“This economy needs support from the government, a check from the government in the trillions,” Gross said today in a Bloomberg Television interview from Pimco’s headquarters in Newport Beach, California. “There is a potential catastrophe if the U.S. government continues to focus on billions of dollars.”
Here's Mr. Gross' hidden agenda. New spending will require bond issues in such massive quantities that only the Fed's money-creation power can clear the market of supply. Without such buying power supporting the bond market, the equilibrium price of Treasuries would collapse to a much lower market-clearing price. Much of PIMCO's asset base would collapse along with it, angering a lot of conservative investors who like the fact that most of PIMCO's funds have been doing very well this year.
I for one do not endorse hyperinflating the U.S. economy just so Allianz and PIMCO can protect their Total Return Fund's 99th percentile ranking. Whenever someone in high finance demands that the government do something, always ask yourself how they would benefit.
Nota bene: Anthony J. Alfidi does not own any PIMCO funds. He prefers to buy bonds individually and hold them until maturity as portfolio diversifiers.
