According to the world’s leading bond fund manager, the enormous scale of the United States’ future liabilities — money it owes to cover future spending on entitlements programs — means that we are likely in even worse financial shape that Greece.
Pimco’s Bill Gross, who announced earlier this year that he was dumping U.S. Treasury bonds from his $1.2 trillion portfolio, told CNBC that concerns over the nation’s massive public debt — currently $14.3 trillion — fails to account for future guaranteed spending on Medicare, Medicaid and Social Security, which the government estimates at close to $50 trillion.
Gross, however, puts the total figure at “nearly $100 trillion,” which he says will require immediate and sustained action to address if the U.S. hopes to avoid a debilitating debt crisis. “To think that we can reduce that within the space of a year or two is not a realistic assumption,” Gross said. “That’s much more than Greece, that’s much more than almost any other developed country. We’ve got a problem and we have to get after it quickly.”
UPDATE: In related news, S&P confers a dubious distinction:
(Reuters) – Greece on Monday became the country with the lowest credit rating in the world after Standard & Poor’s downgraded it by three notches, saying the agency would consider a likely debt restructuring as a default.
A restructuring of Greece’s debt — either with a bond swap or by extending maturities on existing bonds — looks increasingly likely to be imposed by European policymakers as a means of sharing the burden of Greece’s crisis with the private sector, S&P said in a statement.
“In our view, any such transactions would likely be on terms less favorable than the debt being refinanced, which we, in turn, would view as a de facto default according to Standard & Poor’s published criteria,” the agency said.