Pimco’s Gross warns easy-money policies increase global economic risk
WASHINGTON -- Easy-money policies by the Federal Reserve and other central banks have left the U.S. and other economies “increasingly at risk,” bond guru Bill Gross warned.
The co-chief investment officer at Pacific Investment Management Co., or Pimco, said that “investors are all playing the same dangerous game that depends on a near perpetual policy of cheap financing and artificially low interest rates in a desperate gamble to promote growth.”
The comments by Gross in his monthly investment outlook came as stocks opened lower Tuesday amid investor concern that recent upbeat economic data could lead the Fed to start reducing its monthly bond-buying stimulus program.
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The Labor Department will release the November jobs report on Friday.
Economists estimate the economy added about 180,000 net new jobs last month, down from 204,000 in October. If the November figure is closer to 200,000, that could open the door for Fed policymakers to start tapering the central bank’s $85 billion in monthly bond purchases at their December meeting.
Gross said Tuesday that stocks, bonds and other assets are artificially high because of the artificially low interest rates set by the Fed and other central banks to try to stimulate the recovery from the Great Recession.
“Global economies and their artificially priced markets are increasingly at risk,” Gross said.
The Fed, along the central banks of the European Union, England and Japan have been “basically telling investors that they have no alternative than to invest in riskier assets or to lever high-quality assets.”
The message has been that investors should, “Get used to negative real interest rates, move out on the risk spectrum and in the process help heal the real economy,” Gross said.
He expects the Fed to end its bond-buying program sometime next year, but said interest rates will remain near zero for much longer.
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