Bill Gross discusses the "credit supernova"

I just came across an interesting article written by Bill Gross in Feb of 2013 entitled simply, "Credit Supernova!".  As long time readers of my web pages and personal emails to family and friends can attest, this is exactly how I have been predicting things will turn out to be.   Here is one example from Jan 2011 but I assure you that I have not changed my story on this since I figured things out in 2008.   I call it a supernova economy but since the economy is all run by credit and debt, "Credit Supernova" is a very, very close parallel.

For most people familiar with economic matters, Bill Gross needs no introduction.  But in case you might not recognize his name, he leads PIMCO which is one of the largest "fixed investment" (aka bond) funds in the world.  As of 2012, it had $2 trillion with a T worth of assets under management.  This is, by any measure, huge even in global terms.  Gross co-founded the company in 1971.  Yes, that 1971.  The one in which Nixon de-linked the dollar from gold.  In short, Bill Gross has seen it all and then some. He is an insider's insider.

At the very start of the article, Gross writes:"...money may be running out of time.... There may be a natural evolution to our fractionally reserved credit system which characterizes modern global finance. Much like the universe, which began with a big bang nearly 14 billion years ago, but is expanding so rapidly that scientists predict it will all end in a “big freeze” trillions of years from now, our current monetary system seems to require perpetual expansion to maintain its existence."

I too made this connection.

Gross goes on to say,"Banking and central banks were and remain essential elements of a productive global economy.  But they carried within them an inherent instability that required the perpetual creation of more and more credit to stay alive."

Again, I have written about this many times.  But while Gross seems to be implying that such happenings might just be woven into the natural order of things, I have a more down to Earth view.  What we are looking at is a massive global debt Ponzi which is a form of mania.  The energy source of this scam (and it is indeed a fraudulent scam) is credit and debt.  Any mania increases exponentially until the energy supply that feeds it is exhausted.  Once that happens, the collapse occurs at an exponential rate.  Unfortunately, the collapse of a true mania leaves it at a lower energy level than where it began.  This is due to inherent sources of energy sucking resistance elements in the scheme which spirit some of the energy out the back door.  In the case of the debt Ponzi this consists mainly of bankers taking huge fees in order to construct the loans which grow the credit mania.

Go ahead and read Gross' article in its entirety as it is well worth your time even though he might not be spot on with all of his observations IMO.  Or maybe he knows better but doesn't want to sound conspiratorial.  At the end of the day it is not going to matter.  After the deflationary collapse is completed, the inflationary response will be devastating IMO.  Massive inflation is always harder on the people than a deflationary crash. 

At the end of the article, Gross begins talking his book.  He advises a broad range of investments while mentioning gold as sort of an aside because while he understands truth, he is not a gold dealer.  He makes nothing if all of his clients pile into gold.  In fact, he probably goes out of business in that case.  A piece of paper in your hand means nothing if the extreme events implied by his comments come to pass (OK, when not if).  I'm telling you that the market place for paper assets will implode and those who owe you something (a form of credit and debt, right??) will default along with everyone else.  You can only store so much food, so much water, so much ammo.  If you have anything to your name at all you will certainly need to store it in a medium that is beyond government reach, universally recognized and accepted as being a conveyance of value,  small and transportable, etc.   Gold fits that need just as well for you as it did for people in 1500AD as it did for people in 5000BC.