Tim Price: Waking up in a cold debt
My thanks to the author for his letter with its unstinting exposure of debt and credit excesses, published by PFP Wealth Management. Here is a brief sample:
If it were just the Fed determinedly stuffing magical money¹ down any and all supplicants? gullets, that would be bad enough. But there is an opposite, if not quite equal, mad money sink in operation, and it is the global banking sector. In its latest Global Financial Stability Report, the IMF suggests that some $3.6 trillion in maturing bank debt comes due over the next two years. Will indebted governments crowd out the banks ? Will indebted banks muscle their way to the front of the money queue ? Suffice to say, the stars are not so slowly moving into alignment for a global debt catastrophe of biblical proportions. Witness #1 for the prosecution: $3.6 trillion in bank debt cited above. That's chicken-feed for the likes of the Fed, but represents real money to the rest of us. There is going to be an unseemly scrum of debt rollovers competing for investor capital over the coming months. Not all will make it through the emergency exits intact.
¹well, dollars.
Witness #2 for the prosecution: Pimco's Bill Gross. We knew that the bond tsar had liquidated every US Treasury holding in the $237 billion Total Return Fund. Now it transpires, according to Zero Hedge, that Gross is actually net short the Treasury market, with a -3% weighting. In his April investment outlook he wrote that
"[PIMCO has] been selling Treasuries because they have little value within the context of a $75 trillion total debt burden. Unless entitlements are substantially reformed, I am confident that this country will default on its debt; [but] not in conventional ways.."
No, you did not read that wrong: he really did say $75 trillion. As a public service to readers we offer up the next numerical values for US national indebtedness. (Much of the G7 is in the same boat, mind you.)
David Fuller's view Every investor needs to ponder Bill Gross' quote above, which I repeat:
"I am convinced that this country will default on its debt [but] not in conventional ways."
Yes, they will inflate them away by printing fiat currency. It is an old game, much in evidence today, and a key reason why some of us invest in Fullermoney secular themes.