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Bill Gross On "New Normal" Investing As A Failed Marriage: "What To Do When A Love Affair Goes Bad?"

Tyler Durden's picture

In his latest letter, Bill Gross takes another flight of fancy, this time comparing the global economic crunch to love stories gone very bad (think divorce lawyers). From Europe's love affair with a monetary union, to America's infatuation with rags to riches, even with the tolerated (and very mercantilist) Chinese concubine, it has all gone horribly wrong. So what happens when the divorce lawyers come calling, doing their best to take not half but all of your capital? "What to do when a love affair goes bad? How should you invest when Euroland is at each other’s throat, when a thinly disguised battle between labor and capital freezes policy action in the United States, when a mercantilistic partnership between developed and developing nations produces more questions than answers, more losers than winners? Increase the odds for a divorce, we’d suggest, which in investment markets means focusing on the return of your capital as opposed to the return on your capital."
 Pimco's advice? Run.
"In the U.S., strangely enough, matrimonial discord between rich and poor has led to lower, not higher, Treasury yields as approaching recessionary winds force the Fed and private investors to favor bonds. There are limits, however. Ten-year Treasuries at 2.25% are discounting a heap of trouble (none of it strangely enough due to its own credit standing), and neither investor nor borrower may emerge from this brouhaha unscathed." Bingo: 10 year at record lows is anything but good. In fact it is very, very bad
. And while even the ultras may eventually hit 0.00%, all that will mean is that the US economy is completely broken in yet another false signal courtesy of central planning.
As for love gone sour in Europe and China, read on.


New-Fangled Love Songs

  • Liquidity concerns may affect all European peripheral bond markets unless the European Central Bank counters the rush for the exits with an enlarged daily checkbook.
  • In the U.S., discord between rich and poor has led to lower, not higher, Treasury yields as approaching recessionary winds force the Fed and private investors to favor bonds.
  • We prefer investing in the “cleaner” dirty shirt countries of Canada, Australia, Mexico and Brazil, along with non-dollar currencies that have strong trade ties with the Asian continent.
Just an old-fashioned love song
Comin’ down in three-part harmony.
Three Dog Night
In many ways the global economic crisis is like a marriage gone bad. As the Three Dog Night sang years ago, global economies have functioned harmoniously for many years, but suddenly the love songs have become strident and cacophonous, the policy coordination morphing into a war of the roses as opposed to a giving of them. Instead of three-part harmony we are now experiencing, at a minimum, tri-party disharmony, teetering on the brink of “divorce,” which in economic parlance means a possible “developed economy” recession – a downturn from which reconciliation may be difficult due to a lack of policy options and cooperation. But I get ahead of myself. Let’s first ring the wedding bells, then take you through an explanation of three separate global marriages and how each of the partners have grown apart. 

Europe Unites!
Oh those feisty Europeans! Always fighting like a dating couple and then finally resolving their differences by saying “I do” sometime in the 1950s with the creation of the Common Market and the European Economic Community (EEC). In doing so, France and Germany said “never again,” and even though they didn’t like each other (read “hate”) they decided to make economic lurv in the hopes that they wouldn’t destroy the continent again. It later turned into a formal union, a European Community (EC), where they invited lots of witnesses to the ceremony and created instant family members, if that’s metaphorically possible. Twenty-seven of them, including Italy, Spain and the U.K. were now relatives despite some liking pasta and others preferring horrid cuisines featuring Shepherd’s Pie or fish and chips. The marriage progressed to the point of a smaller monetary union sometime in 1999, but critically, without a common budget. Husband and Wife – Germany and Greece – decided to have a joint bank account, but with separate allowances and no oversight. Greece could issue bonds at nearly the same yield as could its Northern hard-working neighbors, but were free to spend it any way they chose. This was an economic version of an open marriage where one party gets to have all the fun and the other worked nine-to-five and came home too exhausted for whoopee. Well sometime last year, global lenders said enough is enough and soon the whole cheating European Union (EU) was at each other’s throats, hiring lawyers and threatening to break up. Calmer heads prevailed when the ECB decided to make nice and use its checkbook. Last week Angela Merkel and France’s Sarkozy sort of got engaged for at least the second time, nixing expanded funding for their Southern neighbors and placing the burden even more on the ECB. Who knows where it goes now, but let’s put it this way – Germany and France are sleeping in a king-size bed while the rest of its EU family are sleeping in separate bedrooms. As a result Euroland faces economic contraction.
California Dreamin’
This impending divorce in America is not about sex or sleeping around, but more about romancing the now stone-cold notion that anyone could be a millionaire in the good old U.S. of A. if only they worked hard enough. Our Statue of Liberty proclaimed “give us your tired, your poor…” and sent many of them West to build a little house on the prairie or strike it rich in the goldfields of Sacramento, California or Skagway, Alaska. Many of them did and a century later, the option-laden fields of Silicon Valley provided modern-day examples of rags to riches fairytales come true. But this odd couple marriage of rich (and poor hoping to be rich), now seems on rather shaky ground. Instead of boundless opportunity, the nursery rhyme describing Jack Sprat – who could eat no fat – and his wife – who could eat no lean – appears to be the starker of the two realities. There are the poor and there are the very rich, with the shrinking middle class resembling Mr. Sprat rather than his wife.

