Huge Coconuts: Bill Gross on General Motors

Saturday, April 29, 2006
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An absolutely smashing and brilliant essay on General Motors and the US government by the world’s preeminent bond guru Bill Gross. Writing this piece took some huge coconuts on the part of Bill. He essentially lays out comparisons between GM and the US economy in a “as GM goes, so goes the nation” analysis of balance sheets, underfunded liabilities, devaluing the currency, and health care costs. This is the most important essay I have come across in some time. Do read it.

How are we to pay for this future burden of healthcare and social security expenses? Aside from contractual legislative changes to both areas (which are surely just around the corner), the way a reserve currency nation gets out from under the burden of excessive liabilities is to inflate, devalue, and tax.

Bill’s point is that both GM and the US government will conjure up bigger and more burdensome schemes in order to play competitively while staving off the pain of adjustment with our foreign competition. A frightening look at what’s to come:

The current attempt on the part of GM to address the high cost of its labor draws a comparison to potential future U.S. efforts to do so via currency devaluation. While a company must deal directly with its employees and or its unions in order to lower wage/benefit expenses, a country

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