"Off With Our Heads!": Bil Gross On How "Future Generations Pay The Price For Their Parents’ Mindless Thrusting"

Tyler Durden's picture

Just Released by Bill Gross, his January Outlook

Off With Our Heads!

  • American politicians and citizens alike have no clear vision of the
    costs of a seemingly perpetual trillion-dollar annual deficit.
  • Policy stimulus is focused on maintaining current consumption as
    opposed to making the United States more competitive in the global
  • Dollar depreciation will sap the purchasing power of U.S. consumers,
    as well as the global valuation of dollar denominated assets.

The mating rites of mantises are well known: a chemical produced
in the head of the male insect says, in effect, “No, don’t go near her,
you fool, she’ll eat you alive.” At the same time a chemical in his
abdomen say, “Yes, by all means, now and forever yes.”

While the male is making up what passes for his mind, the female
tips the balance in her favor by eating his head. The male, absorbed in
the performance of his vital functions, holds the female in a tight
embrace. But the wretch has no head – he has hardly a body. And, all
that time, that masculine stump, holding on firmly, goes on with the

–Annie Dillard, Pilgrim at Tinker Creek

If you’re ever in the mood for a glimpse of raw nature that
closely parallels the human condition, read Annie Dillard’s Pulitzer
Prize winning Pilgrim at Tinker Creek. We are all, in her
well-documented tale, mantises eating and being eaten, mindlessly
thrusting and flailing about in activity that would make little sense to
a visitor from another space-time. What mimics the pelvic thrust of the
male mantis is really the struggling ego of the human being, stretching
for more habitable space, gasping (metaphorically) for purer air,
reaching for dominance over what we know not. Herman Melville, speaking
through the visage of Captain Ahab in Moby-Dick, writes that
“all mortal greatness is but a disease.” The egos that seek renown,
however, are hard to kill and expert at masquerading and wearing
disguises. Even those advocating or living by the Golden Rule can be
held suspect to some chemical – this time above the belt – that says,
“Look at me, look at me.” Presidents, Dalai Lamas, and yes, bond
managers are more than likely infected and affected as opposed to philanthropically or altruistically directed and intentioned.

If so, I’m not sure how one escapes from the philosophical darkness
of this self-described “Tinker Creek.” Eastern religions speak to
seeking the Buddha mind – an “unconscious” consciousness that supposedly
confirms an “inner worldly” worldliness. Theoretically this can lead to
Nirvana, which is the absence of ego – an antibody against Ahab’s
mortal disease. “Nirvana” it is said, “soars on wings that whisper.”
Perhaps, but almost all of us come into this world screaming and the
decibels diminish but never really whisper as the chemicals of old age
work their will. We are all, more than likely, doomed to be mantis-like –
some of us eating, some of us being eaten, but none quite aware as to
why we are at the dinner table in the first place.

Americans, unlike their developed world counterparts, have been
eating their fill lately, and supping at a dinner table laden with pork
and tax breaks for all. Unequivocally, we have been playing the part of
the female mantis, munching on the theoretical heads of future
generations, while paying no mind to the wretches that will eventually
be called upon to pay the bills.

I liked the op-ed on this subject by comedian Larry David in The New York Times the
other day. He thanked Congress and, of course, President Obama for
being able to afford more blueberries in his granola. Job creation for
more berry pickers would be Washington’s convoluted rationale, I
suppose. But, if so, they will assuredly be temporary instead of
permanent jobs and the $800-$900 billion price tag may add up to 3% of
GDP to the U.S. deficit annually for which future wretches will thrust
headlessly to service. The American hegemon knows no limits, it seems,
when it comes to spending other people’s money for their own
consumption. Unlike Euroland or the United Kingdom, which appear
to have gone on an extreme fiscal diet, the American answer to a
bulging waistline is always “mañana.” Debt commission recommendations
are tossed in the trashcan, tea party election rhetoric eventually
focuses on miniscule and merely symbolic earmarks, and both Democrats
and Republicans congratulate each other on their ability to reach a
bipartisan agreement for the good of the nation. Munch! Munch! Off with
our heads!

