Jeff Gundlach has questioned the interest of taxes if “endless” central bank borrowing is a “viable solution” in a stinging attack on the Treasury

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Jeff Gundlach/ Photo taken on November 10, 2018 / REUTERS / Jessica Rinaldi

  • Billionaire bond investor Jeff Gundlach criticized the Treasury’s announcement on Monday evening that it would borrow nearly $ 3 trillion in the next quarter, questioning the tax goal if “endless” borrowing were viable.
  • “If endless borrowing is a viable solution, why did we first impose taxes? ยป- he asked.
  • He also seemed to suggest that borrowing would be considerably higher, saying he would “take over” on that figure.
  • The Treasury has launched an unprecedented stimulus package in recent weeks to isolate the US economy from the impact of the coronavirus.
  • CORRECTION: This story incorrectly referred to the Federal Reserve as announcing that it would borrow $ 3 trillion in the second quarter. The Treasury Department made the announcement.
  • Visit the Business Insider home page for more stories.

Billionaire bond investor Jeff Gundlach criticized the Treasury Department’s announcement Monday that he would borrow nearly $ 3 trillion in the next quarter, questioning the purpose of the tax system if an “endless” loan were viable.

Gundlach, the founder of DoubleLine Capital tweeted Tuesday:

“The United States Department of the Treasury has today admitted a” borrowing “requirement of $ 3 trillion in the next quarter. (I’ll take the “plus”.) If endless borrowing is a viable solution, why did we impose a tax in the first place? ”

The Treasury Department has sharply increased borrowing in recent weeks as it struggles to protect the US economy from the fallout of the coronavirus and the national deadlock that subsequently crippled small and large businesses and American taxpayers.

The Treasury announced on Monday that it “plans to borrow $ 2.999 trillion in negotiable private debt, assuming a cash balance at the end of June of $ 800 billion.”

Gundlach, often known as the “king of bonds,” however questioned the announcement, seeming to suggest that such borrowing levels are unsustainable.

He also seemed to suggest that borrowing would be considerably higher, saying he would “take over” on that figure.

Read more: $ 6.5 trillion BlackRock equity chief describes 5 major themes the pandemic is about to shape – and why investors should take note

The Treasury added: “The increase in net marketable loans held by the private sector is mainly due to the impact of the COVID-19 epidemic, including spending related to new legislation to assist individuals and businesses , changes to tax receipts, including the deferral of personal and business taxes. from April to June until July, and an increase in the Treasury’s cash balance at the end of June. ”

The latest announcement from the Treasury that it plans to borrow $ 3 trillion in the next quarter comes after a series of stimulus measures by the Federal Reserve and Congress has taken action in recent weeks to cushion the impact of the coronavirus.

On April 9, the Fed announced a $ 2.3 trillion package to support lending and start buying corporate debt across a range of credit ratings.

The Fed announced on March 23 that it would start buying corporate bonds for the first time in 107 years, offering help to large and small cash-strapped businesses.

Read more: Famous strategist Tom Lee recommends buying 12 downed travel tickets for an average profit of 32% during the pandemic recovery.

In mid-March, it announced plans to inject $ 5 trillion into troubled markets and cut interest rates near zero.

Gundlach has become the latest voice in the industry to question the policies used to fight coronaviruses.

Famous economist Mohamed El-Erian warned on Monday that the Fed supporting junk bonds could eat away at “what makes America special” and create a new generation of “zombie societies”.

CORRECTION: This story incorrectly referred to the Federal Reserve as announcing that it would borrow $ 3 trillion in the second quarter. The Treasury Department made the announcement.



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