During this country’s recent economic “recovery,” real corporate profits increased by four times the amount of working wages in dollar terms, and, as the chart below shows, are 50% higher than at the turn of the century while wages remain relatively unchanged, something that has not occurred since this country’s nuptials were concluded over three centuries ago. Is it any wonder that preliminary battlefield skirmishes in Wisconsin and Ohio between labor and capital promise to spread across every state of this land? (Not Texas!) Is it any wonder that Republican orthodoxies favoring tax cuts for the rich and Democratic orthodoxies promoting entitlements for the poor threaten to hamstring any constructive efforts to reduce unemployment over the foreseeable future? We are witnessing romantic love turning into a spiteful, bitter clash between partners in name only.

The Asian Miracle

Confucius say, “Can there be a love which does not make demands on its object?” While not a marriage, there has definitely been a love affair between Western consumers and their Chinese producer “objects” for several decades now. We loved them because they made cheap goods, but somehow they seemed to love us more as they slowly but surely put their people to work while ours were hitting the unemployment lines. Imperceptibly, the developed world’s manufacturing base was gradually eroding and being replaced by securitized finance that destroyed itself and nearly its economies in 2008.

China, meanwhile, calmly played its cards with a decades-long plan centered around capitalistic mercantilism, a game the United States claimed to play best but somehow forgot most of the rules. Even when holding the trump card of a reserve currency, mercantilistic domination depends on making something the rest of the world wants. We don’t and they do. The Chinese “object” has turned into an object lesson for developed economies that debt-financed consumerism is reaching an end. This affair then, which has sustained global growth during much of the 21st century, is vulnerable. Both parties still play kissy face and say “luv ya” (weak form for “I love you”) but there is tension there. China questions our credit quality and the yields on their trillion dollars of Treasury bonds. The U.S. questions their exchange rate and claims currency manipulation behind closed doors. This couple claims to still be dating, but “hooking up” may be more like it. Even then, no one stays the night, claiming they left their toothbrush at home.
Judge Judy’s Verdict

What to do when a love affair goes bad? How should you invest when Euroland is at each other’s throat, when a thinly disguised battle between labor and capital freezes policy action in the United States, when a mercantilistic partnership between developed and developing nations produces more questions than answers, more losers than winners? Increase the odds for a divorce, we’d suggest, which in investment markets means focusing on the return of your capital as opposed to the return on your capital. Of the three rocky relationships, Euroland has the most immediacy. Mohamed El-Erian is increasingly of the persuasion that one or more of the outer periphery (Greece, Ireland and Portugal) may be forced to vacate the premises. If so, technically destabilizing liquidity concerns may affect all peripheral bond markets unless the ECB counters the rush for the exits with an enlarged daily checkbook.

In the U.S., strangely enough, matrimonial discord between rich and poor has led to lower, not higher, Treasury yields as approaching recessionary winds force the Fed and private investors to favor bonds. There are limits, however. Ten-year Treasuries at 2.25% are discounting a heap of trouble (none of it strangely enough due to its own credit standing), and neither investor nor borrower may emerge from this brouhaha unscathed. We prefer the “cleaner” dirty shirt countries of Canada, Australia, Mexico and Brazil, where higher yields and more pristine balance sheets prevail.

