Pimco

I often hear commentators on financial cable stations cry wolf and I normally don’t pay that much attention but recently several factors have come together which may indicate a possible more serious situation. First China has reduced purchases of US bonds for the past three months. Japan will be selling US bonds to get money to pay for earth quake damage and finally and most important:

World's largest bond investor Pimco dumps US Treasuries

Bill Gross, who runs Pacific Investment Management's $236bn bond fund believes that US may be in danger of default

When the money makers start to dump, I get concerned. Gross and Warren Buffet have both divested themselves from US bonds.

If the US should default it would not be like a business as the government would continue to function since we just print money to pay the bills. My concern is that this will add to the inflationary pressures we already face. Those of you who are old enough to remember the late 70’s and early 80’s know what stagflation is when we had 13% inflation, 21% interest rates and 10% unemployment. How many home loans do you think were issued when the interest rate was 21%?