PIMCO to President Obama: We need a moonshot

Bill Gross, head of the biggest bond fund has some advice for the next president:

Gross's July investment outlook letter was addressed to Obama, as if he had been elected.

"Dear President Obama," the letter began. "You have inherited a mess. Your predecessor, fixated on emulating a former Republican icon from a far different economic era, chose to emphasize tax cuts for the rich and excessive consumption for all Americans," Gross wrote. "He promoted deregulation and free markets when, in fact, the markets and their institutions needed tough love."

The next president has little choice but to step up fiscal stimulus to revive the economy, Gross said.

"You've inherited an asset-based economy whose well has been pumped nearly dry with lower and lower interest rates and lender of last resort liquidity provisions," he wrote. "Your administration will produce this nation's first trillion dollar deficit."

Crazy commie pinko. In the rest of the article, Gross is quoted on the long-term impacts of net-negative interest rates (when factoring inflation) and how the lever of further cuts just ain't available. (Bernanke said as much last week.) Gross seems to be calling for more debt, but the good kind that generates the 6:1 ratio of private return opportunities on public dollars spent via things like infrastructure, both lo- and hi-tech. (Think fixed bridges and rural broadband, energy and biotech initiatives instead of the quantum-expensive low ROI-bombs and negative ROI belligerence of the last 5 years.)

Pretty refreshing that guys like Gross and Buffett are realists not unicornists when it comes to money velocity and how it's made and made sustainably.