If anyone thought Bill Gross would take what is likely the worst P&L day in PIMCO history without a fight, they would be wrong.
Gross: To paraphrase #Bernanke [6] 2002: “Regarding the Great (Re)pression. You’re right Milton, we did it. Sorry. We won’t do it again.” ???
— PIMCO (@PIMCO) June 20, 2013 [7]
So did Bernanke just do it again?
And incidentally, Gross is of course referring to the following speech [8]:
The brilliance of Friedman and Schwartz's work on the Great Depression is not simply the texture of the discussion or the coherence of the point of view. Their work was among the first to use history to address seriously the issues of cause and effect in a complex economic system, the problem of identification. Perhaps no single one of their "natural experiments" alone is convincing; but together, and enhanced by the subsequent research of dozens of scholars, they make a powerful case indeed.
For practical central bankers, among which I now count myself, Friedman and Schwartz's analysis leaves many lessons. What I take from their work is the idea that monetary forces, particularly if unleashed in a destabilizing direction, can be extremely powerful. The best thing that central bankers can do for the world is to avoid such crises by providing the economy with, in Milton Friedman's words, a "stable monetary background"--for example as reflected in low and stable inflation.
Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again.
Oh, and Bill, the answer is no: Fed assets with and without taper. If this is "doing it again" we can't wait to see what selling $5 trillion in securities, or about 50% of all 10 year equivalents, will look like...
[9]