Skip to comments.Fed to Keep Rates Low for a 'Long, Long Time': Gross
Posted on 07/13/2011 7:27:39 AM PDT by freespirited
The Federal Reserve is unlikely to change monetary policy for years as the economy remains mired in an extended period of slow growth, Pimco's Bill Gross told CNBC.
As Fed Chairman Ben Bernanke prepares his much-awaited Humphrey Hawkins speech, the co-CEO of the world's largest bond manager said he sees no end in sight to the central bank's policy of sub-zero real interest rates.
"What Bernanke should explain in terms of his language is it's really going to be a long, long time from which the Fed deserts its 25 basis points Fed funds target," Gross said. "That means perhaps several years as opposed to several quarters or several months."
Pimco's Total Return is the world's largest bond fund in the world and has been the focus of investor attention as it exited its position in almost US government holdings.
But the firm recently changed course and added some positions in Treasurysstill in shorter-duration notes but nonetheless a wading back in American debt that came as a surprise.
(Excerpt) Read more at cnbc.com ...
Keep low, LOL, when you start those printing presses money loses it value, who knew///????????
His position in the bond market is that even though BB and the FED want low interest rates they will still lose control of them, personally I think Gross is at the end of his career.
Bernake may be the one to bring on the negative interest rate. A -3% rate would help if combined with a policy of high inflation. They could even make it unattractive to hold money. Do not be surprised if it comes to that. They could even make it mandatory to buy things similar to the mandated purchase of insurance. The Volt comes to mind.
From Directive 10-289 from Ayn Rand's Atlas Shrugged:
Point #6: All citizens must purchase the same amount of goods every year as they did in the Yardstick Year, to be enforced by the Unification Board.
Hey. I did not see that but I am glad I am not being ridiculed. This is very possible in this climate. Maybe they are using Atlas as their template.
Gross is correct.
Its Japan 1990-2010 Redux. The FED and Gov’t want no one to suffer pain for either the huge amount of Wall Street bad debt, nor do they want to deal with massive Gov’t deficits, so it is simply “extend and pretend.”
What this means is that we are heading into a deflationary economy where the primary purpose of short term bonds is safe harbor parking of money.
They could even make it unattractive to hold money.
Almost a decade ago, the St. Louis Fed published some scholarly papers about government actions in an economic emergency. One proposed government seizure of all IRA's and 401-k's and diverting them into Treasury bonds, either the usual variety or some kind of Treasury Retirement Bond. This would divert capital into government coffers that otherwise would have gone into the stock market or money market.
Another proposal would have attached expiration dates to Federal Reserve Notes on a sliding scale to effect depreciation. For example, you might pay for a purchase with a $20 bill, the clerk scans the bill and tells you the bill is now worth only $14. "Do you have 6 dollars, sir?" The $10 bill you pull out of your wallet may be worth $10 -- or only $5. That's how they proposed it would work. The idea was to increase the velocity of money.
Low interest rates and high inflation is a disaster for anyone with any cash savings.
It can be argued there is a negative rate at present.
If the $$$ is devalued at say 5% per year and interest paid is say only 1% you have lost 4% on the transaction.
I hope the deflation hits food prices. I do some of the grocery shopping and the price increases are dramatic.
There you have it. I am not an economist but those who say the Fed is out of “Tools”, are “Fools”. The new money is scannable. Or even make only certain bills unusable. People would want to spend now! The schemes get ever more complex. Thanks for the info.
I heard of a new socialist theory somewhere I can’t remember where. But it was based on Tribal Customs of certain native tribes in South America. The wealthiest pay more for goods and services than the poor. Depending on your wealth. For example a poor person would pay 100 dollars for a new car but a wealthy person would pay 100,000. Or something to that effect. Everything could operate on the debit card.
Prices are going up import prices are up 13% and oil 50%
Right. BTW have you seen some of the flashmobs on You Tube?. They are too much.
Didn’t someone once say that they preferred to spread the wealth around.
Inflation is a great way to do this. People who have worked and saved in the past are robbed and the Government spends on its favorite groups...
Almost without exception, every monetary decision taken by the government and the Fed has been the exact opposite of the actions that would be consistent with a sound and prudent fiscal policy.
The hard and costly lessons learned over the years have been disregarded by the Ivy League whiz-kids, liberals and neo-conservatives who are driving the country into third world status.
In years past, prudent government policy encouraged thrift and rewarded savers. Now the government promotes consumption, wild spending beyond ability to repay and actually punishes savers.
At the same time they have presided over America’s change from a nation of builders and producers to a nation of consumers.
The two are changes connected. An economy based on excessive consumption and an inflationary fiat currency cannot have a long life span before the bottom falls out.
My mother-in-law had a better understanding of the forces behind a sound currency than all of the Harvard whiz-kids now engaged in destroying the once mighty US Dollar.
Or . . . they could use the Zimbabwe method - expiration dates on money:
C-notes will not be enough. We will need a new series of bills with Heros of the State on them.