03/02/2015 - Financial Repression on Interest Rates is Destroying Business Models, Capitalism, Pension/Insurance Funds
Janus Capital’s Bill Gross* on the outlook for Federal Reserve policy, the U.S. economy & his objectives at Janus Capital .. “The interest rate can’t be raised substantially even over the next two to three years .. Low interest rates keeps zombie corporations alive because they can borrow at 3 and 4%, as opposed to the 8 or 9%. It destroys business models. It’s destroying the pension industry and in the insurance industry .. Ultimately, low interest rates destroy the capitalistic model at the margin. Instead of investing in the real economy, corporations can now simply borrow at close to 0% and buy their own stocks, which yield 2 or 3% on a dividend basis and provide a return of 6 or 7% on an earnings to price ratio basis.” .. 12 minutes
