02/05/2015 - Financial Repression Is Eroding the Foundation of Capitalism
In his latest monthly investment outlook letter, Bill Gross* rails against the distortions caused by central banks since the onset to the financial crisis – negative interest rates (financial repression) is eroding the foundation of capitalism .. “The rules of the finance-based economy have been substantially changed .. Competitive devaluations and the purchase of bonds at near zero interest rates is indeed a significant distortion of the markets and – more importantly – capitalism’s rules which have been the foundation of growth for centuries” .. Gross thinks that the Federal Reserve realizes the hole that they have dug by allowing interest rates to go too low for too long .. he worries about the consequences for investors: “In the final analysis, an investor must be cognizant of future low and in some cases negative total returns in 2015 and beyond. Capitalism’s distortion, with its near term deflation, poses a small but not insignificant risk to what my mother warned was the final destination for all games. ‘In the end,’ she said, ‘all of the tokens, all of the hotels, all of the properties – they all go back in the Monopoly box.’ The strong odds are that 2015’s distorted capitalism continues with anemic growth, but the box rests on the family room coffee table, waiting, waiting, for its turn.”
– Bill Gross of Janus
