America's next President will be forced to deliver the first $1 trillion (£501.38 billion) budget deficit in US history, says Bill Gross, who manages the world's biggest bond fund.

"You have inherited a mess," Gross, co-chief investment officer of Pacific Investment Management Co, said in an open letter to Democratic Presidential hopeful Barack Obama.

"What do I think you should do as the new President to rectify this mess?

"All I know is that any solution will come with a high price tag."

He says that higher taxes for hedge-fund managers and oil companies will not cover the $500 billion stimulus the economy needs.

The likely expenditures and increased borrowing suggest that "intermediate and longterm yields on government bonds have already bottomed and will gradually rise" through the next four years and possibly beyond, Gross claimed.

Domestic consumption will soon be $300 billion less than needed for an economic rejuvenation, he said.

With the deficit already pushing $500 billion even before the next President is sworn in, Gross anticipates that it will reach $1 trillion by 2011.