US unemployment at 8-9pc till 2010: William Gross

Co-CIO and Founder, PIMCO, William Gross, feels the unemployment rate will be at 8-9 per cent till late 2010 in the US. He believes the economy will bounce back at the mean level. "The rate of unemployment was last seen 20-25 years back."

Here is a verbatim transcript of William Gross's exclusive interview on CNBC-TV18. Also watch the accompanying video.

Ques: How would you explain this phenomenon of selling from global investors into most emerging markets which has put a lot of pressure on their stocks and their currencies?

Ans: I think each local economy, whether US, your land or Japan are all pulling money back into their own respective economies, that is occurring not only for banking system but private investors. During times of economic stress, investors feel more comfortable with what they know and are close to. So it is only natural that emerging market (EM) economies to which funds have been allocated over the past decade would be the focus of a withdrawal of funds that move back to local economies.

Ques: There was an expectation though that the second half of this year might shape up better both for equity market performances and general economic data as well. Would you subscribe to that?

Ans: To suggest that we are coming out of this quickly - a bounce back to the mean level, so to speak, which has been typical of the last 20-30 years in terms of investing and in terms of economic cycles- is basically to avoid reality.

We have had a major problem here, credit has been written down and there is a lot of burden sharing taking place. Economic growth will be positive at some point but probably late 2010 and at that point we will still have unemployment at 8-9 per cent and this is not the economy we are used to for the last 20-25 years.

Ques: So, you don’t think the kind of money which has been thrown in at the system right now with a near trillion dollar package will do anything to alleviate the woes or get the US out of recession in the next few quarters?

Ans: It is a trillion dollars and more if this programme is successful. Up until this point the focus has been on mortgage market, commercial paper, that is fine, that lowers home mortgage rates. But now in terms of asset backed credit cards, consumer loans, auto loans, we are seeing a shot of adrenaline right to the heart of the securitised market. The securitised market is shadow banking system. We have focused on the banking system, now the shadow banking system is being supported, I think going forward not only auto receivables, consumer credit cards but ultimately commercial mortgage backed securities (CMBS) which is the next major problem, stands to be supported by this programme.