And what of China and its fling as mercantile dominatrix? Here to stay – get used to it, PIMCO would say, but at the same time a substantial currency revaluation would assist its image and economy in its new role as the global economy’s economic locomotive. Consider investing, therefore, in non-dollar currencies that have strong trade ties with the Asian continent. Global equities? They’re cheap – dividend yields are higher than bonds in many cases – yet if growth falters there may be more downside to come.

A good relationship, as any adult knows, takes hard work and even then true love never runs smooth. We are into the “bumpy journey” phase of our New Normal where fear, lack of policy options and loss of control can dominate relationships. At a minimum, investors need to prepare for disharmony even with the hope of eventual reconciliation. Those old-fashioned love songs have become new-fangled freshly entangled ones from which an escape may be hard to envision.


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Tue, 08/30/2011 - 08:50 | 1614344 KlausK
KlausK's picture

Rags to riches, bitchez

Tue, 08/30/2011 - 08:51 | 1614348 russki standart
russki standart's picture

Bill Gross has too much time on on his hands. 

Tue, 08/30/2011 - 08:59 | 1614378 augie
augie's picture

playing both sides requires such an impression. 

Tue, 08/30/2011 - 14:17 | 1615848 TheFourthStooge-ing
TheFourthStooge-ing's picture

That ain't the way to have fun, son.


Tue, 08/30/2011 - 09:06 | 1614410 slaughterer
slaughterer's picture

Gross should look to the film "Fatal Attraction" as a better metaphor for the future relation of rich and poor.  Not just a legally regulated "matrimonial discord" but an all-out jealous, homicidal obsessive compulsive that boils your kids rabbit, comes at you with a kitchen knife, stalks you at work, and tries to murder your wife.   Once again, Bill errs on the side of levity.   

Tue, 08/30/2011 - 08:54 | 1614360 Irish66
Irish66's picture

True love, divorce, dear abbey...ohhhhh crap we are .....

Tue, 08/30/2011 - 08:54 | 1614361 Tense INDIAN
Tense INDIAN's picture

Love Money ...nothing would go bad in that one....

Tue, 08/30/2011 - 08:55 | 1614366 Dapper Dan
Dapper Dan's picture

China should have had the "Massey Pre-nup"  it's impenetrable!

Tue, 08/30/2011 - 08:58 | 1614373 Yamaha
Yamaha's picture

A master of the obvious! Once again.

Tue, 08/30/2011 - 08:58 | 1614375 Shineola
Shineola's picture

In the Austrian view, money = labor.   Money becomes overly important to some, when they are permitted to steal the labor of others.  What do they do with this stolen labor?   They just squander it on thier own fancy.  

"On a long enough time-line......"    Well, stealing just doesn't make much sense.

Tue, 08/30/2011 - 08:58 | 1614376 RSloane
RSloane's picture

This must be Gross's August Investment Outlook missive. I enjoy reading all of them.


Tue, 08/30/2011 - 08:59 | 1614379 jimijon
jimijon's picture

And here is my song for this love triangle gone bad...

Not A Protest Song; A Love Song!

Tue, 08/30/2011 - 09:00 | 1614383 misterc
misterc's picture

Here in Germany we get 2.6% yield on the best CD available (still questionable as it's from Bank of Scotland - Lloyds- insured up to 50.000 EUR only and court would be in Great Britain). Plus I have to pay 26% tax on my yield returns.

At the same time my living expenses are up at least, honestly and not exaggerating, 7% (heating, gas, subway fare, restaurants, food, stamps, etc.).
How anybody can still fantasize about CD or "Total Return"-investment strategies is beyond me. People must be really NOOB to hand their money to Pimco who take on Italian debt to get yields up.
Totally broken, corrupt FIAT-system. Rename Merkel to Merkelowa and Brussels to Brusscow. And put your savings in something tangible.

