$1 Trillion

This article, written by famed bond guru Bill Gross of PIMCO, paints a bleak picture of the current financial environment.


In my opinion, banking, at least over the next generation, will be drastically different:

1) gone are the days of no-doc teaser home loans.
2) banks are now much more risk averse (less willing to lend to anyone with just a pulse).
3) many more banks will fail.

What America needs is the Leave-it-to-Beaver era of thrift, honesty and a 20% down payment. I would not lend to someone who didn't pass that filter. I don't have much faith in people not wanting to keep up with the Joneses.

Sadly, however, this crisis means Uncle Sam's place in our lives just got bigger. America will live with much of this. Remember, some of the most odious Acts and Laws were passed several decades ago (e.g., Social Security). So be leery of any measures to 'save' homeowners. Few find it politically expedient to speak the truth: the banks lied; the borrowers lied; the mortgage lenders lied. That's a scary combination. But all should pay the price before the taxpayer carries the burden.

As Buffett said: "Be greedy when others are fearful and fearful when others are greedy." There's blood in the streets now, but expect more. Nevertheless, I am optimistic about the long-term ingenuity of America's creative engines.