Gross: “The markets are likely to blow up”

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In its time it was the world crisis to convince the central bank to intervene by adopting extraordinary measures (both in time and in the quality of the measures), which over time would then be implemented. Unfortunately, however, it seems, the extraordinary in question has become normality, a normality that now, not only will it be difficult to get out but also you are likely to blow up in groped to do so.
The view of Gross
This, in brief, the consideration made by Bill Gross, the bond guru, co-founder of the largest bond fund, PIMCO and currently manager of Janus Capital. For some time the well-known investor has taken a particularly critical approach against the monetary policies pursued by central banks, extreme policies, he said, that blocked the institutions themselves and the economies in a permanent cycle of low interest rates, inflating prices and asset prices without bringing any kind of growth. A strategy that looks more like a therapy based on methadone to a series of measures for monetary stimulus.
“The Quantitative easing will continue in the future although the dose may be reduced in the coming years. But what is still better methadone to heroin addiction, the fact remains that this has created and continue to create a capitalism unbalanced and unhealthy with which, one day, we will have to reckon with. ”
Could this be one of the reasons why, despite the problem of low inflation, which in some areas of Europe has become openly deflation, is being resolved, the banks are in no hurry to not only raise their rates, but only announce a detailed strategy for doing so. In other words, given the difficulty of exit the vortex created, and especially given the fragility of the results obtained so far, central banks, including the Fed, are unwilling to put full stops and then having to change course along the way and are limited still to sail in sight. Currently, recalls Gross in his monthly newsletter to customers, the budget of the various central banks has passed, at the global level, the level of 12 trillion dollars, all while the share of negative yield bonds has come to exceed the equivalent of 9 thousand billion dollars.
Not only Gross
But the complaint brought forward by time Gross is not new: many in the financial community have complained of an extreme increase in prices especially in the stock market (and new records on Wall Street are a confirmation) while bond yields remained low as also the growth in the US and in most other developed economies remains below historical averages. The change of direction, according to critics of this view, it would be coming with the normalization of the Federal Reserve on the cost of borrowing increased twice in the last 12 months and, above all, with the fiscal stimulus in the administration Trump. All measures on which Gross continues to remain skeptical: a long and complex process for the second, still slow for the first. “To control the volatility on the central banks markets, in fact, they are now encased in a QE infinite loop to maintain the operation of the overall system. A possible withdrawal of stimulus strategies should be replaced by a greater flow of asset purchases (stocks and bonds) by the other central banks. Otherwise if the Fed stopped the massive purchase of US debt the yield on the benchmark 10-year will splash to 3.5%, an unsustainable level, condemning the country to recession.

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