Tue, 08/30/2011 - 09:10 | 1614417 slaughterer
slaughterer's picture

Can't you better yields on CDs in Germany from Greek, Irish and Portugese banks with foreign court jurisdiction?  Would any Germans buy those?  (I guess I answered my own question.)

Tue, 08/30/2011 - 09:14 | 1614429 misterc
misterc's picture

I actually moved my small business-liquidity-money away from Bank of Scotland to a German bank with an even lower yield, just to enjoy German CD insurance. I got a little nervous about Lloyd's CDS lately.
I might be an alarmist, but as they say, if panic, panic first.

Tue, 08/30/2011 - 09:24 | 1614460 slaughterer
slaughterer's picture

After having redemption problems with a French bank, I also did the same.  Filling out court forms in French got to be too much over the two years it took to get my money back.  It was obvious to me at the end that the bank in question was a major Ponzi scheme.  Despite alerts to Brussels, it is still in business. 

Tue, 08/30/2011 - 09:00 | 1614384 DK Delta
DK Delta's picture

In light of all the new "policy options" for the Fed being advocated since QE3 has not been announced, i thougth I would address the real question of whether or not the Federal Reserve CAN ACTUALLY AFFORD for banks to start lendign again. The short answer is no, and here is why:

Tue, 08/30/2011 - 09:35 | 1614496 topcallingtroll
topcallingtroll's picture

Excellent article from covering delta.

Has quantitative definition of zombie banks and explains why a system reset is better than global serfdom.

(Of course if there has to be serfs and lords then you need to be a lord)

Tue, 08/30/2011 - 09:43 | 1614515 tarsubil
tarsubil's picture

Doesn't mean much coming from me but that may be one of the best summaries of our current situation I've read. Thanks.

Tue, 08/30/2011 - 10:05 | 1614577 DK Delta
DK Delta's picture

Thanks. I try to keep it simple :)

Tue, 08/30/2011 - 10:31 | 1614727 Greater Fool
Greater Fool's picture

Yes, thanks, a very good explanation of a key aspect of the liquidity trap we're in. What it means to me is that the only safe way to wind down those excess reserves is to set them against loan losses--i.e., force banks to recognize losses, ideally by disgorging the bad assets.

Unfortunately, I think you need a lot of yield-hungry investors and a functioning system of structured finance to accomplish these objectives, and at present we have neither. Funds seem to be liquidity-obsessed, which leads to outrageous malinvestment: Treasuries yielding less than inflation while real assets crumble or are destroyed by the homeless squatting in their ruins. A still-life of missed opportunity and failed resource allocation.

Tue, 08/30/2011 - 10:37 | 1614765 DK Delta
DK Delta's picture

Yes, but that would have go be accompanied by nationalizations. If they are going to expand the money supply in order to fill the vaccum of debt created by reckless lending and speculation, then all those executives need to lose their equity stake for starters. 

Tue, 08/30/2011 - 11:28 | 1615007 Greater Fool
Greater Fool's picture

Right, but that should be the effect. Now, many banks have huge stores of illusionary equity as a consequence of unreasonably optimistic asset marks, in addition to the reserves. Forcing price discovery on the bad assets would of course vaporize a lot of this "equity," but banks that haven't accumulated enough of a cash cushion in the past 3 years to handle this eventuality likely won't and ought to be broken up.

As to what mechanism can force this sort of a change...I think a single grain of sand dropped on this pile will start the avalanche. Since it's essentially under Treasury control, Citi should go first. This would likely lead to the death of Citi as such, which is what pretty much everyone has said was necessary since 2008.

Anyway, perhaps it's politically impossible but this is the only path I see whereby those excess reserves don't cause a huge problem in the money supply. The alternative--deflation--is pain we will experience either in a series of shocks or as a steady ache for the next 20 years (see Japan). I'd like to think that we can find the kind of leadership somewhere not to follow our friends on the Pacific Rim down that road.

Tue, 08/30/2011 - 09:00 | 1614388 Everybodys All ...
Everybodys All American's picture

The US is becoming investor unfriendly. The markets are more or less a centrally planned system now and so anyone who is looking to invest here is simply looking at a rigged outcome.

