Bill Gross: Low Rates Signaling Birth of Austerity

[marmar]

(Bloomberg) Bill Gross said the zero-bound interest rate policies embraced by central banks including the Federal Reserve may end up killing as opposed to creating credit and developed economies may suffer accordingly.

While recent actions by policy makers provide assurances that short and intermediate U.S. bond yields may not change for years, any potential for price appreciation is limited, Gross, who runs the world’s biggest bond fund, wrote today in a monthly investment outlook released on Newport Beach, California-based Pacific Investment Management Co.’s website.

“Monetary and fiscal excesses carry with them explicit costs,” Gross wrote. “My intent really is to alert you, the reader, to the significant costs that may be ahead for a global economy and financial marketplace still functioning under the assumption that cheap and abundant central bank credit is always a positive dynamic.”

The Fed purchased $2.3 trillion of debt in two rounds of quantitative easing known as QE1 and QE2 as part of its efforts to support the world’s biggest economy. Policy makers last month said they plan to keep their benchmark interest rate near zero until at least the end of 2014. Fed Chairman Ben S. Bernanke said following the central bank’s Jan. 25 meeting that he’s considering another program of debt purchases if it appears the recovery isn’t progressing. ................(more)

The complete piece is at: http://www.bloomberg.com/news/2012-02-01/gross-says-witnessing-death-of-abundance-birth-of-austerity.html

[Owlet]

1. Or...

"Austerity signals low birth rates"

Sorry. Just couldn't resist. It's a character flaw. I'm working on it.