If you have not come across the latest monthly installment by Bill Gross, you certainly will want to give it a read (linked below). Bill does a great job this month providing a stark dose of macro economic reality. It’s better to know what you’re up against than pretend what you’re up against isn’t there. Since the discussion is focused on a ‘big picture’ centric view of the U.S. economy, it is relevant to investor or non-investor.
Three key takeaways from Bill’s October column…
- The U.S. has federal debt/GDP less than 100%, Aaa/AA+ credit ratings, and the benefit of being the world’s reserve currency.
- Studies by the CBO, IMF and BIS (when averaged) suggest that we need to cut spending or raise taxes by 11% of GDP and rather quickly over the next five to 10 years.
- Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow, and the dollar would inevitably decline.