Tue, 08/30/2011 - 11:14 | 1614968 weinerdog43
weinerdog43's picture

Beginning!   Where ya been son?  The Wall St. casino has been rigged for decades.

Tue, 08/30/2011 - 09:06 | 1614409 Cognitive Dissonance
Cognitive Dissonance's picture

"What To Do When A Love Affair Goes Bad?"

D I V O R C E the Fed.

Now. Uncontested. Just cut the ties that bind us to the slavery.

Tue, 08/30/2011 - 09:19 | 1614445 Max Hunter
Max Hunter's picture

Is it true that they have a 100 year charter? If so, it would be interesting that for the first time (that I know of) there will be debates next year with a candidate running on the platform of killing the bank like Andrew Jackson.  If RP is elected, based on his position, is it conceivable that the charter not be renewed and debt to FED expunged?

Tue, 08/30/2011 - 09:26 | 1614466 Cognitive Dissonance
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I don't know for a fact about the 100 year charter, but it has been widely reported that something is coming up for renewal.

I wonder if this is the root reason Ron Paul has decided not to run again for his house seat and concentrate instead on the Presidency. Because he no longer needs to speak carefully for fear of upsetting his constituency, which has recently been gerrymandered to make it more difficult for him, he can be much more outspoken......if that's even possible for Paul. 

Tue, 08/30/2011 - 09:49 | 1614534 Max Hunter
Max Hunter's picture

I was thinking the same thing about his not running for a House seat but for another reason that somewhat ties in.  If he does not get the Rep Nom, he would certainly be free to run as an Independent.  Most say this spells troubles for the Rep and hands the election to the Dems, I couldn't disagree more. IMO, he would maintain his 40-45% while the Dems and Rep fight for the remaining 55-60%... With his stance on wars, he would pull at least 10% away from the Dem base..  Funny how all the peace loving Dems fell silent in the past few years..

Tue, 08/30/2011 - 09:54 | 1614551 Cognitive Dissonance
Cognitive Dissonance's picture

Interesting. I hadn't considered the Independent angle.

Is it me or have Presidential election runs escalated into nearly two year long affairs? This started with the 2008 cycle when attention needed to be diverted from the economy stupid. They have always been 12 to 14 month affairs. But it has become the theater of the absurd.

Tue, 08/30/2011 - 10:08 | 1614590 Max Hunter
Max Hunter's picture

No, it's not you... Everything seems to be doing that.. Christmas comes earlier every year as well..

The election cycle is now constant.. Like lighting a cig with the butt of another..

Tue, 08/30/2011 - 10:19 | 1614648 Cognitive Dissonance
Cognitive Dissonance's picture

That is a great connecting observation Max Hunter. While I am very aware of the Christmas shopping season now starting well before Thanksgiving, your comment fired up the brain cells. There are many other consumer cycles that are now running into each other. Back to school shopping in June, Easter sales beginning directly after President's day sales in Feb etc.

The consumer culture tachometer is now firmly in the red.

Tue, 08/30/2011 - 10:07 | 1614582 tarsubil
tarsubil's picture

I can think of two ways to break the Fed: bring the troops home (international rejection of the dollar) or end the Federal income tax (domestic rejection of the dollar).

Tue, 08/30/2011 - 14:57 | 1616041 DoneThis2Long
DoneThis2Long's picture

D I V O R C E the Fed.

Now. Uncontested. Just cut the ties that bind us to the slavery.


but then the idiots in congress, and the "Current Resident" on 1600 Penn Ave, would have full control, in which case, the skids would be greased even more. Well, that might not be entirely true, since most of those bastards are nothing but mere marionettes, with their strings being yanked at every move, by the likes of soros et al, you know the ones ...."new world order" lovers who are aiding in the dismantling of the once Great US, and serving it piece by piece to china, however, the same zealous ideologues and true enemies of the US, fail to notice that that marvel called EU is crapping out, approaching the full blow-out point, at which time most of their 'contents' gleefully ingested as ingredients of the delicious EU, will be excreted, and when the end result will hit the proverbial fan .... duck and cover.