The problem is that politicians and citizens alike have no clear
vision of the costs of a seemingly perpetual trillion dollar annual
deficit. As long as the stock market pulsates upward and job growth
continues, there is an abiding conviction that all is well and that “old
normal” norms have returned. Not likely. There will be pain aplenty and
it’s imperative that we recognize now what the ultimate cost of
blueberries will mean for American citizens of tomorrow. Four major factors come to mind:

  1. American wages will lag behind CPI and commodity price gains.
    policy stimulus is focused on maintaining current consumption as
    opposed to making the United States more competitive in the global
    marketplace, American workers’ real wages will almost necessarily lag
    historical norms. Chart 1 points out the graphical evidence of an
    erosion of labor’s share of the American economic pie, falling from 62%
    of GDP just recently to a current anemic 58%. Blame it on poor
    education, blame it on globalization, but an ongoing rebalancing of rich
    country/poor country wages inevitably will keep U.S. wages compressed
    as deficit spending serves to reflate commodity and end product prices
    in future years but not paychecks. Americans will feel the pain but like
    the male mantis, probably not understand why they’ve lost their head.
  2. Dollar depreciation will sap the purchasing power of U.S.
    consumers, as well as the global valuation of dollar denominated assets.
    amongst almost all other global citizens, Americans are ignorant of the
    merits (and the negatives) of currency depreciation. Unless they are
    smacked with the reality of an expensive hotel or a meal in a foreign
    port of call during summer vacation, we have few concerns when the
    dollar depreciates against a basket of foreign currencies. If our stock
    market goes up 10% annually in dollar-denominated terms, we assume we
    are 10% richer even if the dollar sinks at the same time. If the cost of
    imported goods and especially gasoline goes up more than our paychecks,
    we blame it on a political conspiracy. The fact is that annual budget
    deficits in the trillions of dollars add a like amount to the stock of
    outstanding dollars, resulting in currency depreciation, higher import
    inflation, and a degradation of dollar based assets in global financial
    markets. We become less, not more wealthy, losing our heads while we
    “hold on firmly and go on with (our) business”!
  3. One of the consequences of perpetual trillion dollar
    deficits is the need to finance them, and at attractively low interest
    rates for as long as possible.

    Currently, the Fed is doing
    both, holding short term interest rates near zero, and engaging in Ponzi
    like Quantitative Easing II purchases of longer dated Treasuries in the
    open market. The combination offers bondholders about as an attractive
    situation as the one facing a male praying mantis: zero percent interest
    rates if you stay in cash, or probable principal losses if you take
    durational risk by buying 5 and 10 year maturities. Eventually, as
    reflationary policies take hold, long-term bondholders lose their heads
    (and a portion of their principal as well), as yields rise to reflect
    higher future inflation. Bondholders’ metaphorical warning: “don’t go
    near those longer term bonds you fool.”
  4. Trillion dollar annual deficits add up, and eventually produce a stock of debt that can become unmanageable: witness Greece, Ireland, or a host of Latin American countries of generations past.
    According to Carmen Reinhart and Kenneth Rogoff’s excellent research in This Time Is Different,
    once a country’s debt approaches 90% of GDP (as the U.S. is now doing),
    its economic growth slows by up to 1% annually as the interest payments
    drain resources that should be going for productivity enhancements.
    Sovereign credit risk increases and yield spreads rise relative to
    global competitors. Future generations pay the price for their parents’ mindless thrusting.

Investment Implications

  1. An astute mantis-like investor must defer immediate gratification,
    make a 180? turn from that sexy looking female with those long green
    legs (long term bonds) and mend his ways fast! It is still
    possible to earn an attractive return from bond strategies (such as
    PIMCO’s Total Return strategy in 2010), and the way to do it is to focus
    on “safe spread” that emphasizes credit, as opposed to durational risk.

  2. These “safe spreads” include: emerging market corporates and
    sovereigns with higher initial real interest rates and wider credit
    spreads; floating as opposed to fixed interest obligations; and importantly currency exposure other than the dollar.
  3. For those inclined to lunch on stocks, remember to go where the
    growth is – developing as opposed to developed markets. If the U.S. must
    pay an eventual price for mindless deficit spending, then find
    countries and currencies that appear to have their act under control:
    Canada, Brazil, and yes even Mexico with its drug related violence
    . Mexico has a net national savings rate that exceeds our own by 20% of GDP.
  4. Above all, remember that all investors should fear the
    consequences of mindless U.S. deficit spending as far as the mantis eye
    can see
    . Higher inflation, a weaker dollar and the eventual
    loss of America’s AAA sovereign credit rating are the primary
    consequences. Fear your head – fear your head.

