“The Fed Has Mastered Market Manipulation” – Bill Gross Explains Why He Is Not A “Broken Clock”

One day after Stanley Fischer provided a bizarre justification for why “negative rates seem to work”, saying that “clearly there are different responses to negative rates. If you’re a saver, they’re very difficult to deal with and to accept, although typically they go along with quite decent equity prices”, this morning in his latest monthly investment oulook, Bill Gross takes not only Fischer but the entire Fed to town, and piggybacking on the words of Kevin Warsh, says that “I and others however, have for several years now, suggested that the primary problem lies with zero/negative interest rates; that not only do they fail to provide an ‘easing cushion’ should recession come knocking at the door, but they destroy capitalism’s business models – those dependent on a yield curve spread or an interest rate that permits a legitimate return on saving, as opposed to an incentive for spending. They also keep zombie corporations alive and inhibit Schumpeter’s ‘creative destruction’ which many argue is the hallmark of capitalism. Capitalism, almost commonsensically, cannot function well at the zero bound or with a minus sign as a yield.”
He then directly attacks Yellen’s hypocricy, accusing her of not only creating the income inequality she is supposedly fighting against, but also of deferring “long-term pain for the benefit of short-term gain and the hopes that your ancient model renormalizes the economy over the next few years. It likely will not. Japan is the petri dish example for the past 15 years. Other developed market economies since Lehman/2009 are experiencing a similar fungus.”
And yet, for now the system hasn’t toppled which brings us to Gross’ tongue in cheek conclusion, which pokes fun of broken watches like himself…

This post was published at Zero Hedge on Aug 31, 2016.