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Friday, January 7, 2011

US May Lose Top Credit Rating Unless It Cuts Spending: Gross

The US stands to lose its coveted top credit rating unless Washington policymakers make good on promises to get the nation's financial house in order, Pimco's Bill Gross told CNBC. As Democrats officially ceded power to Republicans in the House of Representatives Wednesday, the co-CEO of the world's largest bond fund manager expressed doubt that the free-spending ways in Congress were going to come to a halt. "I was falling asleep there listening to John Boehner and Nancy Pelosi congratulate themselves on their accomplishments," Gross said, referring respectively to the new speaker of the House and his predecessor. "The ability of both parties to come together in a bipartisan way—hardly. Over the next several years we're going to have a lot of battles." The first one could be over the debt ceiling, which expires at the end of February. As Washington continues to finance its massive $14 trillion debt it needs to borrow an additional $1 trillion a year to keep up with the budget deficit.


While Gross said the level of debt is driving the US towards ruin, Congress will have no choice but to raise the ceiling. But Republicans have vowed they will not do so without serious spending concessions.
The debt is about 90 percent of gross domestic product now, which Gross said translates into a growth rate that will begin to slow at least 1 percent a year.
"It certainly means that we're a slower-growth country and a slower-growth economy," he said. "Ultimately, if we continue a trillion dollars-plus (deficit) then yes, your credit rating will be threatened."
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1 comment:

  1. The lord is coming we better have no doubt

    ReplyDelete