I totally agree that Gross "talks his book", in that he says one thing while doing the opposite. However, this is only true for short-term movements.
His comment was over the long-term, and over the long-term there isn't any other option.

The rating agencies will never downgrade America. Simple as that. To do so would undermine the fiat currency regime worldwide.
But the rating agencies have no credibility anyway, so the markets will do their work for them.

Also, your chart above is sort of old.

legislation. The problem with Oregon here is that they're almost alone in this approach. What's needed is a national anti-sprawl policy. A sustainable future is walkable, so that cars can be a luxury, not a necessity.

What's more at issue here is that Portland and Seattle are continuing to attract new residents even when they can't find jobs. There's a story about how the talk of the "creative class" as the engine of economic growth is fundamentally wrong. The denigration of manual labor and manufacturing has led the "creative class" to kill off the economic engine that they were parasites on.

hmm.....

Put this together with the weird buying sprees that the Chinese and Russian governments have been on, and it adds up to a disturbing picture.

A picture that suggests that the dollar's status as the global reserve currency is in question, and that the loss of seigniorage, that is extra boost to the dollar, that the US makes from issuing the global reserve currency goes poof. All those dollars held in reserve abroad, come flowing back to the US, 3rd world bank holdings held in dollars in New York flow to Switzerland, or other currency dominated accounts in world banking centers.

Right now, the Chinese have been amassing a gold stockpile.

China revealed on Friday that it had secretly raised its gold reserves by three-quarters since 2003, increasing its holdings to 1,054 tonnes - or a pot worth about US$30.9-billion - and confirming years of speculation it had been buying.

Hu Xiaolian, head of the State Administration of Foreign Exchange, told Xinhua news agency in an interview that the country's reserves had risen by 454 tonnes from 600 tonnes since 2003, when China last adjusted its state gold reserves figure.

The confirmation of its surreptitious stockpiling is likely to fuel market talk about Beijing's ability to buy secretly and its ambitions for spending its nearly US$2-trillion pile of savings. And not just in gold: copper and other metals markets are booming thanks to China's barely-visible hand.

The Chinese are already surreptitiously dropping their dollars for hard assets. And now, they're getting vocal about their desire to make the yuan a reserve currency. One of the ways of doing this would be to revive a limited gold standard. There are something like a billion ounces of gold on the planet, and $30 trillion in currencies. In the original Bretton Woods System, gold was fixed at $35/ounce. Now, it would have to be something like $30,000 and ounce. This is a 30 fold increase from the current price. That suggests tremendous inflationary pressure if we return to the gold standard.

The money supply and the value of real, consumable, items have been put out of whack by a financial sector that made funny money through CDS contracts and the like. Be very, very afraid. The Chinese are on to this. They've been making currency swap deals in yuan with Latin American countries. This cuts out the dollar, meaning that they don't need dollars to do foreign trade deals. Hoarding gold is an insurance policy for those who don't do such deals.

Which brings me to another very, very strange thing that's been going on. Russia is hoarding diamonds, another highly limited commodity that can back up a currency. Both gold and diamonds have industrial uses aside from their intrinsic value. It looks an awful lot like the post Bretton Woods system of global money is about to either collapse, or get much more interesting.

Is this someone who is an blogger/online? If so (I don't recall any pseudo persona by that id on EP) plain invite him over.

the bubble absolutely depends on lower interest rates. I don't think they have a Plan B.

No one is asking who will purchase the $1-trillion of US Treasuries to be offered to the market by September. Once that colossal amount of paper is bought, who will purchase another $5-trillion of Treasury paper over the next four-years, as the US-government plunges deeper into insolvency. The Federal Reserve would be forced to print (monetize) vast quantities of US-dollars to pay the principal and interest on the national debt that is not covered by tax revenue.

Of course I would ask:
Where is ThinkFIrst when we need him? :o)

Now that they have offshore outsourced the jobs and we're looking at double digit unemployment, increasing throughout 2010...why not go the whole nice yards and turn the U.S. into a 3rd world nation.....

why in 10 years maybe, just maybe those 2.3 billion population countries like China and India will run out of workers and also look for cost savings and thus offshore outsource their jobs to the United States!

My the future is so bright!

I thought I put this in an Instapopulist but can't find it. So I'll link to Economy in Crisis (one of our middle column must read sites) for the juice. It has Rep. Grayson (Freshman who clearly is trying to do a good job, nice to see!) asking how there is no accounting of so much money in a hearing.

I thought I covered this hearing, maybe not, but won't hurt anything is someone wants to go read through the testimony and overview it again. I believe it's this one.

Also, ya all, watch those Congressional hearings. While so very often we cannot get legislation, still they do invite testimony on the hill that is the truth very often and unfortunately these hearings and meetings do not get the press they should.

the tightening of the money supply is another major worry

is the true definition of deflation... but it won't happen. Why? Bernanke explains in his own words from 2002.

As I have mentioned, some observers have concluded that when the central bank's policy rate falls to zero--its practical minimum--monetary policy loses its ability to further stimulate aggregate demand and the economy. At a broad conceptual level, and in my view in practice as well, this conclusion is clearly mistaken. Indeed, under a fiat (that is, paper) money system, a government (in practice, the central bank in cooperation with other agencies) should always be able to generate increased nominal spending and inflation, even when the short-term nominal interest rate is at zero.

and the payoff quote

What has this got to do with monetary policy? Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

Bernanke has been running the playbook just as he stated seven years ago. We will not experience a deflationary depression... not on his watch.

General fall in price levels is a Keynesian term. Government runs a numbers game ... i.e. - how many numbers can we fuck with to produce the desired outcome. CORE inflation .... WTF?