April 6, 2011 The Right Path? “Skunked” by Bill Gross
Posted by mfalvey on April 6, 2011 · Leave a Comment
April 6, 2011
Here is Bill Gross’s monthly commentary. Bill is known as The Bond King. Arguably one of the best on interest rate and debt analysis.
If you don’t want to read the whole article, here are the key take aways:
- Medicare, Medicaid, and Social Security now account for 44% of total federal spending and are steadily rising.
- Previous Congresses (and Administrations) have relied on the assumption that we can grow our way out of this onerous debt burden.
- Unless entitlements are substantially reformed, the U.S. will likely default on it’s debt; not in conventional ways, but via inflation, currency devaluation and low to negative real interest rates.
- 75% of the budget is non-discretionary and entitlement based. Without attacking entitlements-Medicare, Medicaid, and Social Security – we are smelling $1 Trillion deficits as far as the nose can sniff.
- Once dominated by defense spending, these three categories now account for 44% of total Federal spending and are steadily rising. After defense and interest payments on the national debt are excluded, remaining discretionary expenses for education, infrastructure, agriculture, and housing constitute at most 25% of the 2011 fiscal year federal spending budget of $4 trillion.
Best regards,
Matt Falvey, Chief Investment Officer, Rich Investments, Inc.
