Gross Says U.S. Must Spend to Avoid ‘Mini Depression’Okay, now that’s better… “There is a potential catastrophe if the U.S. government continues to focus on billions of dollars.”
By Kathleen Hays and Dakin Campbell
Feb. 5 (Bloomberg) -- Bill Gross, co-chief investment officer of Pacific Investment Management Co., said the U.S. may slump into a “mini depression” unless policy makers spend trillions of dollars to spur growth.
“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.”
President Barack Obama has proposed a stimulus package intended to spur growth estimated at as much as $900 billion. The U.S. economy shrank by 3.8 percent in the fourth quarter, the most since 1982 as consumer spending recorded the worst slide in the postwar era, the Commerce Department said last week.
Pimco won a Federal Reserve contract in December as one of the four managers of a $500 billion program to purchase mortgage-backed securities. The company was also one of the managers selected to run the Commercial Paper Funding Facility in October.
The Fed will have to step in and buy Treasuries, Gross said, to keep long-term interest rates low as the U.S. increases its debt sales to finance a growing budget deficit and stimulus programs. Central bank officials said Jan. 28 they were “prepared” to buy longer-term Treasuries.
Government borrowing will probably reach $2.5 trillion during the fiscal year ending Sept. 30, according to Goldman Sachs Group Inc.
Speculation has risen that China, which holds $681.9 billion of Treasuries as the single largest investor in U.S. debt, may stop or slow the purchases of U.S. debt as its own economic growth slows.
“To the extent that the Chinese and others do not have the necessary funds, someone has to buy them,” Gross said. “It is incumbent upon the Fed to step in. If they do, that will be a significant day in the bond market and the credit markets.”
Gross, 64, increased his holdings of U.S. government debt, a category that includes agency securities, in December for the first time in a year, according to the company’s Web site. He said today that he will not buy Treasuries.
“A potential catastrophe” shakes me into action – now I’m on the phone calling my Congressman and begging him to bail out Bill Gross with my money and the future earnings of my children as well!
You know, wasn’t he just saying how people would be crazy to be buying up Treasuries at these levels? But this article says that Gross “increased his holdings… in December for the first time in a year,” but then he said today “that he will not buy Treasuries.” Which is it? Or is he just playing word games with everyone again? Come on Bill, that's Gross. Funny, but does anyone get the feeling they are touring the county fair? All I think I hear is “oink, oink!”