Bill Gross on Deficits and the Fed

More

This month's column is about Bill Gross, who heads Pimco, the world's largest bond fund.  We spent a couple of hours talking about his portfolio, and why he's bearish on Treasury bonds.  When this news came out, a lot of commentators seemed to think that this meant that he was predicting a high likelihood of imminent default, but that isn't the case.  What he's worried about in the near term is the low yields, bred of Fed intervention and the global "flight to quality".


But over the longer term, of course, he's worried about the deficit.  But unlike many deficit hawks, he doesn't care how we close it.  I asked him specifically whether he though it mattered whether we closed the deficit using tax hikes or spending cuts, and though he said he personally thinks we ought to raise taxes on people like him, he professed himself basically indifferent between higher taxes or lower spending--he doesn't think that the economic effects of one are obviously worse than the other.

Keep that in mind when you hear people arguing about austerity:.  People like Bill Gross are the ones we ultimately need to convince, because they're the ones whose defection will precipitate a crisis.  And he's not buying either supply-side claims that tax hikes will cause disaster, or the super-Keynesian argument that we can't cut spending because the economy will contract so fast that we'll actually end up with a bigger deficit.  All he cares about is the math: do the numbers add up, or not?


Jump to comments
Presented by

Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

Get Today's Top Stories in Your Inbox (preview)

What Do You See When You Look in the Mirror?

In a series of candid video interviews, women talk about self-image, self-judgment, and what it means to love their bodies


Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

Adventures in Legal Weed

Colorado is now well into its first year as the first state to legalize recreational marijuana. How's it going? James Hamblin visits Aspen.

Video

What Makes a Story Great?

The storytellers behind House of CardsandThis American Life reflect on the creative process.

Video

Tracing Sriracha's Origin to Thailand

Ever wonder how the wildly popular hot sauce got its name? It all started in Si Racha.

Video

Where Confiscated Wildlife Ends Up

A government facility outside of Denver houses more than a million products of the illegal wildlife trade, from tigers and bears to bald eagles.

Video

Is Wine Healthy?

James Hamblin prepares to impress his date with knowledge about the health benefits of wine.

Video

The World's Largest Balloon Festival

Nine days, more than 700 balloons, and a whole lot of hot air

Writers

Up
Down

More in Business

Just In