Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Fed QE Policy Means U.S. Treasury Issuing Debt For Free, Money for Nothing

Interest-Rates / Quantitative Easing Dec 14, 2012 - 03:38 AM GMT

By: Bloomberg

Interest-Rates

PIMCO's Bill Gross told Bloomberg Television's Betty Liu on "In the Loop" today that the Federal Reserve's latest round of monetary stimulus will enable Treasury to issue debt for no cost.

Gross said, "what really happens, and this is critically important, is that the Treasury issues bonds and the Fed buys them and then it remits interest to the Treasury...It basically means that the Treasury is issuing debt for free...Inflation is one of the complications."


Gross on yesterday's move by the Federal Reserve:

"Basically, the Fed's policy has been and other central bank's policies have been over the past few years to basically write checks. Ben Bernanke, back in 2002, when he was the governor, basically told us in the first one or two pages of his scripted speech, he said that the quantitative maneuvers that he anticipated going forward were essentially costless. Those were his words. He is correct. This is critical and important, what really happens is that the Treasury issues funds, the Fed buys them and then it remits interest to the Treasury quarterly or over time. It basically means that the Treasury is issuing debt for free."

On what the economic complications will be:

"There are those, and we are amongst them, that believe that inflation is one of the complications. It has not happened yet. We are well below 2%. The Fed is comforted by that. Ultimately, if you write checks for free and if it is costless to finance a fiscal policy that is well into a deficit figures, then, yes, that is an inflationary moment to the extent that the private sector gets some animal spirits and takes that bait."

On whether he and Mohamed El-Erian have been invited to Washington:

"Not frequently. Mohamed is a great ambassador and he picks up the phone frequently, I think, but we have not been invited to these meetings. I find it a little strange with our $2 trillion asset base, we did participate in 2008 and 2009 and the commercial paper program for the Fed and for the mortgage program. We have been in there helping out, so to speak. We haven't been part of the meetings. That's our style. We're on the west coast. We sort of like breathing the fresh air and looking at the sunshine, but no invitation yet."

On advice he would give to President Obama and Republican leaders:

"I would say get together and figure out a solution. if they do not, there is a recession coming and a downgrade perhaps in terms of long-term treasury bonds. So get out of this and take care of the debt ceiling at the same time. Ultimately, the policy has to be directed towards investment spending as opposed to consumption. Mohamed and I would think that infrastructure is the key. It hasn't been mentioned up until this point. Entitlements have to go down. Taxes have to go up. Within that context, let's put whatever government spending there is to work in a productive way, as opposed to writing checks for consumption. let's make it an investment-oriented economy."

On whether PIMCO will sell more mortgages:

"We have been lightening up on mortgages, it is true. One of the reasons that PIMCO has had such a great year is because we have been anticipating what the Fed is going to do. We bought a lot of mortgages and so we are getting back to home base. It is not that we do not like the asset class, it is an excellent asset class because the Fed will be buying 40 billion of them going forward every month. So we're back to normal and we would suggest that our investors take a look at mortgages. They yield 2% or 2.5% relative to a 10 Year treasury at 1.70."

"In addition to anticipating what the Fed was going to do, it's a statement on safety. We believe that the economy is slow and will stay slow. We are not looking for a recession but we are looking for risk assets to stop bubbling, which means that spreads of corporates will probably not narrow again in 2013 and that we should be focusing on mortgages and the roll down in treasuries that provides a decent alternative to some of these corporate spreads."

On how to protect wealth with tax rates likely going up:

"In a number of ways. First of all, municipals are an alternative. Municipals might be part of the tax package so I think an investor has to be leery at least until we see some legislation in 2013 which defines how municipals fit in. That is one way to do it. You also do it in markets outside the United States which have higher than average growth and are not subject to the higher taxes that you speak to. If you're looking for growth and for risk go outside the united states, if you're looking for substance within the united states to protect yourself, perhaps municipals, but we're focusing at the moment on treasuries and that roll down in terms of yield which gives you an added 50 to 100 basis points which gives you something."

bloomberg.com

Copyright © 2012 Bloomberg - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Bloomberg Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in