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Bring On 'Operation Switch' - Bill Gross Calls For A Reverse 'Operation Twist' To "Benefit Savers And The Economy"

Tyler Durden's picture




 

After years of ZIRP (and QE), finally it has dawned on the "smartest people in the room" that neither ZIRP nor QE do much, if anything, to boost the economy. In fact, judging by the secular stagnation the world finds itself in primarily as a result of the $200+ trillion in debt that ZIRP (and QE) have unleashed, growth is contracting with every passing year.

As such, some 6 years after this website first claimed just that, the "smartest people in the room", especially those working for investment banks and large asset managers, have turned the "tinfoil hat" corner and admit it is time to try something different (of course, they already got their bailouts which were possible only thanks to ZIRP and QE) because everything else the Fed has tried has failed.

Today, in what isn't the first nor the last call to end ZIRP, Janus' Bill Gross has released his November monthly outlook titled "It’s the Zero Bound Yield Curve, Stupid!" in which he calls for an anti-Operation Twist, or "Operation Switch" whereby the Fed sells its long-dated holdings and buys short-term paper thereby "steepening the yield curve and benefiting savers, liability based businesses, and the economy itself." He adds: "They should produce a much steeper yield curve and a higher policy rate to allow banks, financially oriented businesses, as well as household savers themselves to increase margins and restore profit and disposable income growth."

However, even Gross realizes this is futile:

"But they won’t, you know. Yellen and Draghi believe in the Taylor model and the Phillips curve. Gresham’s law will be found in the history books, but his corollary has little chance of making it into future economic textbooks. The result will likely be a continued imbalance between savings and investment, a yield curve too flat to support historic business models, and an anemic 1-2% rate of real economic growth in even the most robust developed countries."

This will continue until the day which Bank of America's Michael Hartnett has dubbed the day the market accepts the Fed has succumbed to "policy failure" and it can no longer push on a string.

But the real reason the Fed no longer has the option to push long-term rates higher is far simpler than any macroeconomic textbook argument or debate between very serious people. It's this.

And that, more than anything, is why the Fed is caught in a trap: even it realizes it desperately needs to raise rates, but doing so may be the catalyst that finally topples the global $200+ trillion house of debt cards.

From Janus Capital

It’s the Zero Bound Yield Curve, Stupid!

I have been increasingly suspicious since late 2011 that Sir Thomas Gresham (1519-1579) may be the modern John Maynard Keynes. I said as much in a Financial Times op-ed when I wrote in December of that year, that the famous “Gresham’s Law” needs a corollary. Not only does “bad money drive out good money” but “cheap money” may do harm as well. Just as Newtonian physics breaks down, and Einsteinian theories prevail at the speed of light, so too might easy money, which has invariably led to stronger economic recoveries, now fail to stimulate growth close to the zero bound.

Historically, central banks have comfortably relied on a model which dictates that lower and lower yields will stimulate aggregate demand and, in the case of financial markets, drive asset prices up and purchases outward on the risk spectrum as investors seek to maintain higher returns. Today, near zero policy rates and in some cases negative sovereign yields have succeeded in driving asset markets higher and keeping real developed economies afloat. But now, after nearly six years of such policies producing only anemic real and nominal GDP growth, and – importantly – declining corporate profit growth as shown in Chart 1, it is appropriate to question not only the effectiveness of these historical conceptual models, but entertain the increasing probability that they may, counterintuitively, be hazardous to an economy’s health.

The proposed Gresham’s corollary is not just another name for “pushing on a string” or a “liquidity trap”. Both of these concepts depend significantly on the perception of increasing risk in credit markets which in turn reduce the incentive for lenders to expand credit. But rates at the zero bound do much the same thing. Zero-bound money – quality aside – lowers incentives to expand loans and create credit growth. Will Rogers once humorously said in the Depression that he was more concerned about the return of his money than the return on his money. His simple expression was another way of saying that from a system wide perspective, when the return on money becomes close to zero in nominal terms and substantially negative in real terms, then normal functionality may break down. If at the same time, and over a several year timeframe, bond investors become increasingly convinced that policy rates will remain close to 0% for an “extended period of time”, then yield curves flatten; 5, 10, and 30 year bonds move lower in yield, which at first blush would seem to be positive for economic expansion (reducing mortgage rates and such). It would seem that lower borrowing costs in historical logic should cause companies and households to borrow and spend more. The post-Lehman experience, as well as the lost decades of Japan, however, show that they may not, if these longer term yields are close to the zero bound.

