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Credit in the U.S. ($56T and counting) is a supernova star, says Bill Gross - its expansion...

Credit in the U.S. ($56T and counting) is a supernova star, says Bill Gross - its expansion produces less and less heat and ultimately causes the star to consume itself. In the 1980's, it took $4 of new credit to create another $1 of GDP; over the last decade it's taken $10, and since 2006, $20. The comparison ends there, says Gross, as inflation rather than implosion lies ahead. Shorten duration, buy TIPs, look offshore for positive real rates of return.
Comments (5)
  • Perfect analogy. It is a black hole. The implosion will be horrific. Ben is making it worse by leveraging worthless Old debt with new money (new debt).
    31 Jan 2013, 12:24 PM Reply Like
  • I think we all know how this movie will end, we just don't know when. My first job out of college was in the early 1980s... I was investing in overnight repos at 22%, due to Mr. Volkers war on inflation, which he ultimately won. The current landscape presents temptations that are overwhelming for inflation and a possible currency war; it is the easiest way for governments to solve their sovereign debt excesses of the past three decades.
    31 Jan 2013, 12:26 PM Reply Like
  • The first question is when, not whether. Bill Gross' investment advice is always right. I hope we avoid a Geithner appointment to replace Benanke.

     

    The second question, and more important one, is how will our society adapt. It will be tough for all, but terrible for "the working class." Will they be treated with proper concern, or will they be relegated to a Dickensian life? If so, colleges and hospitals and many agencies that we view as critical now will disappear.
    31 Jan 2013, 01:04 PM Reply Like
  • Eventually the consumer credit, or consumer debt, economic model self destructs. "I owe my soul to the company store."
    31 Jan 2013, 04:52 PM Reply Like
  • So, when will the debt supernova implode? What could be the trigger? Japan, which is going to spend half of the tax income for interest payments this year? If the interest rate doubles to 2 percent, there is no Japanese tax money left at all.
    Jacquit
    5 Feb 2013, 09:35 AM Reply Like
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