This page has been archived and commenting is disabled.

Bill Gross: "There Will Be Haircuts"

Tyler Durden's picture


The highlights from Bill Gross' monthly outlook letter: "The past decade has proved that houses were merely homes and not ATM machines. They were not “good as money.” Likewise, the Fed’s modern day liquid wealth creations such as bonds and stocks may suffer a similar fate at a future bubbled price whether it be 1.50% for a 10-year Treasury or Dow 16,000.... if there are no spending cuts or asset price write-offs, then it’s hard to see how deficits and outstanding debt as a percentage of GDP can ever be reduced....  Current policies come with a cost even as they act to magically float asset prices higher, making many of them to appear “good as money”.

And the take away: "PIMCO’s advice is to continue to participate in an obviously central-bank-generated bubble but to gradually reduce risk positions in 2013 and perhaps beyond. While this Outlook has indeed claimed that Treasuries are money good but not “good money,” they are better than the alternative (cash) as long as central banks and dollar reserve countries (China, Japan) continue to participate....a bond and equity investor can choose to play with historically high risk to principal or quit the game and earn nothing."

Said otherwise: continue to frontrun the Fed, but one finger on the sell button. The problem with at strategy is that everyone is doing it. And for a glaring example of what happens when everyone hits the sell button at the same time, see what happened to stocks last week following the hacked AP twitter account - that's what a bidless market, if only for a few seconds, looks like. Now extend those "few seconds" indefinitely.


There Will Be Haircuts


“Good as Money,” proclaimed the ad for Twenty Grand Cognac. Being a beer drinker, and never having cashed in a Budweiser to pay for a fill-up at the local gas station, I said to myself “Man, that must be really good stuff!” Even in a financial meltdown I thought, you could use it in place of cash, diamonds, gold or Bitcoins! And if the Mongol hordes descend upon us during a future revolution, who wouldn’t prefer a few belts of Twenty Grand on the way out, instead of some shiny rocks and a slingshot?

Well, not being inebriated at that moment I immediately shifted focus to a more serious topic. What IS money? A medium of exchange and a store of value is a rather succinct definition, but we generally think of it as cash or perhaps checks that reflect some balance of “ready” cash at a friendly bank. Yet as technology and financial innovation have progressed over the past few decades, and as central banks have tenuously validated the liquidity and price of various forms of credit, it seems that the definition of money has been extended; not perhaps to a bottle of Twenty Grand Cognac, but at least to some other rather liquid forms of near currency such as money market funds, institutional “repo” and short-term Treasuries “guaranteed” by the Fed to trade at par over the next few years.

All of the above are close to serving as a “medium of exchange” because they presumably can be converted overnight at the holder’s whim without loss and then transferred to a savings or checking account. It has been the objective of the Fed over the past few years to make even more innovative forms of money by supporting stock and bond prices at cost on an ever ascending scale, thereby assuring holders via a “Bernanke put” that they might just as well own stocks as the cash in their purses. Gosh, a decade or so ago a house almost became a money substitute. MEW – or mortgage equity withdrawal – could be liquefied instantaneously based on a “never go down” housing market. You could equitize your home and go sailing off into the sunset on a new 28-foot skiff on any day but Sunday.

So as long as liquid assets can hold par/cost with an option to increase in price, then these new forms of credit or equity might be considered “money” or something better! They might therefore represent a “store of value” in addition to serving as a convertible medium of exchange. But then, that phrase “Good as Money” on the cognac bottle kept coming back to haunt me. Is all this newfangled money actually “money good?” Technology and Fed liquidity may have allowed them to serve as modern “mediums of exchange,” but are they legitimate “stores of value?” Well, the past decade has proved that houses were merely homes and not ATM machines. They were not “good as money.” Likewise, the Fed’s modern day liquid wealth creations such as bonds and stocks may suffer a similar fate at a future bubbled price whether it be 1.50% for a 10-year Treasury or Dow 16,000.

But let’s not go there and speak of a bubble popping. Let’s perhaps more immediately speak about current and future haircuts when we question the “goodness of money.” Carmen Reinhart has said with historical observation that we are in an environment where politicians and central bankers are reluctant to allow write-offs: limited entitlement cuts fiscally, no asset price sink holes monetarily. Yet if there are no spending cuts or asset price write-offs, then it’s hard to see how deficits and outstanding debt as a percentage of GDP can ever be reduced. Granted, the ability of central banks to avoid a debt deflation in recent years has been critical to stabilizing global economies. And too, there have been write-offs, in home mortgages in the U.S., for example, and sovereign debt in Greece. But the cost of these strategies, which avoid what I simplistically call “haircuts,” has been high, and their ability to reduce overall debt/GDP ratios is questionable. Chairman Bernanke has admitted that the cost of zero-bound interest rates, for instance, extracts a toll on pension funds and individual savers. Some of his Fed colleagues have spoken out about the negative aspects of QE and future difficulties of exit strategies should they ever take place. (They won’t!) So current policies come with a cost even as they act to magically float asset prices higher, making many of them to appear “good as money” – shots of cognac notwithstanding.

But the point of this Outlook is that even IF… even IF QEs and near zero-bound yields are able to refloat global economies and generate a semblance of old normal real growth, they will do so utilizing historically tried and true “haircuts” that rather surreptitiously “trim” an asset holder’s money without them really knowing they had entered a barbershop. These haircuts are hidden forms of taxes that reduce an investor’s purchasing power as manipulated interest rates lag inflation. In the process, governments and their central banks theoretically reduce real debt levels as well as the excessive liabilities of levered corporations and households. But they represent a hidden wealth transfer that belies the vaunted phrase “good as money.”

Before drinking up, let’s examine these haircuts to see why they do not represent an authentic store of value even if their bubbly prices never pop. I will give each haircut a symbolic name – I welcome your suggestions as well via e-mail reply:

(1) Negative Real Interest Rates – “Trimming the Bangs”

During and after World War II most countries with high debt overloads resorted to artificially capping interest rates below the rate of inflation. They forced savers to accept negative real interest rates which lowered the cost of government debt but prevented savers from keeping up with the cost of living. Long Treasuries, for instance, were capped at 2½% while inflation was soaring towards double-digits. The resulting negative real rates together with an accelerating economy allowed the U.S. economy to lower its Depression-era debt/GDP from 250% to a number almost half as much years later, but at a cost of capital market distortions.


Today, central banks are doing the same thing with near zero-bound yields and effective caps on higher rates via quantitative easing. The Treasury’s average cost of money is steadily grinding lower than 2%. If current policies continue to be enforced in future years it will eventually be less than 1% because of the inclusion of T-bill and short maturity financing. The government’s gain, however, is the saver’s loss. Investors are being haircutted by at least 200 basis points judged by historical standards, which in the past offered no QE and priced Fed Funds close to the level of inflation. Large holders of U.S. government bonds, including China and Japan, will be repaid, but in the interim they will be implicitly defaulted on or haircutted via negative real interest rates.

Are Treasuries money good? Yes. But are they good money? Most assuredly not, when current and future haircuts are considered. These rather innocuous seeming (-1%) and
(-2%) real rate haircuts are not a bob or a mullet in hairstyle parlance. More like a “trimming of the bangs.” But at the cut’s conclusion, there’s a lot of hair left on the floor.

