Superstar bond fund manager Bill Gross of Pimco says the government and Federal Reserve shouldn’t reverse their economic stimulus, because the economy can’t handle it.
He doesn’t think the Fed should stop expanding its balance sheet, let alone consider raising interest rates.
“The economy is far too fragile for the Fed to exit quantitative easing,” he told Bloomberg.
Quantitative easing refers to the Fed’s purchases of Treasury bonds and mortgage securities. The Fed decided to end that activity as of March 31, and Gross opposes the decision.
“If they do leave the program, that means the $1.5 trillion of checks that has been written over the past nine to 12 months won’t be there anymore.”
And that spells doom for the economy, he says.
The economy needs stimulus until the private sector picks up the slack, Gross argues.
“When does that happen? To our thinking, not for a long, long time.”
Government stimulus represents the only support holding up the economy, he says.
“What we’ve experienced over the last 12 months is just the substitution of the invisible hand with the visible fist of government,” Gross said.
“Had we not seen these quantitative easing and fiscal programs, the economy would almost certainly be in a depression.”
Not everyone is so worried about the economy. Byron Wien, vice chairman of Blackstone, sees the economy growing 5 percent this year, thanks to a rise in exports, inventories and technology spending.
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