Wednesday, January 27, 2010

Debating the "Ring of Fire"

Barry Ritholtz had some pointed comments for Bill Gross today.

In his post on Gross' "Ring of Fire" chart, depicting deficit and dept/GDP percentages for a number of economically vulnerable countries, Ritholtz noted that the US' fiscal problems were in part due to the government enacting policies (explicit backstops for the GSEs, etc.) that were suggested by Gross and his cohorts.

As Barry put it: "Essentially, Gross is complaining that (amongst other factors) the government listened to him . . .".

There was some interesting debate in the comments section about whether or not the (government backstopped) trillions in mortgage debt on GSE balance sheets should figure into an equation on US govt. debts/liabilities.

I noticed that David Merkel weighed in on this question, and that he also has a post up at Aleph Blog discussing Gross' chart and unsustainable government debts. You might want to check that out, as David is well-versed in credit markets and able to shed some additional light on the subject.

You can find Bill Gross' latest (February 2010) investment outlook, "Ring of Fire", here.