(2) Inflation / Currency Devaluation – “the “Don Draper”

Inflation’s sort of like your everyday “Mad Men – Don Draper” type of haircut. It’s been around for a long time and we don’t really give it a second thought except when it’s on top of a handsome head like Jon Hamm’s. 2% ± a year – some say more – but what the heck, inflation’s just like breathing air … you just gotta have it for a modern-day levered economy to survive. Sometimes, though, it gets out of control, and when it is unexpected, a decent size hit to your bond and stock portfolio is a possibility. If our TV idol Don Draper lives another decade or so on the airwaves, he’ll find out in the inflationary 70s. Such was the example as well in the Weimar Republic in the 1920s and in modern day Zimbabwe with its One Hundred Trillion Dollar bill shown below. As central banks surreptitiously inflate, they also devalue their currency and purchasing power relative to other “hard money” countries. Either way – historical bouts of inflation or currency devaluation suggest that your investment portfolio may not be “good as the money” you might be banking on.


(3) Capital Controls – the “Uncle Sam Cut”

Uncle Sam with his rather dapper white hair and trimmed beard serves as a good example for this type of haircut, if only to show that even the U.S. can latch on to your money or capital. Back in the 1930s, FDR instituted a rather blatant form of expropriation shown above. All private ownership of gold was forbidden (and subject to a $10,000 fine and 10 years in prison!) if it wasn’t turned into the government. Today we have less obvious but similar forms of capital controls – currency pegging (China and many others), taxes on incoming capital (Brazil) and outright taxation/embargos of bank deposits (Cyprus). Governments use these methods to keep money out or to keep money in, the net result of which is a haircut on your capital or your potential return on capital. Future haircuts might even include a wealth tax. Are gold and/or AA+ sovereign bonds good as money? Usually, but capital controls can clip you if you’re not careful.


(4) Outright Default – the “Dobbins”

Ah, here’s my favorite haircut, and I’ve named it the “Dobbins” in honor of this 5-year bond issued in the 1920s with a beautiful gold seal and payable, in dollars or machine guns! Bond holders got neither and so it represents the historical example of the ultimate haircut – the buzz, the shaved head, the “Dobbins.” As suggested earlier, the objective of central banks is to prevent your portfolio from resembling a “Dobbins.” I have tweeted in the past that the Fed is where all bad bonds go to die. That is half figurative and half literal, because central banks are typically limited from purchasing bonds payable in machine guns or subprime mortgages (there have been exceptions and Bloomberg reported that nearly 25% of global central banks are now buying stocks believe it or not)! But by purchasing Treasuries and Agency mortgages they have rather successfully incented the private sector to do their bidding. This behavior reflects the admission that modern-day developed economies are asset-priced supported. Unless prices can continuously be floated upward, defaults and debt deflation may emerge. Don’t buy a Dobbins bond or a Dobbins-like asset or a bond from a country whose central bank is buying stocks. They probably aren’t “good as money!”




Investment Strategy  

So it seems as if the barber has you cornered, doesn’t it? Sort of like Sweeney Todd! Let’s acknowledge that possibility, along with the observation that all of these haircuts imply lower-than-average future returns for bonds, stocks, and other financial assets. If so, the rather mixed metaphor of “money’s goodness” and “avoiding haircuts” is still the question of our modern investment age. The easiest answer to the question of what to buy is to simply take your ball and go home. If the rules aren’t fair, don’t play. That endgame however, results in a Treasury bill rate of 10 basis points or a negative yield in Germany, France and Northern EU markets. So a bond and equity investor can choose to play with historically high risk to principal or quit the game and earn nothing. PIMCO’s advice is to continue to participate in an obviously central-bank-generated bubble but to gradually reduce risk positions in 2013 and perhaps beyond. While this Outlook has indeed claimed that Treasuries are money good but not “good money,” they are better than the alternative (cash) as long as central banks and dollar reserve countries (China, Japan) continue to participate.

The same conclusion applies to credit risk alternatives such as corporate bonds and stocks. Granted, this sounds a little like Chuck Prince and his dance floor metaphor does it not? His example proved that dancing, and full heads of hair are not forever. So give your own portfolio a trim as the year goes on. In doing so, you will give up some higher returns upfront in order to avoid the swift hand of Sweeney Todd. There will be haircuts. Make sure your head doesn’t go with it.

Quick Read

1) Central banks and policymakers are acting like barbers. They haircut your investments.

2) Negative real interest rates, inflation, currency devaluation, capital controls and outright default are the barber’s scissors.

3) Gradually reduce duration, risk positions and “carry” as the year proceeds.


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 05/01/2013 - 07:53 | 3517134 GetZeeGold
GetZeeGold's picture



Seem's a just a tax for people that can't do math.


Contact your local politician for a refund.

Wed, 05/01/2013 - 07:58 | 3517152 Ghordius
Ghordius's picture

or, in other words: "What can't be repaid, won't be repaid"

Wed, 05/01/2013 - 07:57 | 3517156 GetZeeGold
GetZeeGold's picture




Thu, 05/02/2013 - 13:39 | 3523101 Hard1
Hard1's picture

Excellent piece by Mr. Gross.  Unbelievable that the manager of the world's largest fixed income funds warns readers that they will not get their money back (at least in purchasing power terms).   I think good news for Zerohedge as well. Gross's letter even includes images of Zimbabwe's 100 Tln dollar note and the presidential confiscation of gold, both items, regular images for ZH readers. Pity that the news are terrible and denial is rampant!

Wed, 05/01/2013 - 08:04 | 3517174 fonzannoon
fonzannoon's picture

But when it comes to Europe....

"Bill Gross, manager of the world's largest bond fund for Pimco, has launched a stinging attack on efforts by Britain and much of the euro zone to cut debt rapidly with severe austerity measures, warning that such action risks stifling recovery.

"The U.K. and almost all of Europe have erred in terms of believing that austerity, fiscal austerity in the short term, is the way to produce real growth. It is not," Mr Gross told the Financial Times. "You've got to spend money."

Wed, 05/01/2013 - 08:15 | 3517197 Ghordius
Ghordius's picture

when it comes to Bill Gross and PIMCO don't forget that Gross co-founded it 1971 - after Uncle Sam defaulted on the gold-backing of the Dollar, and sold it to the Allianz insurance giant based in Munich, Germany in 2000

imho what he says now has a different motivation from what he said between 1971 and 2000

Wed, 05/01/2013 - 08:28 | 3517222 disabledvet
disabledvet's picture

"good luck proving that in court." (that's suppose to make you laugh.) listen a man isn't just out to make money...he's also also out "to get the word out." does one do this by yelling SHIT ON A STICK COME AND GET IT! of course there's an "optimism bias" in the media...of course we talk our book...but can we REASON with the numbers? hmmmm. "this is a conundrum indeed Chairman Greenspan." WE'RE TALKING TRILLION YOU FEDERAL RESERVE PHUCKTARD! (obviously you can't "reason" with math..the numbers are the numbers so that's another thing to make you laugh, or cry..or be engraged etc). point being IN THEORY these deficits "WERE to be repaid" but it was only upon "successful bubble reinflation"' that "suddenly hope emerged!" i would argue "conditional reality"...subject to change without further notice as they say. RISK RISK RISK RISK RISK. that thing NEVER shows up in "the price." you know..."yeah, man...Amazon's only 400 bucks so i bought it dude" is what i mean. in other words you have to look at valuation relative to the economy and interest rates...THE MARKET will move the Fed...NEVER the other way around. (hopefully it is for...good and peaceful purposes this time. VERY rarely is it ever however and indeed in 2008..."the economy may have just gotten lucky there...." but by no means are we out of the woods yet.