Chart 1: U.S. Corp Profit Growth (1993-2015)

Chart 1: U.S. Corp Profit Growth (1993-2015)

 

In the case of low yielding sovereign, as well as corporate AAA and AA rated bonds, this new Gresham’s corollary is certainly counterintuitive. If a government or a too big to fail government bank can borrow near 0%, then theoretically it should have no problem making a profit or increasing real economic growth. What is more important, however, is the flatness of the yield curve and its effect on lending across all credit markets. Capitalism would not work well if Fed Funds and 30-year Treasuries co-existed at the same yield, nor if commercial paper and 30- year corporates did as well. Investors would have no incentive to invest long term. What central bank historical models fail to recognize is that over the past 25 years, capitalism has increasingly morphed into a finance dominated as opposed to a goods and service producing system.

It is not only excessive debt levels, insolvency and liquidity trap considerations, then, that delever both financial and real economic growth, it is the zero-bound nominal policy rate, the assumption that it will stay there for “an extended period of time” and the resultant flatness of yield curves which may be culpable. As a result, in the case of banks, their “Nims” or net interest margins are narrowed as Chart 1 suggests. It stands to reason that when bank/finance profit margins resulting from maturity extension are squeezed (curve flattening) then overall corporate profits are squeezed as well.

This new Gresham’s corollary applies to other finance based business models as well. If long term liability based pension funds and insurance companies cannot earn an acceptable “spread” from maturity extension – and in the case of zero based policy rates – cannot therefore earn an acceptable return on their investments to cover future liabilities, then capitalism stalls or goes in reverse. Profit growth or profits themselves come down and economic growth resembles the anemic experience of Japan; pension funds begin to cut benefit payments as recently threatened in Puerto Rico and Illinois, reducing disposable personal income. Even unions are not exempt, as preliminary threats to cut benefits by 50% by the Teamsters show. Corporate profits may be further reduced as an increasing number of companies using defined benefit plans are forced to increase contributions to wobbly and underfunded balance sheets. Individual households must also save more and consume less if the return on their savings is reduced by a flatter yield curve.

My primary thesis, supported by the above examples, remains that capitalism does not function well, and profit growth is stunted, if short term and long term yields near the zero bound are low and the yield curve inappropriately flat. Chart 2, which graphically displays yield curve flattening cycles over the past 20 years, shows a remarkable one to two year leading correlation

Chart 2: U.S. Yield Curve (1993-2015)

Chart 2: U.S. Yield Curve (1993-2015)

to increasing/decreasing rates of profit growth seen in Chart 1, even when the flattening results from lower long term yields as opposed to central bank tightening as in 1993-1997. When our modern financial system can no longer find profitable outlets for the credit it creates, it has a tendency to slow and begin to inhibit economic and profit growth in the overall economy. With a near zero interest rate policy, central banks zero out the cost of time, bidding up existing asset prices, but failing to create sufficient new assets in the real economy.

Global central bank staff models will likely not validate this new Gresham’s corollary. Former Fed chairman Ben Bernanke blamed a mild policy rate increase in the midst of the 1930s for an economic relapse, and a lack of credit expansion for Japan’s lost decades 60 years later. He avoided the potential influence of low yields themselves, claiming then, as now, that green-shoots growth would eventually restore normality to savers. But all central banks should now commonsensically question whether ultra-cheap money continually creates expansions as opposed to reducing profit margins and hindering recovery. Recent experience would confirm the latter thesis.