William H. Gross
Managing Director

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101 years and counting's picture

"Future Generations Pay The Price For Their Parents’ Mindless Thrusting"

In reality....future generations will just be paying for the junk their parents are buying them today.

snowball777's picture

The ICBM nuke, stealth bomber, and predator drone playset?!

You shouldn't have!

nate28jf's picture

Parents thrust their junk at children.

Drag Racer's picture

saying that to a TSA agent could get you arrested.

uno's picture

so all the overweight tattoo pierced 16-25 year olds drop out mothers and fathers are going to be the responsible ones we have to be sorry for.  OK....

NOTW777's picture

bill, try eating some bugs and thanks for helping create the monster deficit


its not the "parents" spending the $. its the obama admin and the WScabal of which you are part

snowball777's picture

Sure, all that toxic MBS and those foreclosures just magically appeared.

Eric The Red's picture

Oh, yeah.  Everything turned to crap on the day Obama was sworn in. It was Utiopia under Bush.  I get it now.  More kool-aid please.

downrodeo's picture


They're all playing for the same team. 

malikai's picture

I'd say something like obama=bushjr=clinton=bushsr=regan=carter=ford=nixon=johnson. But that's just me..

Al Gorerhythm's picture

Bill may soon be, eating bugs. I would say that the man is worried about the value of his bonds, as cunverted to paper and is sending a message.

LongSoupLine's picture


BTFD stupid!



Alcoholic Native American's picture

If this was a real war we would be hanging war profiteers, if this was a real crisis we would be cracking down on profiteers, they are not.

Calls for Austerity when all major financial institutions just got an unlimited bailouts is deceptive.  This was all planned the Rhetoric going into 2011 is to cut domestic spending and selling off of public infrastructure and land but of course no budget cuts for the Pentagon and our ventures in the middle east.  All planned.  And all the bandits that just made off with the biggest financial swindle in my lifetime will be buying it up on pennies on the dollar.

This is a non crisis crisis, aka, a swindle.  Now shut up and pay your bills, you will not be getting a bail out you rugged individualist you.

Incubus's picture

Who's entertaining any hopes of a bailout for mainstreet?

I know I'm not.  IF--by some miracle--the masses wake up, I want to be part of the guillotine crew. 

But it won't happen. 

We're already neutered, they'll just keep maintaining this indefinitely.  The only thing that'll disrupt the system is a breakdown of infrastructure/logistics at some point. 

Until we're no longer allowed to suckle at the teat of big business, we won't do a damned thing. And as long as they're able to punch keys and create more play money, nothing will happen.  So, we're all trapped. 

No other country is in a position to force us to pay up on our debts, and it doesn't matter anyhow -- everyone is high off the illusion of success;  why "end" a good thing when you can just ignore all of it and continue for the foreseeable future? 

The lower classes don't matter anyhow--when they get forced from the teat, they'll just be rounded up and tossed into prison and made profitable once more. 



Alcoholic Native American's picture

Yep, the hard part of going after someone or a group with an unlimited amount of money is they tend to buy off any allies you may aquire. Whose going to stop the money trust?  Sad part is presidents of yesteryear used to talk about these types of issues and at least try to take actions against them ( see JFK ).  But these clown ass representatives of today are so dumbed down for public consumption none of these issues even get raised.

Sudden Debt's picture

On my next restaurant visit, I'll just charge the bill to my Great Grand Children.


ruffian's picture

thats funny...I'm going to try that

Sudden Debt's picture

To do so, you will need to jack off when the waitor comes on the bill and leave some sperm on the bill for 5 minutes.

Tell them they can deepfreeze it and inseminate any woman with the message that their kids will need to do the same and the kids from those kids will need to pay. With a interest rate of 20% of course.

Dr. No's picture

quid pro quo.  Remember Tyler and project mayhem are doing the same to you on the food you order.

Withdrawn Sanction's picture

"Future generations pay the price for their parents’ mindless thrusting."

I suppose, but the devil's in the details.