Wed, 05/01/2013 - 09:13 | 3517368 tip e. canoe
tip e. canoe's picture

did not know that.   all his sockpuppet shouts make perfect sense now.   

Wed, 05/01/2013 - 08:44 | 3517228 Ghordius
Ghordius's picture

Austerity never produced growth

Austerity is the equivalent of cutting cancerous cells from the body so that they don't consume precious resources, and eventually you

Austerity is the equivalent of taking the credit cards of your daughters away and explaining them that you won't finance a new bag, dress and pair of shoes every day forever. And that they might have to contemplate work or finding a husband or both

Austerity is about giving breathing space to those parts of the economy that really produce, even if consumption in total goes down

Austerity is about conservation of resources on what is essential, because times are though

Good Austerity would be paired with some help to the truly poor, and cuts in the help to those who won't suffer by that

If I really had any trust in governments spending wisely, then I'd be all in favour of gov spending during recessions/depressions

If those spendings on borrowed funds would go in things that might be truly useful for the real, producing economy, like bridges, harbours, roads and all kind of useful infrastructure, than I'd be all about taking the Keynesian medicine

but we all took the Keynesian medicine since 1971, even though Lord Keynes advocated for paying back debt during good times, the way the US Congress was doing in the 50's and the UK did after the Napoleonic Wars

fact is, peacetimes are good times, wartimes are bad times. The old way was to pay back in the first and spend to win in the second

The new times are all about having peace and war together, declaring it as good times and borrow and spend as if they were bad times

balanced budgets, dammit. in the european case, we already tax as if we were having a war. plenty of tax money that begs to be spent efficiently, instead of having... moar

Wed, 05/01/2013 - 08:53 | 3517305 DeadFred
DeadFred's picture

Well put.

Wed, 05/01/2013 - 09:00 | 3517316 Sandmann
Sandmann's picture

in the european case, we already tax as if we were having a war.

So very true ! We have never gotten rid of the Wartime State which has simply grown inexorably and pre-empted claims on all forms of income

Wed, 05/01/2013 - 09:14 | 3517363 Dangertime
Dangertime's picture


Austerity does not create growth.  It clears away the rubble so one can begin anew.

Wed, 05/01/2013 - 09:22 | 3517415 tip e. canoe
tip e. canoe's picture

excellent summation, G.   however, the problem with "Austerity" will be the same problem as with "Keynesianism", it will be warped & twisted & mangled from its original intent to serve only those in power (and those who pull their strings).

as long as there is a centralized monopoly on "money" and "power", the beatings will continue, no matter whether it's a force feeding (K) or an enema (A).

Wed, 05/01/2013 - 11:04 | 3517900 Ckierst1
Ckierst1's picture

Austerity may never promote growth (although it may redirect assets to productive endeavors), but stimulation diminishes in efficacy (pushing on a string).  Better to let truly free (laissez faire) markets allocate than permitting political elites to choose winners and losers.  We ought to try laissez faire capitalism sometime.  Mercantilism is a travesty in the "Land of the free and home of the brave."

Wed, 05/01/2013 - 13:39 | 3518753 Mojeaux18
Mojeaux18's picture


Wed, 05/01/2013 - 08:57 | 3517307 Sandmann
Sandmann's picture

They are spending water...but not in a productive way.

Wed, 05/01/2013 - 09:09 | 3517351 GetZeeGold
GetZeeGold's picture



Let the real wealth transfer commence. Grab anything precious that is not nailed down.


I'd get some oil but I've only got 5 empty jugs and if you don't seal them up really well that crap gets all over everything.

Wed, 05/01/2013 - 09:12 | 3517335 Ghordius
Ghordius's picture

since it flows I'll continue


central banking based on fiat currency is a war instrument. it's perfect for doing what Germany did 1914: get off the gold backing and print to win. of course because after the war the loser pays for the expenses, every child 1914 knew that

during peacetimes, it's hard for sovereigns to forego the wonderful potentiality of CBs, their flexibility, their might. that's the reason why there are 110 of them in the world. they are something like giant, sovereign-sized credit cards

nevertheless, as with all war instruments, the instrument as such is not evil - it's how you wield it and for what

a credit card is a credit card, in the case you max it out as well as in the case you use it wisely

in this, ZH still does not understand what the EUR is about. it's a response to the eventualities of the fiat USD, that is still the global reserve currency, and so the main protagonist on the monetary plane. it's a damage control instrument

it's also the path of having options, or, better, not painting everybody in the same corner

including the option of having all member countries jumping off the EUR at the same time into their old ones, for example, or floating a new currency that has a chance because of size, and many, many others

but it's also a way not to get ripped apart by the tidal forces of the USD/Yuan fight

and - something probably only continental europeans feel this way - it's a sign of peace between previously constantly at-war-sovereigns because CBs are central to modern wars in the first place

yes, I know, the banks, particularly the megabanks. but they aren't what the EUR is about, they are only clients/customers of the system, not it's "reason of being". corrupt, sick ones, yes, but this is an illness of the parts, not of the system

Wed, 05/01/2013 - 10:09 | 3517634 Sandmann
Sandmann's picture

Again nice comment !  Bank of England 1694 set up to fund wars by Dutch king on English throne. Bank of France 1800 to fund war.  Canada and New Zealand did not get one until 1934.

So it is fair to say Central Banks are there to fund Government. That is exactly what they have done in funding wars and debasing currency and engaging in financial repression.


Wed, 05/01/2013 - 13:57 | 3518823 Tsunami Wave
Tsunami Wave's picture

Aaaaaahhhhhhhhhhhhhhh. And now I see. And when the Fed goes kaput.. As the bad bank amongst other banks of course, a 'good' and new central bank must come into existence. A global bank producing one single currency. 'One bank to rule them all.' Now I understand.

Thu, 05/02/2013 - 01:50 | 3521412 i-dog
i-dog's picture


"understand what the EUR is about. it's a response to the eventualities of the fiat USD, that is still the global reserve currency"

A response ... or a challenge for the throne, Ghordius?

There are two things we do know about the "European Experiment":

1. It was intended to encompass MANY more than the current 27 states (and paltry 11 EZ takers); and,

2. It has used every underhanded means possible to achieve that end - including, but not limited to, secret organisations (Bilderberg, etc) of politicians and bureaucrats working in the background, repeated ballots until the correct answer is given by voters (or the ballot is simply ignored!), and a European Central Bank to swallow, errrr, control it all.

Your continual platitudes of "there's nothing to see here, move along" ring very hollow, to me.

Wed, 05/01/2013 - 07:58 | 3517153 new game
new game's picture

any contact will be anger driven; best to mind my own affairs for now.

Wed, 05/01/2013 - 08:15 | 3517195 mayhem_korner
mayhem_korner's picture

it's a just a tax for people that can't do math.


I saw that on a Lottery Commission bumper sticker.

