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"Trillion-Dollar Obama"

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Senior Manager
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Joined: 30 Jul 2007
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"Trillion-Dollar Obama" [#permalink] New post 30 Jun 2008, 10:46
http://www.bloomberg.com/apps/news?pid= ... refer=home

Obama May Produce $1 Trillion Deficit, Gross Says (Update1)

By Candice Zachariahs

June 30 (Bloomberg) -- Bill Gross, manager of the world's biggest bond fund, said a Barack Obama administration may produce the first $1 trillion deficit and intermediate-and long- term bond yields have already reached cyclical lows.

Higher taxes for hedge-fund managers and oil companies will not cover anticipated Obama tax cuts for the poor and middle- class, universal health care and aid to the depressed residential real estate market, said Gross, a long-time Republican.

``This economy will need a jolt of $500 billion or so of government spending real quick,'' Gross, co-chief investment officer of Newport Beach, California-based Pimco, said in an open letter to Obama, the likely Democratic presidential nominee, published on the company's Web site today.

The likely expenditures and increased borrowing suggest that ``intermediate and long-term yields on government bonds have already bottomed and will gradually rise'' through the next four years and possibly beyond, Gross said, in his analysis that assumes Obama will defeat his presumptive Republican adversary, John McCain.

Gross domestic investment in machines, houses and inventories has fallen by $200 billion since its 2006 peak, Gross said. Domestic consumption will soon be $300 billion short of what's needed for an economic rejuvenation, he said. With the deficit already pushing $500 billion even before the next president is sworn in, Gross anticipates it will reach $1 trillion deficit by 2011.

Republicans ``will blame you for years and label you `Trillion-Dollar Obama,''' Gross said. ``There is, in fact, not much that you or any other President can do.''

Japan Comparison

Gross draws a comparison with Japan's efforts to recharge its economy after a 1980s real estate bubble fizzled. Over seven years, expansionary fiscal spending grew the deficit from 2 percent of GDP to 10 percent at its peak, he says. ``Our trillion-dollar level in 2011 would equate to something like 6 percent of GDP, a mere pittance by Japanese standards,'' Gross said.

Global growth led by developing countries and rising commodity prices will save the U.S. from Japan's experience of deflation and near 0 percent interest rates, Gross said.

Pimco, a unit of Munich-based insurer Allianz SE, manages about $800 billion. The Pimco Total Return Fund has about $129 billion in assets under management.
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Re: "Trillion-Dollar Obama" [#permalink] New post 30 Jun 2008, 10:55
Interesting article and while I too am a Republican, I think it's kind of odd that the author appears to be pointing the finger at Obama, although not specifically.

The author states "not anything any president can do."

Then why is he pointing out Obama? That just doesn't make sense. I understand if he thinks Obama is going to win and he's going to take over the poor economy, but to make it appear as though it is Obama's fault is not good journalism. It angers me when conservatives (again, I am one too) yell about bias in journalism and then write something like this.

Success in politics requires much more maturity than appears in this article regardless of which side of the isle you choose.
_________________

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J Allen Morris
**I'm pretty sure I'm right, but then again, I'm just a guy with his head up his a$$.

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Senior Manager
Senior Manager
User avatar
Joined: 30 Jul 2007
Posts: 385
Location: Europe
Schools: St. Gallen '09
Followers: 6

Kudos [?]: 56 [0], given: 5

GMAT Tests User
Re: "Trillion-Dollar Obama" [#permalink] New post 30 Jun 2008, 11:00
jallenmorris wrote:
Interesting article and while I too am a Republican, I think it's kind of odd that the author appears to be pointing the finger at Obama, although not specifically.

The author states "not anything any president can do."

Then why is he pointing out Obama? That just doesn't make sense. I understand if he thinks Obama is going to win and he's going to take over the poor economy, but to make it appear as though it is Obama's fault is not good journalism. It angers me when conservatives (again, I am one too) yell about bias in journalism and then write something like this.

Success in politics requires much more maturity than appears in this article regardless of which side of the isle you choose.


It's my bad. I should've linked directly to the source (and not someone else's interpretation):

http://europe.pimco.com/LeftNav/Feature ... +Obama.htm

Bill Gross caveats the following at the beginning:

"Thought I would jot down this little note to President Obama.
It’s a little presumptive of course; first that he’ll even be President (he will)
and second that he’d read it (he won’t). But presumptiveness is an inherent
requirement of an investment manager and so I shall proceed."

and opens the actual note with:

"Dear President Obama:

You have inherited a mess. Your predecessor, fixated on emulating a former Republican icon from a far different economic era, chose to emphasise tax cuts for the rich and excessive consumption for all Americans. He promoted deregulation and free markets when, in fact, the markets and their institutions needed tough love. Over eight years, he failed to put forth a coherent energy policy. He needlessly invaded Iraq and lowered worldwide esteem for this nation as a symbol of freedom and benevolence..."
Re: "Trillion-Dollar Obama"   [#permalink] 30 Jun 2008, 11:00
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