Unfortunately, what Gross has become is a splendid specimen of the 'grownup hippies' who in the 60's and 70s were raising hell, in the name of a better America, while now, a decent number of them, to varying degrees, having become 'fat cats', forgot how they were able to amass their fortunes, and instead of uniting and contributing however possible to returning the country on the path to prosperity, are now, continuing to chase an easy buck, by financing our adversaries, and most likely our enemies, based on their propaganda they already consider us their enemy - all to the detriment of the quality of life during the 'golden years' for some of us, as well as the quality of life (or lack thereof) for our children and future generations.

Once Heli-Ben got rates to 4% yet the economy continued its tanking trajectory, the politicians should have pulled their heads out of their asses, and begin serious work on policy intervention aimed entirely at rebuilding the domestic manufacturing base, which is all but gone, as well as ensuring that any fed provided liquidity remains 100% - or close to it - in the US.

Given the facts revealed by the Bloomberg recently released Fed back-door loans, makes me wonder if Uncle Ben himself is not among the facilitators of the "new world order"?!

So me thinks anyway.

Duck 'n cover everyone.

Tue, 08/30/2011 - 09:10 | 1614420 Manthong
Manthong's picture

"Republican orthodoxies favoring tax cuts for the rich and Democratic orthodoxies promoting entitlements for the poor"

Not that I am a Republican, but my read is that only one half of that statement is true. Republicans appear to favor most all tax cuts.

"Tax cuts for the rich" is a hackneyed expression, and a class warfare propaganda term designed to include anyone that makes over an average wage a tax target.

Regardless, Gross is just another player in the same sandbox digging his own style of hole.

Tue, 08/30/2011 - 11:09 | 1614956 weinerdog43
weinerdog43's picture

Sorry, but the practical effect is tax cuts for the rich no matter what they currently call them.  I don't recall any Republic in favor of the earned income tax credit.  The Republics and the rich have been waging class war against the rest of us for decades.  Nice try though.

Tue, 08/30/2011 - 09:14 | 1614430 Jim in MN
Jim in MN's picture

Indoor fireworks

Can still burn your fingers

Indoor fireworks

We thought were safe as houses

They're not so spectacular

They don't light up in the sky

They can dazzle or delight

Or bring a tear

When the smoke gets in your eye real returns for 30 years because of treasonous, insane bond protection rackets from Ben&Timco, AKA the American Yakuza.  Bummer for Bill Gross.  Wonder if he's told his clients they have to reduce consumption and increase savings to reach any kind of goals?  Or if he just whines in public.  Mustn't hazard one's privileged position in information/leak queue...

Tue, 08/30/2011 - 09:14 | 1614433 virgilcaine
virgilcaine's picture

This could only be better if read aloud by M El Erian.. Bravo Mr Gross.

Tue, 08/30/2011 - 09:15 | 1614434 Johnny Lawrence
Johnny Lawrence's picture

Is Gross still short Treasuries, because he must be getting killed on that?

Tue, 08/30/2011 - 09:50 | 1614532 Rainman
Rainman's picture

PTTRX trailing 70% of peers. Mea culpas are in order for underestimating the temporary power of the ponzi.

Tue, 08/30/2011 - 09:15 | 1614435 adeptus
adeptus's picture

"Pimco's advice? Run"

Yeah, run to GOLD!

Tue, 08/30/2011 - 09:17 | 1614440 buzzsaw99
buzzsaw99's picture

And yet so smug a mere six months ago.

Tue, 08/30/2011 - 09:17 | 1614441 TooBearish
TooBearish's picture

luv the New Normal = inflationary depression Billy thanks so much for sugar coating it just a tad

Tue, 08/30/2011 - 09:25 | 1614446 PulauHantu29
PulauHantu29's picture

Billionaire bankers have lots of spare time to tell stories...while the average saver is trying to survive on 0.0001 interest rate from Bernank. However, it is always interesting to read what someone NOT from Wall Street is saying.

Tue, 08/30/2011 - 09:25 | 1614463 sbenard
sbenard's picture

I will never understand or agree with the acrimony toward wealthy people solely because of their income. They already pay the overwhelming majority of the taxes. We need them to use their talents to invest and grow our economy! What's the alternative? Coveting and stealing on a societal scale! That's just equal misery for all!