Wed, 05/01/2013 - 08:37 | 3517230 disabledvet
disabledvet's picture

"the market is a tax." interesting. "gold standard takes that away." we must always feed this beast? i would argue "there is a growth limit." 2008 was a "obvious" one. there will be more. "find yourself at the intersection of the up and the down and you will find history." will yours be told? will it be about you?

Wed, 05/01/2013 - 09:14 | 3517372 kridkrid
kridkrid's picture

The lottery is such a wonderful little example of: 1) how fucked up the government is and 2) how fucking dumb people are to not realize it.

Gambling is illegal, unless it is HUGE... and run by the state.  Gambling is illegal because... well, I'm not sure, but I assume it's because the "juice" earned by the bookie is.. what... immoral or something?  But the bookie is only raking 10%, the state is raking 50%+.  But the lottery is for education, right?  Fucking dumb fucking people who don't understand that money is fungible.  Money the state can now collect from idiots who can't do math to pay for something that the state is already on the hook to pay for.

The lottery really pisses me off.

Wed, 05/01/2013 - 10:07 | 3517613 barroter
barroter's picture

Play Megamillions Today!  The Payout is $100 Million! (Less what the lottery takes, about 40% and less what the gov't takes, another 40%)

Wed, 05/01/2013 - 10:18 | 3517679 player333
player333's picture

"Gambling is illegal because... well, I'm not sure, but I assume "


Its illegal because the state does not get their part.


+1 for a great post and to the point.

Wed, 05/01/2013 - 10:27 | 3517724 Cone of Silence
Cone of Silence's picture

Lotto,  A tax on Stupidity

Wed, 05/01/2013 - 13:49 | 3518792 akak
akak's picture

Kind of like the price of cigarettes, too --- slowly killing yourself while paying through the nose for the privilege.

Wed, 05/01/2013 - 08:35 | 3517231 SheepDog-One
SheepDog-One's picture

Exactly, just a more elaborate way of extracting yo interest payment that all central banksters deserve! The 'old way' is no longer working, that being Avg Joe getting a loan and paying it back gradually with interest. The new way is blow a bubble, and haircut the entire enchilada. One thing is for sure, banksters deserve their free living at the expense of you.

Wed, 05/01/2013 - 07:51 | 3517140 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

This is one of the best pieces out by Mr. Gross. Succint.

What to actually do with it? If the responsible thing for the "public" is to start fading this rally,

then the truly irresponsible thing is to lever up into the parabolic madness we are in the midst of.

AS LONG AS INFLATION IS FALLING, THE CBs are pedal to the metal.

Europe is cooked.

China has severe over capacity and is cooked.

US is living on virtual money.

The economic divergences from mkt price allow for no change of game plan by the CBs.

Scotty, warp factor 10.


Wed, 05/01/2013 - 08:07 | 3517176 mayhem_korner
mayhem_korner's picture



CBs will be pedal to the metal irrespective of inflation.  They have NO CHOICE (unless they want to be viewed as personally responsible for total and near-instantaneous crash of the bond, stock, and real estate "markets", which they don't).

[Front running insider-informed algos] ain't my idea of's more like suicide.  (channeling Han Solo)

Wed, 05/01/2013 - 08:39 | 3517240 disabledvet
disabledvet's picture

"speculations allow for the unwind." is that what you said Hank Paulson? something..."in the future" will allow for deficit reduction? couldn't tell ya...i'm just an average guy. clearly we now have the speculation however...will it pay down the debt...the deficit..or will it be used for...

Wed, 05/01/2013 - 08:45 | 3517270 NoWayJose
NoWayJose's picture

If the Vulcans came by today the would view what is happening and conclude that we are a primitive race with no intelligence - then they would keep going. Maybe that is why we haven't seen them yet...

Wed, 05/01/2013 - 08:48 | 3517271 NoWayJose
NoWayJose's picture

If the Vulcans came by today the would view what is happening and conclude that we are a primitive race with no intelligence - then they would keep going. Maybe that is why we haven't seen them yet...

Wed, 05/01/2013 - 09:04 | 3517329 RockyRacoon
RockyRacoon's picture

You can add Australia to your list of basket cases:

Oz manufacturing PMI signals full blown crisis
Wed, 05/01/2013 - 09:44 | 3517507 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

I thought the headline was a bit hyperbolic, until I saw the number.


I don't think the headline captures that abysmal print.

Wed, 05/01/2013 - 08:30 | 3517144 new game
new game's picture


Wed, 05/01/2013 - 07:54 | 3517149 Yellowhoard
Yellowhoard's picture

Bill finally gets it.

Wed, 05/01/2013 - 08:01 | 3517167 Ghordius
Ghordius's picture

you mean after 30 years and one billion he made out of trading bonds? perhaps he "got it" much earlier

Wed, 05/01/2013 - 08:10 | 3517186 buzzsaw99
buzzsaw99's picture

Bill is good at haircuts. He takes a little off the top from every one of his infestors.

Wed, 05/01/2013 - 08:41 | 3517249 disabledvet
disabledvet's picture

"when you're talking trillions a little can be a lot." market still has to move "your way."

Wed, 05/01/2013 - 07:54 | 3517150 babylon15
babylon15's picture

All the cuts will be on the bonds Ben Bernanke bought.

Wed, 05/01/2013 - 08:00 | 3517165 W T F II
W T F II's picture

I agree....Same w/ BOJ..."national duty" and all that...that is why Merkel ain't lettin' Mario 'bail her in'....

Wed, 05/01/2013 - 08:06 | 3517180 mayhem_korner
mayhem_korner's picture



...with your great-grandchildren's credit card.

Wed, 05/01/2013 - 08:43 | 3517255 disabledvet
disabledvet's picture

again "speculations can pay for many things." we know this from the 90's...of course "that was a prelude to the greatest financial collapse in world history." hmmm. "this sounds political to me." STILL.

Wed, 05/01/2013 - 09:00 | 3517315 somecallmetimmah
somecallmetimmah's picture

Shaved cats for everyone!

Wed, 05/01/2013 - 08:01 | 3517155 JustObserving
JustObserving's picture

how deficits and outstanding debt as a percentage of GDP can ever be reduced

We keep adding intangibles of $500 billion to the GDP every few months?

The US economy will officially become 3 per cent bigger in July as part of a shake-up that will see government statistics take into account 21st century components such as film royalties and spending on research and development.


Wed, 05/01/2013 - 08:00 | 3517157 HD
HD's picture

Fiat Russian roulette.  All or nothing.


Wed, 05/01/2013 - 07:58 | 3517159 W T F II
W T F II's picture

DUH....??!! He JUST figured that out...?? The guy 'returned' 5% a year and is worth $2 billion+ and lauded as a sage...

He and El-Erian are either phony shills or off their game

Wed, 05/01/2013 - 08:18 | 3517200 buzzsaw99
buzzsaw99's picture

Bill was the beneficiary of a 30+ year bull run in bonds coupled with a cozy relationship with the fed. Only now when bonds are extremely expensive does he complain. Pity the poor humble billionaire grifter. Buddy can you spare a few bps?

Wed, 05/01/2013 - 13:51 | 3518806 akak
akak's picture

Yeah, remember just a few short years ago when Bill was almost continually on CNBC singing hosannas of praise for Bernanke, defending TARP and the Wallstreet bailouts, etc. etc. etc.?  NOW he pretends to play the advocate of the little guy against the big bad government who was so recently his best friend forever?

