His conclusion: The whole charade will soon hit a brick wall.
Of particular interest were his comments on gold, commodities, and the “Fort Knox Fairy Tale“…ie. Fed gold certificate claims on Fort Knox bullion holdings which may or may not actually exist.
Says Gross, “Supposedly they [the US Fed] own a few billion dollars of “gold certificates” that represent a fairy-tale claim on Ft. Knox’s secret stash, but there’s essentially nothing there but trust…$54 trillion of credit in the U.S. financial system based upon trusting a central bank with nothing in the vault to back it up. Amazing!”
Gross comments on the end-game picture in saying, “…[G]overnment financing schemes such as today’s QE’s or England’s early 1700s South Sea Bubble end badly…The future price tag of printing six trillion dollars’ worth of checks comes in the form of inflation and devaluation of currencies either relative to each other, or to commodities in less limitless supply such as oil or gold.”
Bottom Line: Pimco’s $1.9 trillion in wealth is closely watching gold. When “inflationary dragons” reemerge (as he puts it), what impact might a percentage of that $1.9 trillion have on the metals and commodity markets?
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