Posted under Economics
The Obama regime has been printing money like crazy for the past two years and finally investors are starting to panic:
World’s Largest Bondholder Shorts U.S. Treasuries
This past weekend it was revealed that Bill Gross, manager and co-founder of the $1.2 trillion Pimco family of bond funds, began shorting U.S. government treasuries. It is a startling development because it shows that the world’s most sophisticated investors are losing faith in America.
Last month, Gross revealed that his premier total return fund sold all of its U.S. government treasuries—a couple of hundred billion’ worth! The announcement shocked market commentators, with one analyst claiming the move was akin to Hershey’s getting out of the chocolate business.
Now it is revealed that Gross has not only sold his whole position, but he is doubling down by borrowing and selling treasuries from other investors, with the strategy of paying them back later when the treasuries plunge in price.
For many bond investors, U.S. treasuries are considered the new gold standard—the safest of investments. No more, says Gross. They are grossly overvalued and set for a major crash.
Why is Gross so negative? In essence, it is because the world’s largest economy is acting like Zimbabwe. Instead of balancing its budget by bringing tax revenues and spending into alignment, the Federal Reserve is monetizing the debt by creating money out of thin air.
In December, the Federal Reserve embarked on a second round of “quantitative easing,” which is really just a complicated term for Zimbabwe-style money printing. Since then, approximately 70 percent of all government spending has been provided by money brought into existence by fiat by the Fed. Over the past two years, the Federal Reserve has become the biggest lender to America—dwarfing even the Chinese and Japanese.
Without the Fed’s funny money, Republicans and Democrats would not be bickering over how to cut $60 billion in spending—it would be more like how to cut $1.5 trillion.