Go to Hell, you lying sack of shit with the Tinkerbell voice.

Wed, 05/01/2013 - 07:59 | 3517160 Ricky Bobby
Ricky Bobby's picture

Does Bill have a But Out Plan?

Wed, 05/01/2013 - 07:59 | 3517161 new game
new game's picture

he falls short in analysis of the resulting collapse when the dollar loses it's world class ponzi status.

bill will eventually get it right.  smart guy, just a little slow...

Wed, 05/01/2013 - 08:02 | 3517162 ParkAveFlasher
ParkAveFlasher's picture

Bill could have just tweeted "RUN".

Wed, 05/01/2013 - 08:02 | 3517163 mayhem_korner
mayhem_korner's picture



#1 (Sheep):  I don't need to outrun the bear, I need to outrun you. (laughs)

#2 (TBTF):  OK.  But you don't know when the bear is coming and I do. (evil smile)

Wed, 05/01/2013 - 08:43 | 3517253 LawsofPhysics
LawsofPhysics's picture

#3 (Skilled tradesmen with dependable tribe):  All eCONomies are really local and I am the fucking bear, boom motherfucker. (Shots ring out - breif pause to silence)  Many fuckers talk, few people do, oh well, back to work creating things of real value without having to support sheep or TBTF.

Wed, 05/01/2013 - 08:02 | 3517164 dontgoforit
dontgoforit's picture

Let the Tribulations begin!  Gentlemen, stop your engines, Atlas has shrugged.

Wed, 05/01/2013 - 08:04 | 3517169 q99x2
q99x2's picture

Get into the bubble so Gross can get out. Nice guy.

Bill. What's he think we just got off the boat.

Wed, 05/01/2013 - 08:05 | 3517171 IdeasRbulletproof
IdeasRbulletproof's picture

Are there any cuts out there that can describe the "mullet"?

Bail-in possibly?

Wed, 05/01/2013 - 08:08 | 3517179 Stanley Lord
Stanley Lord's picture

Bill Gross is a pimp.

Wed, 05/01/2013 - 10:13 | 3517647 Tango in the Blight
Tango in the Blight's picture

Bill is Gross.

Wed, 05/01/2013 - 08:06 | 3517181 new game
new game's picture

the haircut should be labeled -scalped with bone fragments and blood all over the place; just short of a lector snack...

Wed, 05/01/2013 - 08:06 | 3517182 TrumpXVI
TrumpXVI's picture

I have quit the game and earn nothing.

But I knew that those were the choices going in.

I still have a job, and I know that I will have it for at least the next twelve months.

I sleep well at night.  Unlike back when I, "played the game".

ZH is correct.  The illustration of what happens in a market where everybody has their finger on the "sell trigger" should give everyone pause.  Unless you are a very, very big playah, like a JPM or a GS, your ass is gonna be grass before this thing is over.  You ain't gonna be rich no matter how high the Fed drives the S&P.


Wed, 05/01/2013 - 08:11 | 3517189 mayhem_korner
mayhem_korner's picture



Exactly.  You have to guess exactly right if you want to play this game.  And you are misdirected all the time, most intensively when the "boyz" are about to make a move.  Just look at Goldman's play before and after the orchestrated paper-gold takedown two weeks back. 

Preservation of wealth is the only sensible strategy right now.

Wed, 05/01/2013 - 08:39 | 3517237 RaceToTheBottom
RaceToTheBottom's picture

Exactly, within days or even hours of recomending closing out Gold shorts, they parade Abby....  whatever out to promote more QEn.....

Manipulation and volitility is their game.  Screwing muppets is their goal

Wed, 05/01/2013 - 13:06 | 3518575 madcows
madcows's picture

I pulled out in April.   I'm awaiting the correction.

I've gotta say, it's tough competing with the HFT algos.  It'd be nice, too, if the FED would quite dicking with the markets.

I'd love to buy some blue chips with dividends, instead of keeping it in the bank, but I don't trust the market at all.  Not that I trust the banks, either.  I figure I'll have a better chance of pulling it out of the bank than getting it out of the market.  boy, everything is risky.  I hope I can keep all that saving I've done, but I don't work for the government or the big banks, so I'm betting I won't be given the heads up ahead of time.  Fuckers should all be hanged.

Wed, 05/01/2013 - 08:13 | 3517191 Zer0head
Zer0head's picture

seems like a nice man always telling the sheep what he is doing - remember fannie or currently MBS - he shouted from the rooftops what his positions were and SHAZAMMM fannie gets bailed, fed buys MBS and Mr. Gross walks off with billions with no one even suggesting that he has a direct line afterall he was shouting from the rooftops

Wed, 05/01/2013 - 08:15 | 3517194 orangedrinkandchips
orangedrinkandchips's picture




Wed, 05/01/2013 - 09:02 | 3517328 somecallmetimmah
somecallmetimmah's picture

Shaved cats for everyone!

Wed, 05/01/2013 - 08:17 | 3517199 cnmcdee
cnmcdee's picture

Of course, the ZIRP policy is to either force savers to invest their money - or watch the purchasing power of their dollars goto zero.. The elephant in the room I think every is missing is the wealth is not being recirculated - no matter what the inflation rate is at.. Why? Because larger and larger portions of all tax revenue is diverted back to international banks to service interest.. The federal reserve has cast a disease of inflating debt upon the people.. The elite have bigger plans than that yet.  Google anglo-saxon agenda for WWIII, watch Syria as soon as Assad falls the door is ope 

Wed, 05/01/2013 - 08:18 | 3517201 resurger
resurger's picture

and how exactly you reduce your duration, by selling the bonds on your portfolio or buy junk high yield.

Fuck the bond market, its one of the biggest bubbles ever, i want to see how this wil unwind. btw i jever think it will ever will

fuck you gross and fuck you bernanke

Wed, 05/01/2013 - 08:16 | 3517202 Downtoolong
Downtoolong's picture

a bond and equity investor can choose to play with historically high risk to principal or quit the game and earn nothing.

Some choices they’ve given us. Like, do you want rocks, mud, or sand for dinner? What’s your appetite for risk?

It’s the height of hypocrisy when the government and Wall Street tell people they need to take more personal responsibility for their own retirement savings, and then lock them into a financial system which robs them of some of their savings every single day.

Wed, 05/01/2013 - 10:14 | 3517652 barroter
barroter's picture

Agreed.  The choices out there suck.  I am sure Wall St would love to have all that wonderful Social Security money loosened upon them.  How else can they get their paws on it if not "freed" into the Holy Free Market?

Granny...want yield? Then you MUST invest in high-yield Laotian Bond Funds!  Buy at the top because it'll keep going higher! Really...Trust Us!

Wed, 05/01/2013 - 08:19 | 3517207 q99x2
q99x2's picture

May Day holiday in Greece today as Greeks quit not working to protest against working rules.

Wed, 05/01/2013 - 08:22 | 3517213 new game
new game's picture

anyone think a scalp job at your bank/pension ect. will stir the masses?

Wed, 05/01/2013 - 08:28 | 3517218 mayhem_korner
mayhem_korner's picture



Not until the ATMs are all flashing "out of order".

