NEWPORT BEACH, California (Reuters) - The dollar is in danger of losing 20 percent of its value over the next few years if the Federal Reserve continues unconventional monetary easing, Bill Gross, the manager of the world’s largest mutual fund, said on Monday.

“I think a 20 percent decline in the dollar is possible,” Gross said, adding the pace of the currency’s decline was also an important consideration for investors.

“When a central bank prints trillions of dollars of checks, which is not necessarily what (a second round of quantitative easing) will do in terms of the amount, but if it gets into that territory --- that is a debasement of the dollar in terms of the supply of dollars on a global basis,” Gross told Reuters in an interview at his PIMCO headquarters.

The Fed will probably begin a new round of monetary easing this week by announcing a plan to buy at least $500 billion of long-term securities, what investors and traders refer to as QE II, according to a Reuters poll of primary dealers.

“QEII not only produces more dollars but it also lowers the yield that investors earn on them and makes foreigners, which is the key link to the currencies, it makes foreigners less willing to hold dollars in current form or at current prices,” Gross added.

To a certain extent, that is what the Treasury Department and Fed “in combination” want, said Gross, who runs the $252 billion Total Return Fund and oversees more than $1.1 trillion as co-chief investment officer.

“The fundamental problem here is that our labor and developed economy labor relative to developing economy labor is so mismatched -- China can do it so much more cheaply,” he said.

Many Americans believe that the Chinese government is manipulating its currency and in effect stealing away American jobs and throwing the U.S. in an ever-deepening trade deficit. But Gross said this is a byproduct of a globalized economy.

“It is a globalized economy of our own doing for the past 20-30 years. We encouraged all of this, but it is coming back to haunt us. To the extent that Chinese labor, Vietnamese labor, Brazilian labor, Mexican labor, wherever it is coming from that that labor is out competing us and holding down our economy,” he said.

Gross added: “One of the ways to get even, so to speak, or to get the balance, is to debase your currency faster than anybody else can. It’s a shock because the dollar is the reserve currency. But to the extent that that is a necessary condition for rebalancing the global economy overtime, then that is where we are headed.”

“Other countries and citizens are willing to work for less and willing to work harder -- and we forgot the magic formula somewhere along the way,” Gross said.

In that regard, Americans should be investing a lot more overseas than they are to find growth as the U.S. remains in a slowish-growth environment, he said.

“Pension funds and Americans, in general, have a problem because their liabilities are dollar-denominated. It’s probably worth the risk of getting out of dollars and getting into emerging countries and going where the growth is. All of which entails risk relative to the home country. But there’s probably a bigger risk in simply staying comfortably within the confines of dollar-based investments.”