Posted on 03/30/2011 9:48:53 PM PDT by blam
Bill Gross: Without A Gigantic Reform Of Entitlements, America Will Default
Joe Weisenthal
Mar. 30, 2011, 8:00 PM
PIMCO boss Bill Gross has been warning against Treasuries for awhile, and recently he abandoned them completely.
In his latest investment outlook, he warns that America will default, thanks to trillions in entitlement obligations:
...the only way out of the dilemma, absent very large entitlement cuts, is to default in one (or a combination) of four ways: 1) outright via contractual abrogation – surely unthinkable, 2) surreptitiously via accelerating and unexpectedly higher inflation – likely but not significant in its impact, 3) deceptively via a declining dollar – currently taking place right in front of our noses, and 4) stealthily via policy rates and Treasury yields far below historical levels – paying savers less on their money and hoping they won’t complain.
You can download the full report here (.pdf)
(Excerpt) Read more at businessinsider.com ...
Which raises another question: What would America’s creditors be willing to do to prevent this “default” from happening and protect their investment?
On a side note, NO ONE wanted to put the USSR back together and NO ONE will want to the the USA back together.
“So many entitlements...Department of Education, Department of Energy, EPA, DHHS, Arts funding, HUD, Department of labor...”
I think we’ve been over this before. Those programs are not entitlements. The major entitlements are SS, Medicare and Unemployment.
This is BobL’s point. People have been told that since they paid for their parents’ and grandparents’ SS and Medicare that they are entitled to SS and Medicare also. Except elderly people are living longer today, want to retire earlier and had fewer children with less employment opportunities. The young simply cannot afford to pay for everything those on SS and Medicare were promised.
I’ve done those calculations. To avoid default without reforming SS/Medicare, we would have to have the growth rate of China. That is, 10% compounded for the next thirty years.
Not gonna happen.
“There are no ways out of this demographic mathematical bind...”
There’s a third way out - sell off all federal assets. Sell the national parks, the national forests, wilderness, swamps (wetlands) and grazing land. These assets are worth trillions.
As people hit 65 they’re given a check for what they paid in, paid for by selling these assets over a 40 year period. Then recepients get no more. Young people stop paying SS benefits now. SS ends in 40 years.
sfl
Sell to who?
Q: Who has this pile of cash just waiting to by it?
A: No one.
In the end the goods and services consumed by those who are not working will have to be made by those who are working or they’ll have to be borrowed from overseas. The borrowing will continue until we muster the political will to stop (unlikely reading what I have read on FR) or until we default and no one lets us borrow any more.
No only stupid inane idiots. You may be in trouble.
The USSR did not have other countries holding hundreds of billions of their debt, a default on which could collapse their own country's currency/economy.
Desperate times call for desperate measures. And if America's debt holders get desperate, what would they be willing to do to prevent some form of default/devaluation scenario?
Our politicians won't have the nerve to do anything near what is necessary, in fact, I think it's already too late to do anything. That's why I expect they'll just inflate, inflate, inflate.
The end result will be the same though. Very angry people.
I’d suggest we put the assets up for bid and find out who has the money. I own property with marketeable trees. If I put it up for bid I’ll see buyers.
I hear ya. My preferred phrase is “It’s not our debt”. Let the socialists carry their own water.
Excellent post - written in the style of Denninger. Is that you, Karl, writing under another name? LOL
Unfortunately, you, like Karl, while providing outstanding fundamental analysis, typically fail to address the real issue. Oh, you touched on it briefly, as I highlighted above, but only as an introduction to other points you're attempting to make.
Once you understand the 'math', perhaps it's time to focus on the 'reason'. For example, why is it that no one wants to educate Americans about the truth? Who benefits? Let there be no doubt, but some are making fortunes over very purposeful control.
Follow the money.
and increase the ranks of those who pay in.....
stop allowing people to immigrate here and go on SS retirement ....make them at least wait a few years....
and go over with a fine tooth comb all those collecting the disability....disability used to mean being in a wheelchair, etc...and now, "mental stress" can be a free ticket to ride...
not stupid..but no conservative...not sure what he is..a Californian..lol
I hear you're thinking about voting Democrat for the first time in your life. Why? I had a publicized stance against the war, which is part of it. I don't think Bush's preemptive invasion of Iraq was justified. And the facts make that more emphatic now. But the real bone I have to pick is with tax policy. The Republican policy is to lower taxes for the rich, and I think he's gone too far. The Democrats believe that too, so I might pull that lever for a Democrat. But that's eight months away.
not so fast....if you sell off Yellowstone, etc, who do you think will buy it?.....foreigners....Muslims...no,no, no to that idea....
If you want the full Bill Gross newsletter it is free at this link http://bit.ly/g3kiUr
Gross has just laid out why he dumped Treasuries. Too bad China and others are reading what he has to say and what he actually did—— dumping them. Sad for America
Why would I be in trouble? You gonna bring some of those Bubba’s (stupid inane idiots) with you?
They'll only fetch trillions if they are sold off slowly over decades as demand and private capital capability allow.
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