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Money for Nothin’ Writing Checks for Free

Has Pimco’s Bill Gross lost his mind?  He put the above link out a couple of days ago where he lampooned The Fed, The Bank of England and even alluded to “the vault” being empty.  This is a guy who manages some $2 trillion of assets under management.  These are PAPER assets under management, ALL of which derive their so called “value” based on the U.S. Dollar actually having value.  If I read this piece correctly, “between the lines” he is saying that Dollars have no value.

He actually got to the ledge (without jumping) and made the connection that if The Fed lends to the Treasury and gives back the interest then the Treasury can borrow for free and the Fed can create Dollars for free.  But the best part was him “assuming” that the vault is empty.  Does he know something that we only think we know?  It’s almost like he is taking for granted that the vault is empty.  Or maybe because he deals in such large numbers, he views a couple hundred billion Dollars of Gold as a ham sandwich and basically nothing in the scheme of backing trillions upon trillions.

Actually, with the amount of assets under management that Pimco has now grown to, Bill Gross could (no, in reality he couldn’t) decide to move 10% of his funds into Gold and eat up every last ounce “supposedly” in Ft. Knox.  Of course we know that he could not in any practical way do this.  Were he to bid for some 8,000 plus tons of Gold he would force the price higher, MUCH higher.  For this amount is more than 3 years of global mine production.  From an “illustrative” standpoint, 8,000+ tons of Gold is both VERY large yet minuscule at the same time.  8,000+ tons which on the one hand only about 10% of the assets under just one money manager yet represents more Gold than gets produced from Mother Earth in over 3 years.  Do you see the dichotomy?  Do you see the irony?  The lopsided “value” at even these “bubble” ($1,700 Gold) prices.

Bill Gross apparently sees it but good luck doing anything about it for his clients.  Maybe personally, maybe for friends and relatives but as for his clients… they are out of luck.  They are out of luck because were he to act on this recent “clarity of thought,” he alone would push Gold through at least $5,000 per ounce and maybe even $10,000.  And this assumes that no one else even sees what he’s doing and jumps on the bandwagon of moving 10% of assets into Gold!  I might even add that $5,000-$10,0000 Gold would be (is) even laughably lower if you factor in Bill Gross’s assumption that Ft. Knox is empty.

Upon thinking this through a little bit further, for Bill Gross to say this publicly is worse than a death wish, it is self inflicted suicide.  It’s like playing Russian roulette with every chamber loaded with exploding hollow point bullets.  It is not hard to make the leap that he has publicly now said that “everything is worth nothing.”  This is a guy who manages more paper assets than anyone else in the world who is explaining with perfect logic how the “collateral,” the base, THE foundation for everything paper in the entire global financial system… is… well… worthless!  It wouldn’t take a lawyer who cheated to pass the bar and never even got through pre law to put a case of intentional fraud together with Pimco as defendant.

Think about it, all you would need to do is ask something like “and the bonds that you own pay interest in what currency?”  It doesn’t even matter how he answers, Dollars, Pounds, Yen or whatever.  Because “Dollars” are what other central banks use for their “reserves” to “create” value for their currencies.  By extension he has said that all currencies are valueless because Dollars are “free” to produce and thus cannot (don’t) have value.  Please don’t get me wrong, Bill Gross IS telling the truth, I just don’t understand why.  What is the upside?  He can’t be talking his book.  Surely after building the largest “paper” assets under management base of any firm on the planet he can’t be trying to go on the record with an “I told you so.”  Could he?  Who knows, maybe it’s not even important as to “why.”

So, Bill Gross “figured it out” and is just now ‘fessing up.  Did he not see this 2 years ago?  Or 4 years ago when the world got “TARPed” and the Fed extended $16 trillion worth of credit over the globe like a blanket of smooth peanut butter?  Where was he 10 years ago while “we” were being called “off the wall, tinfoil hat conspiratorial lunatics?”  Bill Gross’s revelation either now makes him as “delusional” as us… or maybe we were right all along and he is just now figuring it out?  Whatever the case let me be the first to say “welcome to the club and thank you so much for allowing us to accumulate valuable metal at such juicy prices!”  Now, just how do you think it is mechanically possible for him to put his money where his mouth is?