Future generations in effect say, "Hmm, let's see, I can (a) endure endless austerity of reduced benefits and higher taxes (pain), or (b) I can repudiate debt taken out in my name but without my consent (resulting in damaged credit, loss of deposits, pain).  What to do, given there's pain either way?"

Under (a) ordinary citizens endure the pain essentially alone; while, under (b) pain is shared between the beneficiaries (citizens) and the enablers (the Bill Grosses of the world).  How would (will) you choose?

MachoMan's picture

The inevitability of repudiation is one of the bees in bernake's bonnet...  We may linger in the "austerity" camp for a while...  jockeying for position to get governmental table scraps, but in the end, we will repudiate.

DOT's picture

No thrusting...



no future.

Oh regional Indian's picture

Whoa! This Gross guy really got religion in the past three months eh?

He has a good writer and the Dillard book reference and mantis analogy are priceless. But him and soros with NWO and down dollar down (it's swooning up since he spoke, so soreass is a contrarian indicator now) and the rash of anti-gold MSM.

Mr. bond hates long term securities. 

Now that is an ox, moron!



Internet Tough Guy's picture

Gross is a gifted writer, and liar. No future generation is paying anything off. They never do and they never will. It will be a hyperinfiationary default, same as it ever was.

10044's picture

Lock & load AU@1372 bitchez

Canoe Driver's picture

Greetings, Tyler, from the first-class lounge at Jeddah airport, Saudi Arabia.  Here on business, and wanted you to know you're read here.

Sudden Debt's picture

I've just send a message to the customs at Jeddah customs that there's a American typing on a laptop trying to smuggle cocaine into the country in his ass.




thegreekT's picture

The only thing that can reverse America's doom (and the USD seizure as a reserve currency- its importance is already dwindling) is a magic reverse in productivity and US competitiveness vis-a-vis the emerging powers of China et al. Should this happen it will also result in deepening the US crisis internally.

For anyone wellread on history (rare in these financial blogs), and I mean history as in 2500BC to today in century steps, rather than detailistic financial stuff from 1900s, you will know that we are currently going through a transitional phase of empires. US is dying, China is rising. It started in the early 90s, and will last another generation and a half. By 2060-70 ANYTHING to do with US greatness (or much of the western imperial world and ethics) will be history. The good things that our "empires" gave the world, free thinking, democratic-ish processes etc, will be copied across. Much of the rest will be at the history books.

In other words history repeats. The Egyptians and Phenicians came ruled and went, the Greeks folowed, Romans took over, then split into Byzantine empire, the European renaissance took over from them, while Ottamans ruled the east, Anglosaxons and their empire which subsequently pushed the industrial revolution into gear and created the US dream and resulting greatness etc etc. These are 300+ year cycles. Guess what: The US one is just coming to an end. And there is pretty much nothing you guys (or us Europeans) can do.

The only upside for Europeans vs our US brothers, is that ANY successful monkey in the world wished they were born European and not American. European history, geography and culture might (just) save our asses from total slavery. Not so sure for the US though. My 1yo daughter will be learning mandarin though, thats for sure.

DOT's picture

Tred carefully,Sir, posters here know that all thier lives they have been lied to by those seeking to control them. Historians are notorious for un-ending bias, self interest, and of course , tenure.

Slim's picture

I don't completely disagree but you are writing off the US a bit too much like it will become an African desert wasteland.  The US has excellent food production capability and land resource.  Food is pretty darn important to people.  Additionally natural resources are quite solid should we ever choose to extract them.  Let's not forget natural transportation advantages with numerous excellent harbors/ports/rivers/intra-coastal waterways and decent rail that is easily improvable.  Manufacturing can be done anywhere, proximity to resources is better but with global transportation not a requirement - which leads to China's current competitive advantage which is primarily labor/currency arbitrage.  Their goal is play that advantage and rise as fast as possible before it rebalances with the rest of the world (hence fixed currency and support for developed countries US/Spain/Euro etc... who they need to buy their goods to keep it going).  The US also enjoys excellent relations with resource heavy Canada who shares a boarder and Great Lakes access.  Pre-existing military isn't too bad either especially since a good number of countries around the world have nothing and have become completely reliant on others to defend them.  Not a totally different picture from your own but I think it paints a more accurate picture of the long-term and sustainable advantages that exist for the US (we also have a very friendly resource heavy trading partner to our North).

