Bill Gross: "Investors in Dangerous Euphoria Due to Central Bank Low-Interest Policies"

"Economic Recovery Strong Despite COVID-19 Crisis, Central Banks Still Focused on Stimulus"
"Fed Chair Powell a Captive of Financial Markets... Gradual Rate Hikes Expected Next Year"
"Low Interest Rates Hurt Savers... Capitalism's Savings and Investment Reliance System Collapsing"

[Asia Economy Reporter Park Byung-hee] "From stocks to digital assets such as non-fungible tokens (NFTs), all financial asset markets are in a trance because of central banks."

Bill Gross, the former Chief Investment Officer (CIO) of PIMCO and the original "Bond King," warned of the risks in the current situation where all financial asset prices have surged, criticizing the central banks' monetary policies that still maintain low interest rates as wrong. As the so-called Bond King, Gross has a deeper understanding of financial market interest rates than anyone else.

According to major foreign media on the 16th (local time), Gross pointed out that "the global economy has already strongly recovered from the COVID-19 phase, yet central banks are focusing on economic stimulus." He noted that interest rates are excessively low to an unacceptable degree. Gross said, "Because of the low interest rate policy, investors in all financial markets, from stocks to digital assets, are living in a dreamland," adding, "It is dangerous."

As the U.S. consumer price inflation rate entered the 6% range for the first time in 30 years, controversy over the Federal Reserve's (Fed) low interest rate policy has intensified. This is also why U.S. President Joe Biden is taking longer to decide on the reappointment of Fed Chair Jerome Powell. On the 16th, President Biden announced, "I will nominate the next Fed Chair within four days." A White House official stated that President Biden will choose either to reappoint Chair Powell or nominate Fed Governor Lael Brainard as the new Fed Chair.

Gross expressed doubt about whether inflation will maintain its current high level or rise further. This can be interpreted as meaning that prices have already risen excessively and there is a risk of a sudden drop. However, Gross predicted that in the short term, the inflation rate will exceed the Fed's monetary policy target of 2%.

Despite various side effects, Gross viewed the likelihood of a rapid shift to monetary tightening by central banks as low. A swift tightening could shock the market enough to harm economic recovery. Gross said, "Central banks will not be able to implement strong tightening policies," and criticized, "Fed Chair Powell has become a prisoner of the financial markets." He also predicted, "Chair Powell will gradually reduce the scale of quantitative easing and slowly raise the benchmark interest rate next year."

After the 2008 global financial crisis, the cash liquidity injected into financial markets by the Fed and central banks worldwide through quantitative easing reached $23 trillion.

Gross expressed concern about the long-term effects of continued low interest rates and large-scale quantitative easing policies since the 2008 global financial crisis. He said, "Low interest rates ultimately cause severe pain to savers," adding, "Capitalism is a system that relies on saving and investment, but that system has collapsed over the past decade."

This content was produced with the assistance of AI translation services.