And if the Fed and other central banks one day understand this, what should they do? They should produce a much steeper yield curve and a higher policy rate to allow banks, financially oriented businesses, as well as household savers themselves to increase margins and restore profit and disposable income growth. How is a steeper yield curve possible however, if at the same time they are raising policy rate targets to more normal levels as I and others have recommended for some time now in the U.S.? Two ways in my view, neither of which would support intermediate/long term bond prices at current levels but which might be beneficial to the longer term real economy.

  1. Central banks could raise their inflation targets. Japan has done so over the past few years, avoided deflation/recession and actually benefited bond and equity markets. Targeting 3% inflation worldwide should raise 10-30 year yields more than short rates resulting in a steeper curve at slightly higher yield levels. San Francisco Fed President John Williams recently brought up the possibility of raising inflation targets in the absence of more stimulative fiscal policy.
  2. I propose an “Operation Switch”. Instead of 2012’s “Operation Twist”, which sold 2-5 year notes and reinvested the proceeds in longer dated Treasuries now resting in their portfolio, the Fed should do just the reverse. After all, the twist did nothing to improve YOY GDP growth – it may in fact have lowered it as the above argument claims – dropping GDP in the 4th quarter of 2013 to .9% YOY following the “Twist” in 2012. The Fed now holds upwards of $2 trillion longer dated Treasuries and mortgages that can be “switched” into 2-5 year paper, steepening the yield curve and benefiting savers, liability based businesses, and the economy itself. But they won’t, you know. Yellen and Draghi believe in the Taylor model and the Phillips curve. Gresham’s law will be found in the history books, but his corollary has little chance of making it into future economic textbooks. The result will likely be a continued imbalance between savings and investment, a yield curve too flat to support historic business models, and an anemic 1-2% rate of real economic growth in even the most robust developed countries.

The Fed, the ECB, the BOJ? Stupid, they are not. But stubborn, and reluctant to adapt to a significantly changed finance based economy over the past 40 years? Most certainly. Central bankers’ failure to recognize the “Shadow Banking” system pre-Lehman proved that, and their fixation on zero bound or in some cases negative yields, with their accompanying low and flat intermediate and long term rates, confirms the same today.

 

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Tue, 11/03/2015 - 09:51 | 6743459 buzzsaw99
buzzsaw99's picture

LMAO. gross wouldn't be one of the smartest people in the room if he was sitting in there all by himself imo.

Tue, 11/03/2015 - 10:06 | 6743510 Money Counterfeiter
Money Counterfeiter's picture

Central banks should pack up their shit and go home.

Tue, 11/03/2015 - 10:11 | 6743527 pods
pods's picture

Well Bill, as a saver, I would like to just say thank you from the bottom of my heart for looking out for us little people.

Every one of these megalomaniacs are playing their book. Always an angle.

pods

Tue, 11/03/2015 - 10:27 | 6743584 VinceFostersGhost
VinceFostersGhost's picture

 

 

 

"Benefit Savers And The Economy"

 

Screw that. We want total transformation and a banana republic.

 

YES WE CAN!!!

 

No working more than 29.5 hr/wk.....and sign up for your free wickedly expensive heathcare.

 

Thank goodness for King Paul Ryan....he will surely save us.

Tue, 11/03/2015 - 10:58 | 6743752 ToSoft4Truth
ToSoft4Truth's picture

Three Cheers for Paul Ryan….  He’ll save the Republic.  Boehner… just didn’t have enough time. 

Tue, 11/03/2015 - 10:59 | 6743760 VinceFostersGhost
VinceFostersGhost's picture

 

 

Between crying and drinking.....there wasn't much time.

Tue, 11/03/2015 - 11:14 | 6743822 Shad_ow
Shad_ow's picture

"YES WE CON!!!"

FIFY

Tue, 11/03/2015 - 11:57 | 6744022 RafterManFMJ
RafterManFMJ's picture

Replace saver(s) with slave(s) and this becomes a really good article.

Tue, 11/03/2015 - 10:11 | 6743528 NoDebt
NoDebt's picture

Yes, let's lower the rates on short term paper some more.  What a brilliantly stupid idea

That would enable all sorts of short term pump-and-dump operations within what Stockman calls, correctly, the "canyons of Wall St."  How this is going to "help" anything outside of Wall St., I have no idea.

