As America struggles to recover from a massive financial crisis caused by frenzied unregulated banking speculation fueled by profits at the public’s expense, financiers increase their call for US lawmakers to eliminate entitlement programs, the only safety net millions of Americans have in today’s economy. Pimco’s Bill Gross opined on CNBC Monday that when adding in all of the money owed to cover future liabilities in entitlement programs, the US is actually in worse financial shape than Greece and other debt-laden European countries…and should therefore focus on slashing entitlement rather than public debt or defense.
Gross argues that much of the public focus is on the nation’s public debt, which he figures at $14.3 trillion, when it should, in his mind, be focused on money guaranteed for Medicare, Medicaid and Social Security, which comes to close to $50 trillion. “To think that we can reduce that within the space of a year or two is not a realistic assumption,” Gross said in a live interview. “That’s much more than Greece, that’s much more than almost any other developed country. We’ve got a problem and we have to get after it quickly.”
Gross spoke following a report that US banks were likely to scale back on their use of Treasurys as collateral against derivatives and other transactions. Bank heads say that move is likely to happen in August as Congress debates whether to raise the nation’s debt ceiling, according to a report in the Financial Times. We’ve always wondered who will buy Treasurys” after the Federal Reserve purchases the last of its $600 billion to end the second leg of its quantitative easing program later this month, Gross said. “It’s certainly not Pimco and it’s probably not the bond funds of the world.”
Pimco, based in Newport Beach, Calif., manages more than $1.2 trillion in assets and runs the largest bond fund in the world.