In his latest Investment outlook , the founder and co-CIO of
PIMCO, warned that the US will begin to resemble Greece, before the
turn of the next decade if it doesn't address the fiscal deficit
"Fed would print money to pay for the
deficiency, inflation would follow and the dollar would inevitably
decline. Bonds would be burned to a crisp and stocks would
certainly be singed; only
gold and real assets would thrive within the Ring of Fire ."
Gross "Ring of Fire" included Japan, U.K., Spain, Greece and
France along with U.S.-the countries which are in the worst public
sector deficit/structural fiscal gap situation.
" The U.S., in fact, is a serial offender, an addict whose
habit extends beyond weed or cocaine and who frequently pleasures
itself with budgetary crystal meth ."
He however added that " Armageddon is not around the
corner. I don't believe in the imminent demise of the U.S. economy
and its financial markets. But I'm afraid for them."
While most of Gross's analysis is accurate and his warnings
completely make sense, US cannot be compared to Greece and Spain.
These countries have uncompetitive economies, very high
unemployment rates and most importantly no control over the
monetary policy or the currency.
US is still one of the most competitive economies in the world
and that is the reason why investors are willing to lend money to
the US government at ultra-low interest rates.
Further with the US dollar as a reserve currency and an
independent central bank, US is in a much better position to manage
its debt. With an economic recovery and prudent fiscal adjustment
policies, US can bring down its debt substantially.
What do you think about his views on the US debt
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