How about this as a counter-proposal:  Abolish the Fed.  Here I will agree with Gross- never gonna happen.

So let's look at "Plan B" (also never going to happen, but FWIW):  No more Fed Funds Rate.  Simply abolish the entire Fed Funds program.  Get the Fed out of the overnight paper business completely and let markets set rates (this is already the reality for smaller banks).  Leave the discount window open, just ditch the Fed Funds rate and thereby the ability of the Fed to peg short term interest rates to artificially low levels forever.

 

Tue, 11/03/2015 - 10:22 | 6743571 negative rates
negative rates's picture

That's too bad for you, cause you aint gonna like plan sea.

Tue, 11/03/2015 - 10:22 | 6743568 weburke
weburke's picture

I am glad he writes, he is looking for reasons to believe, but, worshipping at the numbers of the mechanism will only distract you from the owners of the show, and they are up to vast amounts of no good. 

Tue, 11/03/2015 - 10:53 | 6743685 Croesus
Croesus's picture

"Gresham’s corollary"

No, what we need, is "Gresham's Antithesis" - "Good money, drives out bad". 

You could look at a bunch of different ways, but I'll take the "honest human being" approach: 

I work hard. I'm frugal. I save. Why the fuck should I be penalized because I'm NOT 'on the take'? Why should I pay more, for being RESPONSIBLE?  

Penalize the IDIOTS of society.  "Stupid" should have an EXPENSIVE pricetag, and the bill shouldn't be paid by other people. 

'Nuff said. 

Tue, 11/03/2015 - 10:58 | 6743748 Retired Guy
Retired Guy's picture

The article was on track up to 'the central banks should raise inflation goals.' Inflation is theft. Inflation is the hidden tax that powers $53 million gas stations and $175 million balloons. Inflation is no friend of the ordinary citizen.

Zero interest as the article points out has many problems. Why would a sensible person invest if the return is zero? The money supply has sloshed around for years but when it comes to rest, zero return will mean zero investment, stagnation and no new jobs for the new job seekers.

At the end of the inflation 1970's we got the sky high interest of the 1980's. People were amazed interest could go to 20%. I worked like hell in the 80's because I wanted to have saving to get the the high interest. I imagine everybody else did too because the economy boomed. There were jobs for everybody.

I think zero interest has put people on the couch like vultures waiting for something to die. I think high interest would give the vultures reason to stop resting and go out and kill something.

Tue, 11/03/2015 - 09:53 | 6743463 _ConanTheLibert...
_ConanTheLibertarian_'s picture

Make my day punk?

Tue, 11/03/2015 - 09:55 | 6743465 XRAYD
XRAYD's picture

Sir John James Cowperthwaite, once Financial Secretary in Hong Kong (1961-71, who refused to collect economic statistics, on the grounds that " "for fear that I might be forced to do something about them".

He also believed that 

"In the long run, the aggregate of decisions of individual businessmen, exercising individual judgement in a free economy, even if often mistaken, is less likely to do harm than the centralised decisions of a government, and certainly the harm is likely to be counteracted faster." 

 

(Thnks to Ft reader DrJip)

Tue, 11/03/2015 - 10:14 | 6743542 TrustbutVerify
TrustbutVerify's picture

Reminds me of the aphorism, "That which is measured will be controlled." 

Tue, 11/03/2015 - 09:56 | 6743473 Seasmoke
Seasmoke's picture

Gold getting hammered.  Well than it must be 8AM. Gold has probably lost over $2000 from 8am-10am during 2015. 

Tue, 11/03/2015 - 10:12 | 6743529 cpnscarlet
cpnscarlet's picture

You must say that this is one area where the FED has been very successful, at least in their execution. Success for savers...not so much.

Sinclair must be poopin his pants during the last 8 days watching his reputation go down the tubes after his August comments. I wonder what suckers are going to pay $100 to hear him guess wrong in LA.

Tue, 11/03/2015 - 10:21 | 6743562 venturen
venturen's picture

The government has success in other areas according to the WSJ today "White, middle-aged Americans are dying at a rising rate, a new study shows, a startling reversal that suggests addiction and mental-health issues are setting back decades of gains in longevity.

Suicide, alcohol abuse, drug overdoses and chronic liver diseases largely drove the rise, which occurred between 1999 and 2013,"

http://on.wsj.com/1P6LzWn
Tue, 11/03/2015 - 11:24 | 6743863 Peak Finance
Peak Finance's picture

This is by design, our age and ethnic group is specifically targeted for destruction. 

Tue, 11/03/2015 - 10:22 | 6743569 taopraxis
taopraxis's picture

I am and will remain a buyer of gold all the way down...certainly not in any hurry, though.

Tue, 11/03/2015 - 09:57 | 6743477 LawsofPhysics
LawsofPhysics's picture

This has never been about "saving" anyone, especially saving taxpayers...

This has always been about maintaining power and control over real ASSETS, including the human kind!

The government/Fed knows that it would have been cheaper to simply give money directly to taxpayers, with the requirement that they pay down debt first.  That is the ONLY equitable way to hand out REAL STIMULUS.  Make it a million dollars, think of the inflation they would generate!

roll the motherfucking guillotines already! nothing changes otherwise.

Tue, 11/03/2015 - 10:14 | 6743540 Id fight Gandhi
Id fight Gandhi's picture

I'm tired of being in survival mode while the crooks print money, gut companies and pat themselves on the back.

 

I miss the USA when it was something to be proud of and next generations were to have boundless hope and prosperity.

 

So many people I know are so miserable and depressed and hide behind their phons with time wasting drivel and don't even bother to talk anymore.

 

 

Tue, 11/03/2015 - 11:17 | 6743834 Shad_ow
Shad_ow's picture

So true.

Tue, 11/03/2015 - 11:17 | 6743838 LawsofPhysics
LawsofPhysics's picture

okay, then stop accepting their fucking paper!!!

The U.S.A. you speak of has not existed for generations...

I just miss the U.S.A. that actually manufactured something fucking real...

Tue, 11/03/2015 - 11:37 | 6743915 rejected
rejected's picture

I offered a eagle for payment at a Best Buy for merchandise worth $100 fiat. At that time the one ounce coin was worth about $1300 fiat. They laughed and refused, but happily took the trash fiat.

There was a reason the PTB nationalized the education system years ago. The skilless masses you see on the street yapping / tapping on their iThingy's that cannot tie their shoestrings are the grand result of that takeover.

Like Hamsters on a cage wheel we have been indoctrinated since toddlers and nothing barring a life changing event will change 99.9% of us.

 

Tue, 11/03/2015 - 09:58 | 6743481 The Wampum
The Wampum's picture

Global central bank assets (QE) are ripping past $15 trillion with interest rates going negative. I picture Maverick ejecting out of his tailspin in Top Gun. http://banksterbubble.com/central-banks-gone-wild-race-to-debase-visuali...

Tue, 11/03/2015 - 10:01 | 6743497 strangeglove
strangeglove's picture

"I want to Die Poor like you!"

 

Bill Gross

Tue, 11/03/2015 - 10:10 | 6743522 Apocalicious
Apocalicious's picture

We all die poor. 

Tue, 11/03/2015 - 10:58 | 6743754 VinceFostersGhost
VinceFostersGhost's picture

 

 

Our children are born in debt.

 

We need to skip this school crap.....and get them straight to the factories.

Tue, 11/03/2015 - 10:04 | 6743503 taopraxis
taopraxis's picture

Tune in , turn on(naturally) and drop out...it will not fix anything but you will no longer notice or care.

Tue, 11/03/2015 - 10:09 | 6743518 ThanksIwillHave...
ThanksIwillHaveAnother's picture

Did Gross read 'Fiat Money Money in France'?  In 50 pages Andrew White (founder of Columbia U) explains all the problems with fiat money vs specie-backed.  At the end of the day the absolute yield is irrelavent.  What should be watched is company creation and capital formation outside the financial sector.  If that is healthy, then economy is.  The incentive today is to take money out of bank to guard against cyprus-like event.  That the experts in FIAT Money cannot see this proves they are imbeciles.

Tue, 11/03/2015 - 10:23 | 6743574 venturen
venturen's picture

yes but rich imbeciles. 

Tue, 11/03/2015 - 10:27 | 6743555 DOGGONE
Tue, 11/03/2015 - 10:24 | 6743581 two hoots
two hoots's picture

All that matters to the Federal Reserve and their member banks is their well being (if the banks are good then everything else must be ......irrelevant).  

Tue, 11/03/2015 - 10:27 | 6743595 madbraz
madbraz's picture

Gross loser obviously wants some kind of manipulation of the long term interest rate to go higher as it benefits him and banks.  The good news is that this has been enabled by the NY FED in the last few years, regardless if it is illegal and criminal activity.

 

long term rates are low and want to go low because there is no growth.  if they are to manipulate it even higher (to a degree they can when there is no significant volume going the other way on safe haven demand periods), they collapse the system as no creditor can pay 5-10% when growth is zero.

 

i have news for you, billie gross despicable part of this shyster system, the yield curve is incredibly steep right now in historical terms.  

Tue, 11/03/2015 - 10:29 | 6743603 cpgone
cpgone's picture

Oh yeah, thats going to happen.

LOL

Tue, 11/03/2015 - 10:30 | 6743607 Nutflush60
Nutflush60's picture

What I think this gets wrong is that QE is doen to help government fiance their debts. These bozos want both higher inflation and rates to remain depressed.

Tue, 11/03/2015 - 10:30 | 6743610 Not if_ But When
Not if_ But When's picture

All i know is that If the FED does do anything differently - it will not be to help "savers".

Tue, 11/03/2015 - 11:16 | 6743662 Give up. Realit...
Give up. Reality is not scientific nor even mathematical.'s picture

Does anyone here even recall "the miracle of compound interest" that made this country the dynamic economic envy of the world?

Now, the FED is stealing everyone's savings in an effort to patch up the insolvent, criminal member banks that have swindled everyone rapaciously for decades using FED policy.  There's nothing mysterious going on here.

FED policy is about saving all the other Bernie Madoffs of the financial world, and nothing more.  Everyone in the ZIRP club is a criminal.  Your bank, my bank and every bank in the country, they're all running a ponzi.  The ZIRP money is what feeds the ponzi, and also facilitates the criminal heist that has gone on now for seven years, each year further destroying the economic well-being of the country.

Letting the market set interest rates is the most rational wealth redistribution mechanism ever invented  Market-rate interest rates encourage saving, thrift, self-reliance, entrepreneurialism, and industry.  It also removes the need for the welfare state completely.

What does the welfare state's wealth redistribution scheme encourage?  Sloth, criminality, illigitimate children, inflation, declining economies, decadence, dependence and drug abuse.

Tue, 11/03/2015 - 11:23 | 6743861 rejected
rejected's picture

What made this country great was clever inventiveness, hard work, common sense and not having governments at all levels sucking the life out of them, telling them what, where, how and why.

Tue, 11/03/2015 - 11:59 | 6744027 the grateful un...
the grateful unemployed's picture

the feds role should be to price interest rates according to risk, which they sometimes do, if the speculative trade is a bit frothy they raise rates and nip it in the bud. then in 2008 they did a flip, when the speculative trade in derivatives was about to collapse they lowered rates to keep it going. the fed should have raised rates in 2008. now they have a problem, the economy is on life support and they are about to switch it off.. there was some dream of theirs that the economy would magically recover after a period in this induced coma. thats always been the argument. and sure bank reserves and MM reserves are adaquete. rather than allowing the market to set interest rates, they need to restrict credit, which accomplishes the same thing, but after going all subprime all the time could the economy stand that, what if you only got two credit card offers this week instead of three? the policy has created an egalitarian expansion of credit, though consumers pay more as an economic class, than banks and corporations there is no means testing to credit, including QE. the issue then is not interest rates but credit and by extension collateral or savings

Wed, 11/04/2015 - 17:40 | 6750369 LooseLee
LooseLee's picture

'Any' control by anyone, including the Fed, is a form of Communism/Fascism. Therefore, the market should be 'free' to set interest rates. Moreover, the Fed (and all central banks), should be abolished and replaced with what the American Constitution prescribes. Read it if you don't already know.

Tue, 11/03/2015 - 12:57 | 6744288 Ward no. 6
Ward no. 6's picture

i just pulled out all my savings today.

i told them what is the point of having a savings acct when there is barely any interest on it????

fuck this shit

Tue, 11/03/2015 - 11:15 | 6743829 rejected
rejected's picture

The purpose of a central bank is to buy all real assets and the power that goes with them with their paper. Everything they do serves that purpose.

Articles in the media like this one are little slivers of hope for the marks, sort of like the hope and change the harlot in the oval office constantly spreads.

The dollar will eventually be destroyed and a new fake currency will be introduced, but the real assets with real value those dollars stole will be safely tucked away in the bankers vaults. 

There is very little that can be done as most humans seem content with the few scraps thrown their way. The ones that do care are too few in number and are considered dangerous by those afraid of losing what few scraps they get.

Real change usually only comes from disaster but usually ends up worse as the same people that caused it are usually expected to correct it which is the intent of their game.

Good luck to those of you that "own" their paper.

 

Tue, 11/03/2015 - 11:27 | 6743879 tongue.stan
tongue.stan's picture

Bring on "Operation Twitch",

where the hanging by the neck, twitching bodies

of every CB, central planner, bought off politician.

shitbag hedgie, hft algo writer, bumfucked technocrat,

drone bomber, PC nazi, roided out LEO, ideologue talking head,

towelhead, and goyim filtcher,

are all put on display ala the mussolini hanging.

Start with ending the Fed, by any means possible.

Tue, 11/03/2015 - 11:38 | 6743925 the grateful un...
the grateful unemployed's picture

gross is the red haired step child among bond managers, fired at Pimco, now Soros pulled 500M from Janus. i heard him say, whimsically that maybe bond investors should be buying berkshire hathaway. if the fed cant reach 2% inflation well why not 3??

the solution involves the IMF and their plan to add currency to the global marketplace but maybe thats too much pie in the sky. it would prick that global debt bubble a little. QE main street is a trial ballon, so far none of the political candidates have floated that, but it could be an October surprise.

all this yak about economic models shouldnt distract you from the real message, fed policy doesnt work, and the fed is above all a pragmatic and political institution. the fed might counter we made a lot of people rich, just not the ones who vote, (by that i mean red state voters who get about 1.3 votes according to the electoral college) of course the rich can buy those votes but increasingly the promised payoff hasnt come yet. so now the constituents are saying show me the money (entitleism, well the rich are entitled why not me?)

the fed will grudgingly hand out disbursements and squeeze their balls with 3% inflation. got it

Tue, 11/03/2015 - 12:29 | 6744153 JPMorgan
JPMorgan's picture

Pay interest on savings... hahaha that's a good one.

It's more likely they will ban cash, cut off the exits and steal savers money with negative rates.

 

Tue, 11/03/2015 - 13:09 | 6744349 I Write Code
I Write Code's picture

>"Gresham’s Law” needs a corollary.
>Not only does “bad money drive out good money”
>but “cheap money” may do harm as well.

Very good way to put it.  Way to go BG, maybe you ain't dead yet after all.

Tue, 11/03/2015 - 13:15 | 6744381 F0ster
F0ster's picture

We're reaching 'peak usery'... The solution to too much debt is will be, too much debt! 

Tue, 11/03/2015 - 18:18 | 6746081 RMolineaux
RMolineaux's picture

It is noteworthy that Gross is no longer silenced by his need to protect the market value of long term bonds.  These will surely drop like a rock if the yield curve steepens.  

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