The Securities Litigation Expert Blog

Bill Gross Warns of a "Credit Supernova"

Posted by Jack Duval

Feb 1, 2013 12:08:49 PM

Bond guru Bill Gross is asking what a number of Very Smart People are asking these days:  how long can massive money printing go on without any adverse consequences?  (PIMCO)  In my experience, much longer than you think.

Gross quotes one of my graduate school favorites, Hyman Minsky, but the most salient point is this:

Each additional dollar of credit seems to create less and less heat. In the 1980s, it took four dollars of new credit to generate $1 of real GDP. Over the last decade, it has taken $10, and since 2006, $20 to produce the same result.

I'll add my own quote of Stein's Law:  Anything that can't go on forever, won't.
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Topics: Bill Gross, Super Nova, Stein's Law, Hyman Minsky, investments, PIMCO

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