Wed, 05/01/2013 - 10:13 | 3517657 barroter
barroter's picture

...and the cable goes out and there's no more Doritos.

Wed, 05/01/2013 - 08:29 | 3517221 Zer0head
Zer0head's picture

the only thing that will stir the masses is when their SNAP cards are declined at the local booze can

Wed, 05/01/2013 - 08:38 | 3517235 new game
new game's picture

1)first responders world wide in recent phys gold rush. 2)most certainly insiders selling 3)smart money reduction in equities and bonds to gold, cash r.e. and anything durable and phys. 4)average dude selling r.e./mortgaged b/4 collapse.

out of debt and free to do what ever the fuck...

Wed, 05/01/2013 - 09:06 | 3517338 eclectic syncretist
eclectic syncretist's picture

The bunch of numbnuts at the controls of the Reserve Note spigots are flying blind.  Bernanke asserts we can always prevent deflation but is apparently clueless about the amount of things people have that they could do without, and if they choose to do without them in massive numbers, whether out of frugality or necessity, there will be deflation no matter how much money the Fed loans to banks for ~free.  He can't stop it.  And if he does get inflation ignited, with all the funds that have already been pumped into the system, it will be very lucky if hyperinflation is avoided.  Their entire life's work is built upon a self-deception, that value can be imagineered endlessly, because they refuse to acknowledge that confidence and trust can vanish.

Wed, 05/01/2013 - 08:50 | 3517215 Mercury
Mercury's picture

Stop dancing around Bill.

Eventually someone must take it in the neck and the government is going to do everything it can to make sure it's not them.

Wed, 05/01/2013 - 08:25 | 3517216 Colonel
Colonel's picture

Just a trim or a boot cut?

Wed, 05/01/2013 - 09:05 | 3517333 somecallmetimmah
somecallmetimmah's picture

Shaved cats for everyone!

Wed, 05/01/2013 - 08:28 | 3517217 sangell
sangell's picture

How do I get some of those Dobbin Machine Gun Bonds. I'll take the machine gun!

Wed, 05/01/2013 - 09:14 | 3517353 somecallmetimmah
somecallmetimmah's picture

Dude, you don't need a machine gun.  Get a shaved cat, instead.  They squeak when you bite them!

Wed, 05/01/2013 - 08:28 | 3517223 Yen Cross
Yen Cross's picture

       Likewise, the Fed’s modern day liquid wealth creations such as bonds and stocks WILL suffer a similar fate at a future bubbled price whether it be 1.50% for a 10-year Treasury or Dow 16,000...

   Fixed it for ya Bill...

Wed, 05/01/2013 - 08:29 | 3517224 Peter Pan
Peter Pan's picture

Believe me, the only haircut that is central to saving the system is the haircut that needs to be applied to the size of the government payroll and the promises governments everywhere make.

All other haircuts after this one can be managed and might actually instill a new energy in all aspects of human endeavour which will in turn lead to clever ways of improving the quality of life without necessarily gutting the planet and turning on each other.


Wed, 05/01/2013 - 09:08 | 3517341 LawsofPhysics
LawsofPhysics's picture

So after bailing out all those private companies and PRIVATE WEALTH, the government (i.e. middle class taxpayer) is still supposed to pay off that debt?  Go fuck yourself, it's a bit more complicated now asshole.  Maybe we should have let those companies, their stockholders, and thier fucking owners fucking die after all.  Crash it all motherfucker, time to find out precisely what the real value of everyone's labor really is, fucking bring it, I am long sharecropping already.

Wed, 05/01/2013 - 09:49 | 3517534 barroter
barroter's picture

...and they call themselves "capitalists." What a bunch of weaklings...begging gov't to prop up their private monies with taxes.  Each time when one of these types screams "Social Darwinism," it's a joke! They are themselves the biggest violators of their own precepts.  If I remember correctly, a few members of Congress (who had Big Oil's leash around their necks) were demanding that the tax payer bailout BP for the PRIVATE mess they created in the Gulf.

Feelings of entiltement?  Look no further than any corp that can afford an army of lobbyists.

Wed, 05/01/2013 - 09:22 | 3517417 somecallmetimmah
somecallmetimmah's picture

Just say, "no" to haircuts, and "Hell, yeah!" to shaved cats!

Wed, 05/01/2013 - 08:35 | 3517227 RaceToTheBottom
RaceToTheBottom's picture

So everyone is playing the same game.  When was the last time you were in direct competition with WS scum and you won?

I would guess it is good to use that data in your planning....

Wed, 05/01/2013 - 09:57 | 3517573 barroter
barroter's picture

Musical chairs...

Am sure Wall St will be enticing many more onto the floor while the "Turkey Trot" song keeps playing.  Problem being there are four chairs and over a million players. The guy who will raise the needle off the record is the one paid off by the richest in the game.  Don't be surprised when the most connected happen to be sitting in those four chairs when the music stops.

"It's Different This Time"  Since when has human behavior changed in the past 2.5 million years?

Wed, 05/01/2013 - 08:39 | 3517239 Benjamin Glutton
Benjamin Glutton's picture

STFU Mr.Gross you freakin deadbeat depositor bail out sucking thief...


have you forgotten that the FED/USA saved your deposits that you foolishly loaned to other banksters?

Wed, 05/01/2013 - 08:37 | 3517241 observer007
observer007's picture

Casey: All Banks Are Bankrupt

A bigger crash is coming, there's absolutely no question about that in my mind. The only question is whether it happens later this week, or next week, or next month, or a few months from now. I don't know, but it won't be long before it all starts unraveling.

I cannot stress strongly enough that I think anyone who chooses to keep a significant amount of money in any bank is patently stupid. I mean that in the technical sense of stupidity - being an unwitting tendency towards self-destruction.

Wed, 05/01/2013 - 08:40 | 3517244 polo007
polo007's picture

Quietly, without much public fuss or discussion, a new ruling class has risen in the richer nations.

These men and women are unelected and tend to shun the publicity hogged by the politicians with whom they co-exist.

They are the world's central bankers. Every six weeks or so, they gather in Basel, Switzerland, for secret discussions and, to an extent at least, they act in concert.

The decisions that emerge from those meetings affect the entire world. And yet the broad public has a dim understanding, if any, of the job they do.

In fact, these individuals now wield at least as much influence over the lives of ordinary citizens as prime ministers and presidents.

The tool they have used to change the world so profoundly is one they alone possess: creating money out of thin air.

There is an economic term for this: quantitative easing. More colloquially, it's called printing money.

Since the great economic meltdown in 2008, these central bankers have probably saved the world's economy from collapse, and dragged it into the unknown at the same time.

The amounts they have created are so vast as to be almost incomprehensible — trillions of dollars in pounds and euros, among other currencies.

At the end of 2012, the balance sheets of the world's largest central banks, those of the G20 nations and the eurozone, including Sweden and Switzerland, totalled $17.4 trillion US, according to Bank of Canada calculations from publicly available data.

What's their legacy?

When the record of the 2008 global financial catastrophe is fully written — that story remains a work in progress — the world's central bankers will emerge either as heroes, or as the people who administered a cure that turned out to be as bad as the disease.

Three of them in particular will go down in history: Ben Bernanke of the U.S. Federal Reserve, Mario Draghi of the European Central Bank, and Canada's own Mark Carney, soon to be the governor of the Bank of England.

