The world’s largest bond investor said the fight over raising the country’s borrowing limit threatens to throw the debt market into a tailspin.
“It’s the wrong way to do it,” said Bill Gross, manager of the $241 billion Pimco Total Return Fund, the largest mutual fund. “Obviously, I’m all for a move to a balanced budget over time. But this is like imposing the death penalty for shoplifting.”
In arguments over lifting the federal government’s $14.3 trillion debt limit, both sides have used bond investors as a bogeyman.
Congressional Republicans say bond investors will set off a Greek-style financial crisis in the U.S. if the national debt grows. They have promised not to raise the limit without deep spending cuts.
The Obama administration says if Congress refuses to raise the debt ceiling in time, bond investors will flee U.S. debt and create a larger meltdown than the last one.
Why do governments care what Gross thinks? Because bond buyers such as him are essentially bankers to the world, playing a vital but behind-the-scenes role in the global economy. Any country that spends more than it receives in taxes relies on them to make up the shortfall.
Under the current limit, the government can borrow another $234 billion, a ceiling that could be reached as early as March.
