Bill Gross on Inflation & Recession

The Fed is walking a tightrope between inflation and a recession, hoping to find its way to neutral. Bill Gross, of PIMCO, shares their insight.

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"There’s a lot of stress in the
financial markets. Let’s face it, this economy, the US economy and
even the global economy is delevering, and when an economy delevers there are
substantial problems and substantial risks.

"We’ve seen a lot of that. We’ve
seen writeoffs in the hundreds of billions of dollars with more to come. But
yeah, there’s a lot of tenuous action in the financial markets these days and I
expect more of it."

Gross: Fed Will Hold Steady for Rest of Year | 25 Jun 2008 | 03:20 PM ET

What's been said:

Discussions found on the web:
  1. Troy commented on Jun 27

    3:30-3:55, anchor’s playing a mean game of Tetris

  2. Chief Tomahawk commented on Jun 27

    Posted at 3:30 AM? Doesn’t the BP ever sleep?

    CNBC’s Worldwide Exchange just had on two Germans and an Austrian who were all bullish on gold. One called for $2,390, and another said $6,000 to $10,000 if the U.S. goes into Depression and that “the credibility of the U.S. Fed is in question”.

    For those keeping score, that was 3 out of 3 consecutive guests bullish on gold… (they were not on the same segment).

    And then there’s Bill Fleckenstein’s “Lord of Dark Matter” saying it’s “never been this bad” yesterday by phone to Fleck.

  3. Jim Haygood commented on Jun 27

    From the Marketwatch article on UMich consumer sentiment: “Nine of 10 [consumers] said the economy was in recession.”

    This is a self-fulfilling prophecy. If 9 of 10 consumers think the economy’s in recession, then it IS in recession.

    Government officials, Fedguvs and the pump monkeys will be the last to get a clue. By the time they wake up, the market may be effed up enough to buy.

  4. Unsympathetic commented on Jun 27

    The ironic problem with running his policy off of “inflation expectations” is that once they become unhinged, BB can’t turn a knob to fundamentally convince people inflation is now going to be contained. He should have been simply monitoring money supply (including credit) all along.

    As the saying goes, it works until it doesn’t.

  5. Jim Haygood commented on Jun 27

    Overlooked in this morning’s statistical dog’s breakfast was personal savings jumping to 5%, the highest since March 1995 — and up from 0.4% last month. Personal savings had even been negative for awhile last year.

    Classically, recession scares people into saving instead of spending. If a formerly negative savings rate pops to 5%, and consumers are 70% of GDP, then you’ve just subtracted (0.05 x 0.70) = 3.5% from real GDP. That’s a serious chunk, when real GDP allegedly is growing at 1% (and I think it’s already negative).

    And that’s how a garden-variety recession turns into a black-dog Depression.

    Savers are destroying America. SHOP, or we all drop!

  6. ben commented on Jun 28

    if you don’t want to be in equities go with bill. Pimco total return has done well over the trailing 12.

    you’d think though with al those billions he’d get a better haircut.

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