Pimco’s Gross: US Economy ‘Running Out of Time'

The financial system is like a supernova star that grows until it runs out of energy, explodes and collapses, warns Bill Gross, managing director of fund giant Pimco.

Its fuel is central banks’ loose monetary policies, which are becoming increasingly ineffective at promoting real economic growth, Gross writes in his monthly investment outlook report.

Total U.S. credit outstanding is now at $56 trillion and growing, Gross writes. “It is a monster that requires perpetually increasing amounts of fuel, a supernova star that expands and expands, yet, in the process begins to consume itself.”

Expanding credit increasingly goes to creditors and market speculators and less and less to real economic growth. Instead of promoting small-business development, investment banking is dominated by leveraged speculation and Ponzi finance when additional credit is needed just to cover interest payments.

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