Bond manager William H. Gross has some tough talk for government debt issuers. If widely agreed, the view expressed by the PIMCO managing director will make the hard task of budget-deficit cutting in the industrial world even harder.
“Just last week Bank of England Governor Mervyn King said that it would be difficult to cut government spending quickly, but that there neeeds to be a clear plan for doing so,” wrote Gross in his monthly investment outlook.
“Not good enough, Mr. King. Don’t care. Show investors the money, not vice-versa,” Gros wrote.
Clearly, soveriegn debt is replacing the credit crunch as global economic issue number one. An extraordinary balancing act will be required of elected officials in deomcracies whose recoveries are extremely fragile but whose budget deficits already have caused worry among investors.
Hards words, if understandable from an investor’s viewpoint. Gross already has had some quite negative things to say about British sovereign debt.
In an extreme situation, and depending on the people in power, a showdown between citizens and creditors in the U.K. or elsewhere will likely be ugly for both groups. See Greece as potentially Exhibit A.