In his monthly “Investment Outlook,” PIMCO’s Bill Gross questions the long-term wisdom of the Fed’s continuing efforts to keep the economy growing by pumping in money to spur investments. As Ben Bernanke said in November 2011, “Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost" (emphasis added).
While it appears that the policies are working, Gross cautions that there are dragons in the cave where the Fed and other government banks keep their printing presses, including long-term inflation. As a result, Gross suggests that investors confine themselves to maturities and bonds with short/intermediate targets supported by the Fed. Will investments in real businesses that can have positive long-term benefits to the economy be sacrificed?
As interesting or even disturbing as the Bernanke quote is, and as apt as Gross’ reference to the old Dire Straits song may be, our own favorite comes courtesy of Sir Isaac Newton: “I can calculate the movement of the stars but not the madness of men.”