That is nearly a quarter of global GDP, and slightly more than double the $8.5 trillion these same institutions were holding at the end of 2007, before the financial crisis hit.

Stock markets have risen on this tide of cheap money. So has real estate. So, arguably, has everything else.

Wed, 05/01/2013 - 09:59 | 3517587 barroter
barroter's picture

Marx revised just a little bit. "We must kill all the rich" should be changed to, "We Must Kill All the Bankers."

Wed, 05/01/2013 - 08:39 | 3517250 spankfish
spankfish's picture

This is totally off topic, but I just read this and said WTF?  Climate change now forces women into prostitution.  Our Congress Critters are out of control... still.  This gives new meaning to what we call the area surrounding and including DC as "the logic free zone".  Got to be a williambanzai7 pic on this somewhere.

Wed, 05/01/2013 - 09:26 | 3517429 somecallmetimmah
somecallmetimmah's picture

"Climate change now forces women into prostitution."

What came first?   Prostitution or shaved cats?

Wed, 05/01/2013 - 18:01 | 3519956 Kirk2NCC1701
Kirk2NCC1701's picture

"A prostitute will do it for money.  A wife will do it for an air conditioner."  - Xavier Hollander

"Both address climax change." - Me

Wed, 05/01/2013 - 08:44 | 3517257 polo007
polo007's picture

Mark Grant sits on the aft deck of his yacht in South Florida's spring sun, ostentatiously relishing his wealth as only an American does, and dispensing advice. He's made his money, and he likes to wear it.

Grant's personality is as big as his mansion and as flashy as his collection of exotic cars — he actually calls himself "The Wizard," a tribute to his own financial acumen.

While we are talking, his cellphone rings intermittently, and the callers are usually serious moneymen. Bill Gross of Pimco, the world's largest bond agency, is a friend; his praise adorns the dust jacket of Grant's recent book.

Inevitably, the callers are seeking investment advice.

A nearly 40-year Wall Street veteran, Grant is currently the managing director of a Texas-based investment bank and the author of a daily must-read investment commentary called Out of the Box.

His advice these days to tycoons and small investors alike is simple and direct. For heaven's sake, seek safety. Preserve your capital. "Keep what you have."

To Grant, the central banks' money printing has distorted the financial universe beyond any sensible dimensions.

The Federal Reserve alone is churning out $85 billion a month, or just over a $1 trillion a year. The combined balance sheets (which reflect created money) for the European Central Bank and the 17 individual banks of the eurozone stand at $3.45 trillion.

Wed, 05/01/2013 - 08:45 | 3517263 Legolas
Legolas's picture



Don't be caught long on hair.  Short hair !

That would only be a problem if they are also "holding short hair" that belongs to you.

Otherwise, problem solved.

Wed, 05/01/2013 - 09:08 | 3517345 somecallmetimmah
somecallmetimmah's picture

Get a shaved cat!  Problem solved!

Wed, 05/01/2013 - 09:53 | 3517565 Legolas
Legolas's picture

You're right, shaved pussy is the solution !

Wed, 05/01/2013 - 08:51 | 3517282 polo007
polo007's picture

The National | Apr 29, 2013 | 20:46

The Monarchs of Money

The world's central banks have printed unimaginable amounts of money in recent years. Neil Macdonald explores what this means for the global economy and for your financial well-being.

Wed, 05/01/2013 - 08:50 | 3517290 Rustysilver
Rustysilver's picture

Bill Gross is gross and a pimp. He has his own agenda and his advice should be taken with a little of caution.

Wed, 05/01/2013 - 09:13 | 3517356 somecallmetimmah
somecallmetimmah's picture

Even pimps need a little shaved cat lovin', too.

Wed, 05/01/2013 - 08:55 | 3517302 eclectic syncretist
eclectic syncretist's picture

My summary? Bill Gross has his life's work wrapped up in the current monetary system, which, as he can plainly see, is falling apart at the seams, meaning his life's work has essentially been spent chasing an illusion, and he's not happy about it.

Wed, 05/01/2013 - 08:55 | 3517309 polo007
polo007's picture

Hiding the bad news

What these bankers do with this new money they print is buy government debt, or shore up failing banks or teetering national economies or industries like housing or insurance, part of the policy they call quantitative easing.
They say, and many respectable experts support them, that quantitative easing has saved entire economies from imploding.

They also say — high priest-like — that they must keep the details of their discussions secret because their words could be misinterpreted, and entire markets could move on a misunderstanding.
And they stress they are operating entirely within the mandates given them by elected governments.
That's as may be.
It's also true the central bankers did not ask for the immense power they now exercise.
It was thrust upon them because the private sector made enormous, stupid, ruinous blunders, and because elected politicians were too terrified to make all the deeply unpopular decisions, like whether to let more banks fail, that had to be made when the financial meltdown started feeding on itself.
Politicians, given the chance, kick the can down the road; central bankers act.

But because of their mandate to maintain economic stability, they like to hide the bad news, or obscure it with vague euphemisms.

Wed, 05/01/2013 - 09:01 | 3517318 Sandmann
Sandmann's picture

If Velocity falls as Quantity increases we have a major transmission problem

Wed, 05/01/2013 - 09:07 | 3517330 LawsofPhysics
LawsofPhysics's picture

In that case, we have had a problem since around 1995.

Wed, 05/01/2013 - 10:52 | 3517826 somecallmetimmah
somecallmetimmah's picture

Grease the wheels of industry with the fur of shaved cats!

Wed, 05/01/2013 - 09:08 | 3517344 marathonman
marathonman's picture

It's also true the central bankers did not ask for the immense power they now exercise.

I call bullshit on that statement.  The bankers have set up a system that would allow them to own and control the world.  It's all by design.

Wed, 05/01/2013 - 10:04 | 3517598 barroter
barroter's picture

Po' bankers...they never wanted this heavy burden...(sniff and boo hoo).

Wed, 05/01/2013 - 13:54 | 3518819 peaceful
peaceful's picture

it's actually a pretty smart schematic..

You put a moron/inflated ego puppet in charge. You dress him up as a hero that has the freedom to set up any examples he deems necessary for society. (Bush for example was for church, god, lower taxes etc.. Barry is playing the education, healthcare, jason collins freedom cocktail). But when all fails..the banksters will throw the idiot into the fire and they will begin anew..I

Wed, 05/01/2013 - 09:07 | 3517332 marathonman
marathonman's picture

So in the 'New Normal' the best "asset" is a fixed (low) interest long term loan on assets that adjust for inflation.  The increasing inflation transfers wealth to the property holder while devaluing the payments to the loan.  The downside of this strategy is that a good downturn can interrupt your cash flow and force you to default on your loan and it goes back to the banksters.  What a sick system this is.

Wed, 05/01/2013 - 09:10 | 3517339 ak_khanna
ak_khanna's picture

The foreign banks and lenders being backed by politicians of bigger and stronger countries and global financial institutions are insisting that countries like Cyprus and Greece repay them in full even though this is likely to push their economies in recession in the foreseeable future.

Moneylending to these countries by the foreign banks and lenders was a commercial decision whereby they received a higher interest rate to compensate for the risk they took in lending to them. The losses of this mess ought to be borne by lenders who enjoyed supernormal profits in good times and knowingly took the decision to lend to countries like Greece and Cyprus. The losses should not be borne by the depositers the taxpayers of other European countries by funding endless bailouts.

