At some point our debt will become unsustainable, that you can take to the bank. Personally, I believe it already is.
http://www.marketwatch.com/story/qe2-a-ponzi-scheme-says-pimcos-gross-2010-10-27NEW YORK (MarketWatch) —
The Federal Reserve’s highly anticipated plan to engage in quantitative easing to pump money into the economy is a “Ponzi scheme,” said Bill Gross, who manages the world’s biggest bond fund for Pimco. The actions of the Fed, led by Chairman Ben Bernanke, will “likely signify the end of a great 30-year bull market in bonds and the necessity for bond managers and, yes, equity managers to adjust to a new environment,” he wrote in a commentary posted on Pimco’s website Wednesday. See Gross’s full commentary.
“Check writing in the trillions is not a bondholder’s friend; it is in fact inflationary, and, if truth be told, somewhat of a Ponzi scheme,” he said. While the U.S. has sometimes paid down its debt, “there was always the assumption that as long as creditors could be found to roll over existing loans – and buy new ones – the game could keep going forever.”
AM Report: Federal Reserve Gears Up for StimulusThe Fed is close to embarking on a new round of monetary stimulus next week despite doubts among economists and some Fed decision makers. Jon Hilsenrath discusses. Also, John W. Miller discusses Europe's tougher line on trade with China, as the EU focuses on China's process for bidding on contracts.
Two-year Treasury yields /quotes/comstock/31*!ust2yr (UST2YR 0.37, -0.05, -12.20%) , which move inversely to prices, fell to the lowest level on record -- 0.33% -- recently as bond investors increasingly expected the Fed to announce a second massive bond-purchase program after its meeting on Nov. 2-3. Read more on Treasury bonds.
Yields on 10-year notes /quotes/comstock/31*!ust10y (UST10Y 2.67, -0.06, -2.27%) fell to the lowest since January 2009 and the dollar index /quotes/comstock/11j!i:dxy0 (DXY 77.30, -0.85, -1.08%) , a measure of the U.S. currency against a basket of major rivals, has dropped back to the weakest levels of the year. Read about dollar.
Going into next week’s elections, Gross said voters need to realize that this Ponzi scheme is unusually “brazen” and has been brought on by the government – of every political party – and its citizens.
“It is not a Bernanke scheme, because this is his only alternative and he shares no responsibility for its origin,” he said.
Such a plan “raises bond prices to create the illusion of high annual returns, but ultimately it reaches a dead-end where those prices can no longer go up,” Gross wrote. “Having arrived at its destination, the market then offers near 0% returns and a picking of the creditor’s pocket via inflation and negative real interest rates.”