When drunks drive

It turns out Bill Gross and Steve Roach were swapping notes on the global economy. The candid exchange took place over email during late August and early September and was posted at Morgan Stanley’s website. A reader forwarded us the thread…

“Bill, I don’t know about you, but I’ve lost confidence in the world’s fiscal authorities.” Roach is almost desperate. “[B]y fuelling the debt-driven super-liquidity cycle of the past several

years, they, too, have now become part of the problem, I fear.”

The bond man’s response: “While I would concur that monetary authorities have been drinking with reckless abandon without turning over the keys to a designated driver, there’s only so much I can do. What? Sell my bonds and accept their penal yield of 1.5% in short-term paper?”

“Central bankers used to be the tough guys,” retorts Roach, “and you used to be one of the world’s leading bond market vigilantes who held them accountable for doing the right thing. Where are the vigilantes now that we really need them?”

“So the world’s on my shoulders now?” retorts Gross, in an email back to Morgan Stanley’s chief economist. “My first obligation is to my clients.”

And meanwhile, gold has quietly increased from 250 to 420 in the last four years. Hmmmm….