Bill Gross Against QE
For the past few days the chorus has been getting louder: Monetary easing does not work and creates structural imbalances in the economy leading to systemic risks and asset bubbles.
Today Bill Gross weighed in with this “Perhaps zero-bound interest rates and quantitative easing programs are becoming as much of the problem as the solution.”
Bill Gross runs the largest bond fund, Pimco Total Return so he knows a few things about fixed income securities like US Treasuries and Mortgage Backed Securities -the ones that the Fed is buying to the tune of $85 billion a month in a bid to boost the economy and the financial system.
The Fed is the primary buyer of these securities. If the Fed were to taper their purchases or stop buying them altogether who would buy them? Other buyers surely would want a higher return which would cause interest rates to rise.
You can figure out what happens then.
The nasty scenarios you might envision are why the Fed is in a no win situation. It can taper and risk imploding the “recovery”, the stock and real estate markets or it can keep up the purchases risking a larger crash later. My guess is they continue to talk tapering while continuing to print money to buy US Treasuries and MBS’s.
Whatever choice the Fed picks will require a lot of luck to stave off a crisis.
I hope the Fed feels lucky.
Get Free Updates From Smaulgld.com
Please visit the Smaulgld Store for a large selection of recommended Kindles, books, music, movies and other items.
Or you can support Smaulgld.com by making all your Amazon purchases through the search widget below and by ordering your gold and silver by clicking on the JM bullion ads on the site:
DISCLOSURE: Smaulgld provides the content on this site free of charge. If you purchase items though the links on this site, Smaulgld LLC. will be paid a commission. The prices charged are the same as they would be if you were to visit the sites directly. Please do your own research regarding the suitability of making purchases from the merchants featured on this site.
The content provided here is for informational purposes only. Making investment decisions based on information published by Smaulgld (SG), or any Internet site, is not a good idea. Accordingly, users agree to hold SG, its owner and affiliates, harmless for all information presented on the site. SG presents no warranties. SG is not responsible for any loss of data, financial loss, interruption in services, claims of libel, damages or loss from the use or inability to access SG, any linked content, or the reliance on any information on the site.
The information contained herein does not constitute investment advice and may be subject to correction, completion and amendment without notice. SG assumes no duty to make any such corrections or updates. As with all investments, there are associated risks and you could lose money investing. Prior to making any investment, a prospective investor should consult with its own investment, accounting, legal and tax advisers to evaluate independently the risks, consequences and suitability of that investment. SG disclaims any and all liability relating to any investor reliance on the accuracy of the information contained herein or relating to any omissions or errors and as such disclaims any and all losses that may result.
Send Litecoin to this address:
