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I think this is a result of the frustration Gross has with central banks printing money. He is mad that it makes it difficult to make money in bonds, but no one

by bluetwo 10y ago

I think this is a result of the frustration Gross has with central banks printing money. He is mad that it makes it difficult to make money in bonds, but no one under 50 cares about this. A side-effect is that it makes stock prices go up regardless of the underlying value. This people care about so this is the message he keeps spreading. Negative interest rates, which he is also concerned about, are insane. People would be rioting in the streets if they really understood how this inflates value for those who have money and inflates debt for those who owe.

toomuchtodo 10y ago
While you might not care about bonds if you're under 50, surely you care about the overinflated value you're pouring into real estate (your home) or equities (your retirement) if you're under 50, whose prices are going to deflate quickly when the Fed raises rates. If Congress won't use policy to push wages up, thereby stoking consumer demand, we will be condemned to stagflation and never ending asset froth/bubble/pop cycles. The Fed has run out of tools in their belt. If it took pushing benchmark rates close to zero to get the US economy humming again, and we're still close enough to zero to call it zero, what happens if another economic slowdown occurs?
skybrian 10y ago
Don't you have that backwards? Low interest rates are good for debtors - they pay less interest. Negative interest means you're being paid for borrowing.
- rayuela 10y ago
  Yup. I think they've confused inflation rates with interest rates. When is low interest rates bad for borrowers (growth outlook aside)? Inflation definitely has the inverse relationship, where a higher inflation rate is better for borrowers.
- bluetwo 10y ago
  Low interest rates are good (you could argue) but negative interest rates make it harder to GET dollars to pay back your loans because the value of each dollar is more. Imagine if you borrow 200k for a house and when you sell it you can now only get 150k, or if you take a new job and the market for your skills pays 20% less than it used to. Negative rates distort things in weird and unintuitive ways.

by bluetwo 10y ago

toomuchtodo 10y ago

While you might not care about bonds if you're under 50, surely you care about the overinflated value you're pouring into real estate (your home) or equities (your retirement) if you're under 50, whose prices are going to deflate quickly when the Fed raises rates. If Congress won't use policy to push wages up, thereby stoking consumer demand, we will be condemned to stagflation and never ending asset froth/bubble/pop cycles. The Fed has run out of tools in their belt. If it took pushing benchmark rates close to zero to get the US economy humming again, and we're still close enough to zero to call it zero, what happens if another economic slowdown occurs?

skybrian 10y ago

Don't you have that backwards? Low interest rates are good for debtors - they pay less interest. Negative interest means you're being paid for borrowing.

rayuela 10y ago
Yup. I think they've confused inflation rates with interest rates. When is low interest rates bad for borrowers (growth outlook aside)? Inflation definitely has the inverse relationship, where a higher inflation rate is better for borrowers.
bluetwo 10y ago
Low interest rates are good (you could argue) but negative interest rates make it harder to GET dollars to pay back your loans because the value of each dollar is more. Imagine if you borrow 200k for a house and when you sell it you can now only get 150k, or if you take a new job and the market for your skills pays 20% less than it used to. Negative rates distort things in weird and unintuitive ways.