That said, it's time to end the Fed heroin that fuels Wall St's endless entitlement and Pollyanna Party. We need to get back to investing, not just betting on the Fed's roulette wheel!

Tue, 08/30/2011 - 09:42 | 1614514 Caviar Emptor
Caviar Emptor's picture

They already pay the overwhelming majority of the taxes

Not exactly. The "rich" are a very small % of the populaiton. So the total taxes collected on the overwhelming majority of people is higher through real estate tax, gasoline tax, sales tax (on every restaurant meal and every retail transaction in most states, for ex), phone/wireless/cable tax, road and bridge tolls, parking tax, airport tax, license and permit fees...and on and on...

It's higher not only by total, but by %. Taxes in the US are regressive, higher on lower income. 

Tue, 08/30/2011 - 10:44 | 1614805 topcallingtroll
topcallingtroll's picture

Since lower income people use more government services they should pay a higher proportion of taxes. They still dont pay enough.

Notice how the Bastard of Omaha said we should tax billionaires more, but the talk and proposals quickly focused on the " top one percent" but in reality included the top three percent.

They lie when they say they only want to tax the rich. 97 percentile is not rich. Not even close.

Tue, 08/30/2011 - 09:28 | 1614474 Caviar Emptor
Caviar Emptor's picture

It's a lot more serious than "divorce, Italian style"

There's disagreement on everything from QE to monetary and fiscal policy, taxes, entitlements, pensions, unemployment, housing, infrastructure, military expenses, foreign policy.....

Heck, we can't even agree on whether it's deflation or inflation. 

Or whether we're in a capitalist, socialist or centrally planned fascio-communisitc autocracy. 


Been sayin it for a while. Look for further discord. There are no easy answers or quick fixes anymore. And more QE is a sure way to accelerate destruction of the economy when we should be looking to cut losses. But when things get desperate, people do desperate things. Gold is your only friend

Tue, 08/30/2011 - 09:47 | 1614528 Jim in MN
Jim in MN's picture

Indeed...the only thing the Republicans and Democrats can agree on is to not discuss the FLAGRANT CRIMINAL CORRUPTION at the senior levels of the government and financial/corporate sector.

Corruption is eroding the legitimacy of the system, without which there can be no market-based economy.  Or democracy...incidentally.

Illegitimate authority is simply corrosive acid for property rights and capital formation.  A revolving door to Treasury/WH and trillion-dollar sweetheart deals spells E-N-D.  Yet it is ***never*** discussed.

Tue, 08/30/2011 - 09:34 | 1614492 Josh Randall
Josh Randall's picture

"We prefer investing in the “cleaner” dirty shirt countries of Canada, Australia, Mexico and Brazil, along with non-dollar currencies that have strong trade ties with the Asian continent."

And so we in the US have out lived our uselfulness ? Great - tell that to Walmart - when the American consumer goes, the world goes  

Tue, 08/30/2011 - 09:56 | 1614555 Oh regional Indian
Oh regional Indian's picture

Josh, sure looks/feels like that eh? How do you get 4-5 generations of people who believed in manifest destiny, their own un-earned greatness and a massively out of proportion sense of entitlement to turn on a dime? 

Sure looks like the US pop at large has been fattened and sickened for something and it does nto look good (I've been in there and now out).

Interesting for me to read since India is prominently missing from his investing list. I've long known that India is being set-up for a huge nutsack-kick. The entire India story was built on a thin/weak foundation of back-office jobs and delivery joobs for McD's and PizzaHut's, now spawning like a cancer all over here. India is merely the Anti-china for the globalists.

So interesting too. A third of the world's total population, staring off across th ehighest mountain range in the world, with Tibet, ShangriLa and goodness knows what other magic at the fulcrum


Tue, 08/30/2011 - 09:54 | 1614553 Platinum_Investor
Platinum_Investor's picture

Bill Gross is doing his duty, so when the world explodes he will have a clear mind knowing that he warned people and even invested the way he speaks.  Kudos to B.Gross

Tue, 08/30/2011 - 10:07 | 1614580 buzzsaw99
buzzsaw99's picture

Gross had no problem shaking down the fedgub or front running the fed. The only reason he is P.O.ed now is because he got kicked out of "the big club" for shooting his mouth off. Gross is a pig.