The best way out of this mess for the citizens of Cyprus and Greece is default.

Wed, 05/01/2013 - 09:27 | 3517447 Jim in MN
Jim in MN's picture


TANSTAAFL Bitchez!!!


There ain't no such thing as a free lunch....aka 'Frugality or Fragility'.


If you can't earn due to corruption, you have to SAVE MORE to meet targets.  Which in turn means you have to SPEND LESS.

Figure it out people.  The 'returns' in the paper markets are completely illusory because they WILL be stolen.  Count on it.

Frugality.....or fragility.  The choice is ours as well as theirs.

Wed, 05/01/2013 - 09:32 | 3517458 GVB
GVB's picture

You can borrow money to infinity, but you can only repay a certain amount of accumulated debt. If When people come to realize they will be unable to repay the amount of accumulated debt, that's the point in time where we are in right now. In my opinion, there are a dozen of reasons why the current situation has escalated, but I would address below "financial concept" (FRB) as the core problem. Always funny to read the definition again. Following URL, I've posted in previous news posts. Here it is again: It's about FRB explained/debated in Eur Parl.

*** Fractional Reserve Banking --- How it works *** (from Wikipedia)

In most legal systems, a bank deposit is not a bailment. In other words, the funds deposited are no longer the property of the customer. The funds become the property of the bank, and the customer in turn receives an asset called a deposit account (a checking or savings account). That deposit account is a liability of the bank on the bank's books and on its balance sheet. Because the bank is authorized by law to make loans up to an amount equal to a multiple of the amount of its reserves, the bank's reserves on hand to satisfy payment of deposit liabilities amounts to only a fraction of the total amount which the bank is obligated to pay in satisfaction of its demand deposits.

Fractional-reserve banking ordinarily functions smoothly. Relatively few depositors demand payment at any given time, and banks maintain a buffer of reserves to cover depositors' cash withdrawals and other demands for funds. However, during a bank run or a generalized financial crisis, demands for withdrawal can exceed the bank's funding buffer, and the bank will be forced to raise additional reserves to avoid defaulting on its obligations. A bank can raise funds from additional borrowings (e.g., by borrowing in the interbank lending market or from the central bank), by selling assets, or by calling in short-term loans. If creditors are afraid that the bank is running out of reserves or is insolvent, they have an incentive to redeem their deposits as soon as possible before other depositors access the remaining reserves. Thus the fear of a bank run can actually precipitate the crisis.

Many of the practices of contemporary bank regulation and central banking, including centralized clearing of payments, central bank lending to member banks, regulatory auditing, and government-administered deposit insurance, are designed to prevent the occurrence of such bank runs.



Wed, 05/01/2013 - 10:42 | 3517779 somecallmetimmah
somecallmetimmah's picture

Debt is but a promise that hasen't been broken yet.  I recommend stocking up on shaved cats.

Wed, 05/01/2013 - 10:09 | 3517623 Catullus
Catullus's picture

The Eat the Rich Crowd is out again on ZH. Let the same thing be written by some no name blogger with a little more colorful imagery of SHTF and it's like gold to some of you. Let the exact same argument come from someone who manages the largest bond fund on the planet, and all of the sudden he's talking his book.

And for those of you new to reading, Bill Gross has been making the same argument for 5 years now. That he can clearly see that the Fed had to hold the line Treasury yields is just being smart. Making money off of that means he's savvy.

What he's actually doing is saying that Wealth Effect tactic by which the Fed pumps money in to juice the equity markets is a game that the average investor can't win. Your portfolio may have returned to 2007 levels, but that's at the expense of the new risk inherent in the higher price. Interesting when a bond fund manger tells you that bonds are a loser's game.

Wed, 05/01/2013 - 10:09 | 3517640 semperfi
semperfi's picture

Bill Gross is a moron

Wed, 05/01/2013 - 10:48 | 3517816 the grateful un...
the grateful unemployed's picture

Bill Gross is more to the point than either of the Rands, who only pay lip service to the cause of abolishing the obscene Fed policy. A fund manager who suggests you can take your marbles and go home is giant leaps ahead of any backsliding politician. (by example AZ and UT want to allow gold as currency)

Wed, 05/01/2013 - 10:29 | 3517739 New American Re...
New American Revolution's picture

"Only gold is money." - JP Morgan.   This is because it is the Tree of Life, refined further, it becomes the non-existant single atom element.  But still it exists.   And as far as bonds taking a hit, what is continually being created is being bought much sooner than later by the FED, and they will take the first haircut for all of what they have when they lose their charter sometime between 2016 and 2019.  The conditions that are created to cause this will then make the barbaric relic of gold, unbarbaric. 

Wed, 05/01/2013 - 10:59 | 3517877 moneybots
moneybots's picture

"Austerity does not create growth.  It clears away the rubble so one can begin anew."


Booms create austerity, as 100% of booms end in a bust.

Wed, 05/01/2013 - 11:02 | 3517880 the grateful un...
the grateful unemployed's picture

still say the issue isn't debt, its collateral or capital, and capital is not money, capital is the store of value, while cash is the exchange. the fed destroys capital by printing cash, the result is asset deflation, to which their answer is, print more money. rinse and repeat.

at the bottom of the 2008 crisis the Fed should have raised interest rates. i said that to some financial experts and their jaws dropped open. (as yours are now probably) raising rates would have priced interest rates according to risk, which to me is what the Fed should be doing, gauging risk and helping the market price that risk, not defining risk, according to a list of phonyd up government numbers and the ambitions of some out of work salesman who want to run the country from washington dc. the  first depression investment advice, put your money in your mattress, is now plan B.

the fed knows it too, and they'll be trying to shake you out of cash. gross is just repeating history for those of you who didn't learn it properly by reading phony'd up government history texts. talk to the survivors, learn, its not too late.

Wed, 05/01/2013 - 13:38 | 3518746 bugs_
bugs_'s picture

I'm cutting...cutting...CUTTING...your hair!

Wed, 05/01/2013 - 13:48 | 3518785 Kirk2NCC1701
Kirk2NCC1701's picture

How much gold was actually "confiscated" in 1933?  From how many people?  How much gold was actually "handed it"?  By how many people?

Thought so.  Next time, they'll just tax the sh*t out of it at POS (point of sale). 

Or -- and I would not put it past them (and am the FIRST to say this) -- they will keep hammering down the paper price till there is no more retail bullion to be had anywhere.  Then and only then will They* re-anchor the fiat to gold (banking holiday), with reserve ratios and gold/fiat ratios TBD.  If you seek to cash in after the Reset, it won't matter, because they'll just tax the sh*t out of your nasty, speculative & 'undeserved' windfall.  If they don't throw you into a FEMA camp.

* Out of sheer greed and self-interest, the Fed crime syndicate will seek to get alignment from the other CB crime syndicates in the G20.  If possible.  Else they'll settle for as many as they can, but still shoot for world domination via SDR's from the IMF.  IMF: the International Monetary Fund.  But we like to call them affectionately by other names:  I = International, Iniquity, Insatiable...,  M = Monetary, Mammon, Moloch...  F = Fornicators, Fraudsters...

Do NOT follow this link or you will be banned from the site!