Portugal has announced big tax increases to solve its current sovereign debt crisis. Independent private analyst firms such as Fitch Rating, Standard & Poor’s, and Moody’s figure that it is increasingly likely that Portugal and the other “PIIGS” nations will not be able to pay off their government bonds.
In his October newsletter to clients of Pacific Investment Management Company (PIMCO), founder Bill Gross summarized the coming disaster that faces the country, and noted that “only gold and real assets would thrive…”
Gross manages the world’s largest bond fund along with CEO Mohamed El-Erian, with nearly $2 trillion of assets under management. His clients include individual retirees, pension plans, educational institutions, foundations, and endowments, each seeking safety of principal along with reasonable returns. Accordingly he must temper his words not to frighten away the very people he serves. But he’s courageous enough to tell the truth.
Federal Reserve Chairman Ben Bernanke said in an October 1 speech that his U.S. central bank would copy Japanese economic policy to get the U.S. economy moving, despite the fact that the Japanese economy hasn't seen significant economic growth since the 1980s.
In a speech to Arab leaders at the Waldorf Astoria Hotel in New York on Friday, September 28, Secretary of State Hillary Clinton highlighted the economic casualties of intrusive regulations, contending that less government involvement in the economy is necessary because “too many people still can’t find jobs” in countries like Libya, Egypt, and Tunisia.
Waiting for the economy to improve before turning off the printing presses is likely to take a very long time. The August numbers on the economy were disheartening for those waiting for such an improvement: U.S. durable goods production fell for the third month in a row, astonishing economists who had predicted much better numbers. GDP continues to slow, and companies such as Caterpillar, the world’s biggest construction and mining equipment manufacturer, cut its earnings outlook because of the continuing slowdown in the world economy.