Tue, 08/30/2011 - 09:56 | 1614558 HistorySquared
HistorySquared's picture

If you want to know why his macro calls have been so awful, look at the man's principles. Although he is showing signs of reform, at the core he is a Keynesian, as is El Erian, as was McCaully. He misses the role of government induced credit bubbles in laying the foundation for the bust, which is why he is now fundamentally wrong on China, Brazil, Australia, and Canada.  That being said, he may make money for the wrong reasons in those places, as bonds rally in a flight away from equities. 

Tue, 08/30/2011 - 09:57 | 1614560 RSloane
RSloane's picture

I don't think his clients care as long as he makes money for them.

Tue, 08/30/2011 - 10:08 | 1614583 s2man
s2man's picture

It looks to me like the "new normal" is volatility.  But I'm sure that will change after the next crisis...

Tue, 08/30/2011 - 10:08 | 1614585 Pure Evil
Pure Evil's picture

Why are these assholes still trying to bamboozle us with the notion that China is the economic locomotive that will pull our asses out of the fire. Admittedly we were stupid enough to jump into the frying pan by turning our economy from a manufacturing base into a financial services based economy, but how are ghost cities, copyright infringement, and downright theft of intellectual properties going to lead the world economy for the next 100 years. China is still a backwater with well over 75% of its population living in poverty. If the Western economies continue to tinker with Japanese style central bank fiat immersion then China will only be the worlds powerhouse if they stop playing the mercantilist and start playing the worlds military hegemon.

Tue, 08/30/2011 - 10:48 | 1614839 BoNeSxxx
BoNeSxxx's picture

If the Western economies continue to tinker with Japanese style central bank fiat immersion then China will only be the worlds powerhouse if they stop playing the mercantilist and start playing the worlds military hegemon.


Already in the works courtesy of the U.N., IMF, and World Bank... (oh, did I list those three as separate entities? -- Oooops).  They have been saying for years that China needs to start pulling its weight on the world police stage.


Cue the transfer of US military bases (taxpayer funded) to the Chinese (gratis).


You read it here first folks...

Tue, 08/30/2011 - 10:57 | 1614892 agNau
agNau's picture

The keepers of the Dollar never wanted competition for their World reserve currency status. Hence the move toward destruction of Euro soon at a theatre near you. The Dollar debt is exponentially greater and should place it a the bottom of the heap. The saving grace for the Dollar is and will always be(as long as military power is sustained) the "petro" dollar status. The countries that dared change that have felt the pointed end of the military spear. In my mind the entirety of power and control still resides there in the tie of oil and the US Dollar. Gold will as always be the ultimate currency. The Oil control is the ultimate power. Watch for moves on that power and know where the real battle lies.
The first step in maintaining western banking control is seeing light in the breakup of the "union" Europe.
The next step would involve pushing China back in a box. This being more directly about Oil control. Watch the ME/Russia. Our presence militarily there is not about freedom, but only about maintaining petro dollar control.
China threatens that control. The missing piece of the puzzle is the Iran.
A glance at the global map is all that is necessary to see the strategic line.

Tue, 08/30/2011 - 12:02 | 1615182 BoNeSxxx
BoNeSxxx's picture

Well said.  However I think the Euro is fulfilling its destiny (as planned by the banking elite)... namely, to set up a unified European currency to eventually (and conveniently) be folded into a One-World currency through an eventual merger with the USD -- a 'de facto' and undisputed world reserve currency with a unified central bank under the private IMF or BIS.

It will be interesting to watch this spectacle unfold as IMHO the Euro is imploding faster than they had hoped or planned.  The world is waking up to the B.S. of fiat currency, central banking, and disappearing sovereignty... their stomach for a World Currency is weakening.

The next move will be both an opportunity and a curse (same word, ironically, in Chinese).

Either we stand up as free people and end the grip of the TPTB and the MIL or we fall to totalitarian world government at the hands of our own jack-booted thugs.  Even odds today on John Conner vs. Skynet.

Mon, 09/05/2011 - 09:41 | 1634069 shacai
shacai's picture

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