Bill Gross is out again today with another glaring display of his "gross" ignorance when it comes to sovereign currency/fiat money systems.
|The global monetary system which has evolved and morphed over the past century but always in the direction of easier, cheaper and more abundant credit, may have reached a point at which it can no longer operate efficiently and equitably to promote economic growth and the fair distribution of its benefits. Future changes, which lie on a visible horizon, may not be so beneficial for our ocean’s oversized creatures. Both the lower quality and lower yields of previously sacrosanct debt therefore represent a potential breaking point in our now 40-year-old global monetary system. Neither condition was considered feasible as recently as five years ago. Now, however, with even the United States suffering a credit downgrade to AA+ and offering negative 200 basis point real policy rates for the privilege of investing in Treasury bills, the willingness of creditor whales – as opposed to debtors – to support the existing system may soon descend. Such a transition occurs because lenders either perceive too much risk or refuse to accept near zero-based returns on their investments. “There she blows,” screamed Captain Ahab and similarly intentioned debt holders may soon follow suit, presenting the possibility of a new global monetary system in future years, or if not, one which is stagnant, dysfunctional and ill-equipped to facilitate the process of productive investment.|
Looks like he was really aroused by the whole, Bruno Iksil "London whale" thing as his comments were heavy on the whale/ocean/sea creature analogies.
But here's the point...look at where he says, that the "willingness of creditor whales to support the system is at risk." He seemingly believes that there are these big, private entities ("creditor whales") who have been supporting the whole system with their money (their fiat?) Perhaps he is even making a veiled threat to withdraw his own creditor whale support at some point because I'm sure Gross believes he is one of these creatures.
Gross continues to misunderstand where that "credit" comes from. Where does the fiat (dollars, yen, euros, British pounds, Swiss francs, etc) that he's referring to come from? What is its origin? Does it come from him? Does it come from these so-called, creditor whales? No! The creditor whales are the mere recipients of the fiat issued by the respective governments. It can never run out, which means that the funds to buy government debt can never run out. It is created by government spending itself.
Hey, Bill, there are no "creditor whales." They are figment of your very misguided imagination.