Cognitive Dissonance's picture

Gross continues to polish his legacy for when he retires from the spot light. It doesn't hurt that he's positioning himself to be on the side of the people when the anger boils over. I find it interesting that his new home is isolated from the plebs by a bridge. Maybe it's just a coincidence.

The Newport Beach house, which had been listed for $26 million, is on Harbor Island, a gated community linked to Newport Beach by a short bridge.


I don't give a shit what someone says when it doesn't match what he does. Bill can talk about hometown values until he's blue in his face. He ain't living them and doesn't intend to as long as he wishes to grow his wealth and power. But it sounds good when the plebs are massed at the bridge.

velobabe's picture

i have been to Harbor Island a couple of times. it is junky. i body surfed at that break. almost killed myself, by getting smacked by a wave.

topcallingtroll's picture

The number of socialist losers and angry whiners is increasing on zero hedge, but is fortunately still a minority.  Bill Gross is right.  Many others are also right.  It's our collectivist mentality and desire to get something for nothing that motivates the socialists and the losers and it will destroy our country.  Unfairness never stopped economic growth, but laziness and killing of incentives certainly can.  I started with almost nothing and am doing quite well.  So can that minority on zero hedge who just complain and sit at home.  Go out and create a business like I did.  If you can't do it then you truly are a loser, so just quit your bitching and go whine to your momma who is letting you stay in your old bedroom because you don't want to work.

Missing_Link's picture

Bill's losing it.

Jim B's picture

I have never said this before but, I agree with Gross COMPLETELY!

DavidC's picture

I'd hardly call what the UK is doing thus far as an extreme fiscal diet - it strikes me more as 'We'll only spend £120 billion this year instead of £150 billion, so we're cutting our spending by, shock, horror, £30 billion". And as far as student tuition fees are concerned (not that it was mentioned above), all I can see happening there is a move to the American model, flash buildings, more unnecessary courses producing more graduates with fewer jobs available.

Cynical? Maybe...


malikai's picture

You're probably right, sadly. What the UK needs more than anything right now is a shakedown in the schooling system, breaking TPTB in the universities. They should really be cutting all subsidies, sacking all the top brass of the major universities, and letting the remains build anew. A student educational revolution is what we need. Adopting the corporate "seat warmer" factory model of the US is only going to make drones, not a new economy.

maddy10's picture

Both of you are wrong

UK's budget Deficit is 150bpounds instead of 163bpounds last year

That means they are still borrowing for many more years until they balance their budget, that is if they can!

DavidC's picture

I was using the figures as an example, not an exactitude.

My point remains valid, however, even with your comment and, indeed, is confirmed by it.


ZackAttack's picture

Yes, future generations. Because, of course, it's impossible for bondholders to share any of the pain.

STFU, Combover.

Panafrican Funktron Robot's picture

This.  It's fun how they're framing the debate to be between scorn and pity for the "useless eaters".  I can't think of an insult good enough to describe these people. 

Cognitive Dissonance's picture

And always they position themselves as doing "the people's" work....which of course is in the best interest of the useless eating people. I don't know what's worse. Their hypocrisy or the fact that so many people eat it up for breakfast.

Rodent Freikorps's picture

Did anyone expect being conquered by Mexico would lead anywhere else?

RagnarDanneskjold's picture

Future generations pay the price for their parents’ mindless thrusting.

The Pope agrees, take of the condom and thrust with a purpose!

Birddog's picture

It is the politicians who drained the Treasury of what our parents taxes paid.  First by congress tapping Social Security funds in the 80's replaced funds with an IOU to keep the whole thing rolling.  Next, I think IRA's, Roth IRA's & 401k plans along with private Pension funds are the next Target.  In 1933 they siezed citizen's gold...this time around, the IRA's & 401k's are the "new" gold for politicians to target next...a matter of time.

ella's picture

BG should worry about Republican de-reg instead.  http://www.ritholtz.com/blog/2011/01/corporate-self-regulation-how-did-t...

Mr. Issa appears to be off his rocker. 

ella's picture

BG should worry about Republican de-reg instead.  http://www.ritholtz.com/blog/2011/01/corporate-self-regulation-how-did-t...

Mr. Issa appears to be off his rocker. 

Unlawful Justice's picture

My bullshit detector just pegged. Painting with a wide brush you can say just about anything that is both true and untrue.