Thursday, May 31, 2012

Bill Gross displays some more of his "gross" ignorance

Bill Gross is out again today with another glaring display of his "gross" ignorance when it comes to sovereign currency/fiat money systems.

Read this:

The global monetary system which has evolved and morphed over the past century but always in the direction of easier, cheaper and more abundant credit, may have reached a point at which it can no longer operate efficiently and equitably to promote economic growth and the fair distribution of its benefits. Future changes, which lie on a visible horizon, may not be so beneficial for our ocean’s oversized creatures. Both the lower quality and lower yields of previously sacrosanct debt therefore represent a potential breaking point in our now 40-year-old global monetary system. Neither condition was considered feasible as recently as five years ago. Now, however, with even the United States suffering a credit downgrade to AA+ and offering negative 200 basis point real policy rates for the privilege of investing in Treasury bills, the willingness of creditor whales – as opposed to debtors – to support the existing system may soon descend. Such a transition occurs because lenders either perceive too much risk or refuse to accept near zero-based returns on their investments. “There she blows,” screamed Captain Ahab and similarly intentioned debt holders may soon follow suit, presenting the possibility of a new global monetary system in future years, or if not, one which is stagnant, dysfunctional and ill-equipped to facilitate the process of productive investment.

Looks like he was really aroused by the whole, Bruno Iksil "London whale" thing as his comments were heavy on the whale/ocean/sea creature analogies.

But here's the point...look at where he says, that the "willingness of creditor whales to support the system is at risk." He seemingly believes that there are these big, private entities ("creditor whales") who have been supporting the whole system with their money (their fiat?) Perhaps he is even making a veiled threat to withdraw his own creditor whale support at some point because I'm sure Gross believes he is one of these creatures.

Gross continues to misunderstand where that "credit" comes from. Where does the fiat (dollars, yen, euros, British pounds, Swiss francs, etc) that he's referring to come from? What is its origin? Does it come from him? Does it come from these so-called, creditor whales? No! The creditor whales are the mere recipients of the fiat issued by the respective governments. It can never run out, which means that the funds to buy government debt can never run out. It is created by government spending itself.

Hey, Bill, there are no "creditor whales." They are figment of your very misguided imagination.

8 comments:

widmerpool said...

How did Paul McCulley stomach Bill Gross???

Mike Norman said...

I guess that's why he took an early retirement.

paul said...

"…he is even making a veiled threat to withdraw his own creditor whale support at some point…"

I see this as good thing. One less entity extracting wealth from the system without giving anything back.

Mike Norman said...

Good point! And won't it be fun to see his face when he pulls out and rates keep going lower!

Leverage said...

He is talking he's book.

He can only make money out of treasuries by trading as (real) yields are close to the negative camp, that's insufficient for a big firm like PIMCO to earn enough profits. Welfare for savers by the government should end, go cry to the banks for creating inflation savers or invest your money in productive things (or spend it in real goods & services).

They need corporate welfare by the government, higher yields, but the FED is running out of bullets of market manipulation giving their dropping portfolio of bonds, so yields are only following their own natural path in a disinflationary period: down.

Soon the only thing the FED will be able to do is increase this bullish treasury market even more. And with the government being prohibited of issuing more debt there is a notable scarcity of bonds, specially for collateral of high quality at times of stress like now.


Way to shoot yourself in the feet finance types, by demanding austerity less bonds are issued which in turn make bonds go higher. You are completely retarded. Not that I care as IMO the government should stop every form of corporate/rich welfare and lemon socialism to these idiots.

Matt Franko said...

I think Gross may be broke and he has to keep working....

All these guys as Mike points out HAVE to be broke if they are taking their own advice...

He should be playing golf and/or fishing...

Resp,

SchittReport said...

the more obvious capital misallocation is the amount of investment & wealth going to ignorant people like him.

i wish someone had predicted this phenomenon 20 years ago e.g. ideologues and stupid ones at that would have a high probability of financial success, and i had believed them.

then i could have dispensed with the 100 hour work weeks and focused on developing flawed, ignorant ideologies. also makes me want to go back to UC berkeley and ask them to revoke my iq test results.

MortgageAngel said...

Haha Maybe they hide under his bed at night. (creditor whales)