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US Treasuries not valued amid 500% debt GDP: Gross, Buffett

dollar landfill dumping

“Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said Treasuries “have little value” because of the growing U.S. debt burden. The comment echoes Warren Buffett, the billionaire investor who recommended avoiding long-term fixed-income bets in U.S. dollars because the currency’s purchasing power will drop.”

The U.S. has unrecorded debt of $75 trillion, or close to 500 percent of gross domestic product, counting what it owes on its bonds plus obligations for Social Security, Medicare and Medicaid, Gross wrote in his monthly investment outlook. The U.S. will experience inflation, currency devaluation and low-to- negative interest rates after accounting for consumer-price gains if it doesn’t reform its entitlement programs, he said.

President Barack Obama’s government has increased the U.S. publicly traded debt to a record $9.05 trillion, leading Gross to compare the nation to Greece, which had its credit ratings cut two steps by Standard & Poor’s on March 29. “We are out-Greeking the Greeks,” he wrote. Source: Bloomberg

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One Comment

  1. The Anarchist The Anarchist May 3, 2014

    This article s so silly. The author dismisses the fact that a monetarily sovereign government issuing its own non-convertible, fiat currency with a flexible exchange rate never depends on revenue per se to spend and can never, involuntarily, go broke, therefore, the author ignores the fact that the Federal government can simply destroy its own liabilities reduces its debt by up to 90%. It would not want to eliminate that debt all at once since then it would starve the private sector of net financial assets, i.e., the proceeds from deficit spending. Depriving the private sector of NFA forces it into more debt and could lead to recession.

    Factoring in future safety net costs as a reason to forego present investment is valid in the very short run. But not for the long run. If CBO projections of surpluses, deficits. GDP and other economic indicators after the Clinton Administration we’d be in the worst depression in our history.

    One need only understand the basics of national income accounting and grasp sectoral balance identities to fathom the effects of both monetary and fiscal policy in our three sector, macroeconomic system.

    No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia.
    Two key equations in economics:

    1. Federal Deficits – Net Imports = Net Private Savings
    2. Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports

    Nine Steps to Prosperity:
    1. Eliminate FICA
    2. Federally funded Medicare — parts A, B & D plus long term nursing care — for
    3. Provide an Economic Bonus to every man, woman and child in America, and/or
    every state a per capita Economic Bonus. Or institute a reverse income tax.
    4. Free education (including post-grad) for everyone.
    5. Salary for attending school
    6. Eliminate corporate taxes
    7. Increase the standard income tax deduction annually
    8. Increase federal spending on the myriad initiatives that benefit America’s 99%
    9 Federal ownership of all banks

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