Bill Gross’s latest monthly paper is out, as usual it contains great thoughts and this month its all about the Fed and the impact of low interest rates and the issues that come with it, see below for snippets and a link to the paper.

  • “financial repression”, long stretches of years and in some cases decades where short-term and even long-term yields were capped and suppressed below the level of inflation. In the U.S. the most recent repressive cycle extended from 1930 to 1979, nearly half a century during which investors on average earned 1.5% less than the rate their principal was eroding due to inflation. It was a savers nightmare.
  • Because zero bound interest rates destroy the savings function of capitalism, which is a necessary and in fact synchronous component of investment
  • My advice to them is this: get off zero and get off quick. Will 2% Fed Funds harm
    corporate America that has already termed out its debt? A little. Will stock and bond prices go down?

Source: Janus Capital Group

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