditors And Investors Are At The Behest Of A Central Bank And Policymakers That Will Rob Them Of Their Money"
this is only true if you leave your money in their system and continue to play by their rules
smart money is pulling out of the central bankers' game and putting their money into tangible goods
why do you think gold is at $1300+, silver at $28+ and the mint is selling 4 million ounces of silver in 2 weeks?
If I had to guess, the smart money invested 10 years ago. And another bubble is in the making.
Hey son, then just....buy the freakin dips in SBUX!
It means, "No matter how high your IQ is, you can be made to feel like a complete IDIOT".
Get Howard Stern in there as Fed Chief.
Just to throw this out there - maybe the rats are starting to abandon ship. There seem to be increasing examples of this but who knows.
...agree...I have even seen some articles in the mainstream fiancial press in which the writers actually questioned the increasing divide between the haves and havenots....and whether this was a sustainable path....or the road to Tunisia...
I think Bill has realized recently that he has been thrown under the bus as well.
Bill's Fed batphone must not be ringing or just out of service...frontrunning works until it doesn't.
Last time Gross came out to attack FED, It signaled a drop in euro against dollar..It could be a coincidence, but watch out for some Irish opposition party leader to make some statement about re-negotiating bail out terms, or something else that will make focus move back away from dollar and on to the euro. Trading these markets is only for privileged, mad/brave or very smart.
I would be happy to take a loan at negative interest but it wont be avsilable to me. If the fed dare do that we will be coming at them with more than pitchforks. That would be the last straw and would complete my evolution into a fanatic radical.
Consumer credit outstanding: $2.4 trillion
Mortgage debt outstanding: $10.6 trillion
Federal debt outstanding: $14 trillion
Commercial/multifamily mortgage debt outstanding: $3.2 trillion
Municipal bonds outstanding: $2.8 trillion
Corporate debt (non-financial companies) outstanding: $7.4 trillion
Public pension underfunding: $2.5 trillion
Infrastructure investment needed: $2.2 trillion
U.S. fiscal gap: $202 trillion
Bottom line here there is 20 trillion owned by the banks that are worth about 70% of what they are worth..
So we need to do 20 mil/.7= 28 trillion (if you don't understand why I divide by .7 vs multiplying by 1.3 you won't get it anyway)
So we need to add 8 trillion over say about 10 years then the inflation will have done its job (and stolen the 8 trill from holders of cash)...
Can someone tell me what the rate of QE is and what would be the average rate of inflation over this 8 trillion gap??
I am thinking that it is .8 tril a year of QE (and masked qeQE by the branch fed banks) for 9 years and and 4% inflation over the next 8 years.
Having looked at it a long time I think this is EXACTLY the plan.
The glaring assumption you are making is that creditors will just sit there and take it. Credit markets do not exist in a vacuum.
I agree inflation calculated over a 10 year spread, balance sheet recession.
Gross is just pissed he doesn’t have a out of town license to escape and is stuck with the domestic inflation suffering herd.
http://en.wikipedia.org/wiki/Qualified_Foreign_Institutional_Investor
20mil/.7=28.571 mil.
Is this what Bernanke is up to?....
http://seenoevilspeaknoevilhearnoevil.blogspot.com/2011/01/is-this-what-bernanke-is-up-to.html
Bill is just covering up his tracks since he got caught red handed by ZH last fall trading on advance information from the Fed. He is just trying to create the illusion that he is not their buddy and is not getting special treatment that other investors don't get.
In my opinion Bill Gross detractors miss the mark of the man. He is not a great human being, not even close. But there is obviously a severe shortage of those, including on ZH. But he is a self-made man with such an amazing track record it is unlikely to be a statistical fluke. He doesn't mix with the beautiful people or the movers and shakers. He is the anti-Larry-Fink. He is a loner who has trouble relating to other people; extremely smart, quirky and a bit tortured. He is not a person who would ignore valuable information, but he is a person who would choose his path carefully.
I would bet Gross is genuinely disturbed by the dimwits in Government and Central Banks who are more useful idiots than evil geniuses. Financial Institutions are designed to take advantage of such a farce. In the U.S. the citizenry was supposed to prevent such a disaster, but the citizenry is as dumb as a "bag of hammers," (thanks to the ZH contributor who uses that term; I have adopted it).
No, the world is short great minds, and even shorter great minds who think there is much hope of turning around the current downward spiral of our Country; I think this is confirmed by most ZH commentary. Bill Gross probably is genuinely looking around in increasing amazement and honestly saying: "WTF." He is the only mega-PM who admitted "The Bernank" is funny/sad shit. Making a lot of money is not a crime; I have no use for those who think it is. I remain a cautious Bill Gross fan...not as a human being, as an independent and great investor.
"Dumber than a box of rocks" has a lovely ring to it as well.
R B Good-no excellent post. well thought out and presented. Milestones
If you controlled a trillion dollars of bonds in a bond market that sucks and the Bernank or Timmeh was your friend, would'nt you trade on inside info? Get real...
Gross' definition of 'investor' is probably the douchebags who buy his bond funds, or invest in US treasury debt more broadly. Lending money to government, not to private industry that can actually create jobs and productive capacity.
If one alters their definition to 'investor', there are plenty of opportunities in the economy. In fact, I've never seen so many in my lifetime.
I think Gross understands that major inflation will be required to prevent default of US denominated debt, and he is just warning his investors that he is playing a very dangerous game here, trying to make some return when over the lond haul it it very clear the policymakers plan to make all long-term returns highly negative. His comment is validated by Faber's observation that the dollar is no longer a store of value. So if Gross is required to invest in bonds, and long-term bonds will be paid off in inflated dollars, how is he able to generate a real return for his investors?
Those who think we are facing deflation fail to realize that if the Treasury defaults on its bonds, the cartel loses world reserve currency status, and the US transitions into third world status in four days. So you can be sure that Ben will continue to print, and while everyone will deplore it, no one will stop him.
The assumption that you and most other people on this thread make is that the FED is in control of interest rates. I beg to differ. If the FED were in control of interest rates, then wouldn't QE2 have driven them down? The FED is acting desperate and, IMO is a total joke. The global bond market is far too big for any entity to control. The secondary market on T-bills sets the rates, regardless of the open market operations. We haven't seen much inflation because all of this money printing is just transferring bank losses to dollar holders. The losses are a contraction in the credit (money) supply so the new dollars are just plugging the hole. Credit is not expanding, or it is expanding very slowly even as the FED continues its desperate bid to expand it. Bill Gross has positioned himself and his investors for deflation. He is buying only the most pristine debt, especially debt backed by the Treasury (including GSE paper). IMHO, by doing so, he is acting in the best interest of his clients.
I personally think this is not permenant, but temporary.
Think about Fed's balance:
on the asset side, we have gold( denomenated in dollar and heavily undervalued giving the assumption that Dollar will keep sliding);
On the liability side, we have treasuries...debts, also denominated in dollar;
So the link between in this is dollar and inflation.
I came out with a hypothosis that there are 2 phases:
Phase 1: devaluate the dollar( better the balance sheet--boos asset and get rid of debts)
Phase 2: With such valuable asset ( gold) backed, dollar will regain its momentum and...hopefully break Euro.
(Phase 3: Dollar Donimate Again, the US is going to call themselves Master Gekko....)
...the cartel loses world reserve currency status, and the US transitions into third world status in four days...
Sorry, that's never going to happen as long as the US remains the world's military "superpower." What happened in Germany (and later, elsewhere) when their currency went up in smoke only happened because Germany did not have the military power (at the time) to go and take France's shit. We have that power. Before our FRN goes to zero, we will invade whoever has the stuff we want. The USA will not starve as long as there is food elsewhere on the planet and the USA has the biggest guns.
touche'...we have two outcomes people: default (and implode) or inflate our way out of our debt.
Both outcomes are defaults just one is faster and more upfront than the other.
A+ on that....inflation is the politicos best friend...it increases taxes, makes the average Joe think he is doing better, bails out the banks, and operates behind the scene.What more could any elected official ask for?
Inflation paid for our war in Vietnam and its is paying for our other wars today. It permits our elected officials to promise a chicken in every pot (though the birds continually shrink).
Personally I would take inflation any day of the week...it is far easier to make investment decisions with rampant inflation always there to help you along. Dumb real estate purchases look smart in a few years...price increases are easy to pass through as everyone expects them,and your local muni bond payments get met through rising property taxes. All in all, for a democracy, it is the only way to go.