There is always a point in time when a series of events take shape to show a clearer picture of the situation at hand. The chief's at PIMCO believe that the global economic transformation is already visible above the horizon. A transformation that Mohamed El-Erain has described as, "The world was a plane flying on a big engine called the US consumer. That engine is getting exhausted. Many smaller, new engines are coming on: China, India, Brazil, & Russia." These smaller new engines are visible to the Obama administration too. It's clear from the President's budget speech that he knows that other countries are advancing to transform their economies. The scenario of unfolding events is in the eye of the beholder. What picture emerges for you?
Wednesday, June 17, 2008: Who is Mohamed El-Erain? Co-chief executive officer and co-chief investment officer of Pacific Investment Management Company, or PIMCO. El-Erain lays out major trends in global economic transformation. Trends such as the re-alignment in global growth, inflation, the innovation of structured finance, and the transfer of wealth. An outline of El-Erain's trends are described in an article by Thomas Tan. Why is El-Erain important? Because PIMCO is the worlds largest mutual fund, and what El-Erain thinks about US debt is an indicator in itself. In light of seeing global transformation, is El- Erain telling investors that hold US bonds to "take our risk of of the table?"
Thursday, January 6, 2011: Treasury Secretary Tim Geithner debt limit letter to congress. "Never in our history has Congress failed to increase the debt limit when necessary. Failure to raise the limit would precipitate a default by the United States."
Wednesday, March 8, 2011: PIMCO reportedly cashes out of US Treasuries in January 2011.
Tuesday, March 29, 2011: The PIMCO outlook. What advice do you have for US investors? Mohamed El Erain, "Be careful of overloading on US based investments."
Thursday, March 31, 2011: PIMCO's founder William Gross reduces US Debt to zero.
Monday, April 4, 2011: Treasury Secretary Tim Geithner's debt limit letter to congress. "If the debt limit is not increased by May 16, the Treasury Department has authority to take certain extraordinary measures, described in detail in the appendix, to temporarily postpone the date that the United States would otherwise default on its obligations."
Wednesday, April 13, 2011: Senate Committe On Finance. Ranking members Max Baucus (D-Mont.) and Orrin Hatch (R-UT) release hearing statements regarding the deficit reduction. Witness Testimony provided by Dr. J.D. Foster, The Honorable David Walker, and Dr. Alan S. Binder.
Wednesday, April 13, 2011: President Barak Obama Budget Speech. "Go to China and you’ll see businesses opening research labs and solar facilities. South Korean children are outpacing our kids in math and science. They’re scrambling to figure out how they put more money into education. Brazil is investing billions in new infrastructure and can run half their cars not on high-priced gasoline, but on biofuels. And yet, we are presented with a vision that says the American people, the United States of America – the greatest nation on Earth – can’t afford any of this."
Sunday, April 17, 2011: Meet The Press-Treasury Secretay Tim Geithner. "Congress will raise the debt limit," and "it is essential to preserve the credit worthiness of the United States of America."
Monday April 18, 2011: Standard & Poor's Rating Service downgraded it's outlook on U.S. Government debt expressing doubts that about bringing massive federal budget deficits under control.
Monday, May 2, 2011: Treasury Secretary Tim Geithner extends the deadline for raising the national debt to August 2, 2011.
Monday, May 9, 2011: PIMCO, Bill Gross manager of the world's largest bond fund announces that he will raise his bet against government debt one percent.
If the managers of the worlds largest mutual fund have decided that buying US debt is not a good investment right now; if our President knows that smaller economies are steadily growing, and if our Congress can't agree on working budget, then where does the US go from here?
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