Bill Gross seems to like being wrong:
“I’m not a big Krugman advocate. But I agree that you don’t cut everything and hope the private markets reward you for it. It has to be a balance. What Europe really needs is to get the private market back in there. They’re trying to convince the Pimcos of the world to return (by having the European Central Bank lend to banks), but all the efforts so far use public money. The global marketplace is privately funded. And if the private markets can’t be convinced, this crisis is going to be with us for a very long time.”
It’s not that he’s stupid, its that he is ignorant. Hard to say this about one of the best bond traders of all time, but he simply doesn’t know the fundamentals of money and bonds.
He identifies the problem correctly: the private markets can’t be convinced about the euro. But he gets the how and why this is the case all wrong. He doesn’t want to invest in Europe because he can’t quantify default risk and inflation risk very well at the same time.
And it’s all because the euro has a flawed structure, not because of too much borrowing.
(P.S. Warning! Bill Gross talks his book like crazy and every statement he utters should take this into account. )
hard not to be if you started your bond business in earnest in 1982ish.
(btw the 10-yr UST looks ready to print an all-time low yield soon)
Resp,
True, very true.
But many people had access to that same bond market over the years. He’s a pretty sharp guy.