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Oct 28
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Bill Gross, director of Pimco, best known as the most successful bond investor of his generation, has given his thoughts on how Federal Reserve plan to pump money into the US Economy will affect the bond market in the future.
He has termed the move by Federal Reserve bank a giant ponzi scheme. Yes, the entire federal money system is a Ponzi scheme, but this isn’t news. This system has been in place for about 100 years.
The Future of Bond Market Prices and Interest Rates
The actions of the Fed, led by Chairman Ben Bernanke, will “likely signify the end of a great 30-year bull market in bonds and the necessity for bond managers and, yes, equity managers to adjust to a new environment,” he wrote in a commentary posted on Pimco’s website Wednesday. See Gross’s full commentary.
Check writing in the trillions is not a bondholder’s friend; it is in fact inflationary, and, if truth be told, somewhat of a Ponzi scheme,” he said.
The End Game
Such a plan “raises bond prices to create the illusion of high annual returns, but ultimately it reaches a dead-end where those prices can no longer go up,” Gross wrote. “Having arrived at its destination, the market then offers near 0% returns and a picking of the creditor’s pocket via inflation and negative real interest rates.”