Inflation like "dragons" lurking within the "cave" of money-printing programs

PIMCO's Gross warns investors of looming inflation
"The future price tag of printing six trillion dollars' worth of checks comes in the form of inflation and devaluation of currencies either relative to each other, or to commodities in less limitless supply such as oil or gold," Gross wrote.

Gross, whose Pacific Investment Management Co. had $1.92 trillion in assets as of September 30, 2012, referred to a speech in 2002 by Federal Reserve Chairman Ben Bernanke in which Bernanke said that the United States could print an unlimited amount of dollars "at essentially no cost."

Gross countered in his letter that the cost will be inflation, which will weaken the returns on long-term bonds and eventually risk assets such as stocks and high-yield bonds, and also hurt businesses.

Gross likened inflation to "dragons" lurking within the "cave" of money-printing programs. "Zero-bound interest rates, QE maneuvering, and ‘essentially costless' check writing destroy business models and stunt investment decisions which offer increasingly lower ROIs and ROEs," Gross wrote, referring to returns on investment and equity.
Comment: Image Source: Jack MacGown's Cave Dragon

1 comment:

  1. Very interesting. I have to tell you, I am fascinated by the national debt clock at the top of your blog. Kind of scary.


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