Bill Gross Semi-Endorses Ron Paul for President?

LvMIC:

When Bill Gross speaks, many people listen.  He doesn’t head the largest bond investment company in the world, PIMCO (Pacific Investment Management Company), for nothing. Though not an Austrian or Austrian minded by any means, Gross has been critical of the Federal Reserve and recently made a surprising almost-endorsement of  Congressman Ron Paul for U.S. president (watch around the 6:24 mark):

With someone of Gross’ financial stature, such a mentioning would normally play well for the Texas Congressman.  Unfortunately, the general public is not nearly as money minded as Gross.  This doesn’t mean Gross has perfect market foresight however given his role in the financial mainstream and some recent missed calls but this off hand endorsement of Paul should certainly be examined in the broader sense.

Take a look at this portion of Gross’ recent newsletter (my emphasis added):

Letting your pet retriever roam the woods might do wonders for his “animal spirits,” for instance, but he could come back infested with fleas, ticks, leeches or worse. Fed Chairman Ben Bernanke, dog-lover or not, preannounced an awareness of the deleterious side effects of quantitative easing several years ago in a significant speech at Jackson Hole. Ever since, he has been open and honest about the drawbacks of a zero interest rate policy, but has plowed ahead and unleashed his “QE bowser” into the wild with the understanding that the negative consequences of not doing so would be far worse. At his November 2011 post-FOMC news briefing, for instance, he noted that “we are quite aware that very low interest rates, particularly for a protracted period, do have costs for a lot of people” – savers, pension funds, insurance companies and finance-based institutions among them. He countered though that “there is a greater good here, which is the health and recovery of the U.S. economy, and for that purpose we’ve been keeping monetary policy conditions accommodative.”
My goal in this Investment Outlook is not to pick a “doggie bone” with the Chairman. He is makin’ it up as he goes along in order to softly delever a credit-based financial system which became egregiously overlevered and assumed far too much risk long before his watch began. My intent really is to alert you, the reader, to the significant costs that may be ahead for a global economy and financial marketplace still functioning under the assumption that cheap and abundant central bank credit is always a positive dynamic. When interest rates approach the zero bound they may transition from historically stimulative to potentially destimulative/regressive influences.
Recent central bank behavior, including that of the U.S. Fed, provides assurances that short and intermediate yields will not change, and therefore bond prices are not likely threatened on the downside. Still, zero-bound money may kill as opposed to create credit. Developed economies where these low yields reside may suffer accordingly. It may as well, induce inflationary distortions that give a rise to commodities and gold as store of value alternatives when there is little value left in paper.

Unfortunately, Gross gives a lot of credit to Bernanke for juicing the economy in the video.  But of course papering over a bunch of losses and effectively zombifying banks to prop up the stock market doesn’t fix the core issues of the economy which has become even more dependent on the printing press.  Still, Gross has become wary of the Fed’s actions recently.  He recognizes that suppressed interest rates and cheap money create distortions though probably doesn’t understand the full nuances of the business cycle and its causes.
There is also the fact that treasuries aren’t going up in value anytime soon thanks to Bernanke’s promise to keep rates low till at least 2014.  Though he won’t lose a great amount of money as interest rates remain zero-bound for years to come, Gross admits:

Most short to intermediate Treasury yields, however, are dangerously close to the zero-bound which imply little if any room to fall: no margin, no air underneath those bond yields and therefore limited, if any, price appreciation.

So what are the real implications of Gross admitting that he is “a little Ron Paulish”?  It should come as no surprise to anyone who visits LvMIC that Ron Paul, and the Austrian School from which he is a disciple, is marginalized continuously by the mainstream press and modern academia.  Paul is often slandered and labeled the equivalent of a crackpot and unelectable.  The Austrian school, despite its analytical functions and teachings on economic theory which provide a comprehensive understandability on the causes of the business cycle, is still regarded as fringe.  Yet here is arguably the most respected money manager in the world (again, you don’t control that much wealth for no reason) admitting that he is leaning Paul’s way.  It’s a testament to the kind of impact Paul’s ideas are having on those who hold influence.  As Mises pronounced,

Both force and money are impotent against ideas.

Though he may not fully understand Paul’s views or how damaging the Fed’s policies really are, we can rejoice in the fact that Gross realizes the pathetic contest of Democrats vs. Republicans is not really a contest at all as there lies little room in differences between the two.