Hullabaloo

Tuesday, June 21, 2011

 

Breaking the fever

by digby

I think it's terrific that PIMCO's Bill Gross came across with a strongly worded message for congress to stop acting like assholes and deal with the economy like rational leaders. His statement was pitch perfect and hopefully will lead to some action.

But I have to say that he bears some responsiblity for deficit fever cranking up over the past few months. People listen to him so when he placed a big bet that treasuries were going to spike, it carried weight. Here's Krugman from a couple of weeks ago:

Bill Gross is without doubt a great investor. I have often found the economic analyses coming out of Pimco deeply enlightening. And in 2009-2010 the firm won big by betting, correctly, on interest rates staying low.

For the past year or so, however, Pimco seems to me to have been making less and less sense. Gross bet big on the idea that rates would spike when quantitative easing ends; I guess he has three weeks to be vindicated, but it sure doesn’t look like it. And the economic logic was all wrong.

It was a big deal when he did that and however he meant it, it was taken as validation of the deficit hawks beliefs that the US was being so crushed by debt that we needed to immediately dismantle the country.

Luckily, he seems to have realized that he's dealing with crazy people and feckless poltroons who would willingly take down the whole system if it meant getting Rush Limbaugh's grudging approval and is now prescribing a real stimulus to boost demand (and fix our crumbling infrastructure in the bargain.)

Unfortunately, any stimulus seems to require that we give huge amounts of money to the wealthy in exchange. The latest brainstorm is a stimulus and "repatriation holiday" which allows corporations to "bring home" their profits from foreign countries without paying anything much in taxes on them and then passing them out as dividends to their shareholders.

Dday explains:

The repatriation tax holiday is a blatant giveaway to big business, which will only be used not to put overseas funds into investment, but into corporate treasuries and dividends. It’s literally a welfare handout to the most powerful corporations in America. This has become the only way to get an infrastructure bank going. Considering that you have BILL GROSS on your side for the infrastructure idea, that’s just sad.

I'm sure that Bill Gross is now considered socialist, so who cares what he thinks?


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digby 6/21/2011 12:45:00 PM |