Fed Easing Will Likely End Bond Bull Market, Gross Says

Bill's analysis (opinion) seems generally right on. However, he seems to overstate the possible size and impact of the announcement that further asset purchases by the Fed will lead to 'an end of the bond bull market'. The FED often makes announcements without specific size or timing commitments. A modest or gradual renewal of asset purchases is unlikely to produce roaring inflation - the FED announcement may be a version of 'jaw-boning', intended to influence markets without having ultimate majot teeth. What is actually done (amount of purchases, what is purchased, offsetting Fed actions) by the Fed in this prospective program is yet to be seen, so panic is not a wise reaction. Inflation generally requires a growing economy, labor cost pressures, and takes time to re-ignite. The economy needs stimulatory actions by government. The immediate Federal budget deficit cannot be addressed in the current economic climate, but must be a lower priority to economic growth. Economic growth will produce jobs and tax revenues which will address the deficit. Unfortunately the right formula to revive a weak economy such as this one is consistent fiscal policies, including marginal tax reductions, pro-business/small business policies, limits to regulatory disincentives, and minimal political fingerpointing.The political stalemate in Congress is not helping, nor the resulting massive uncertainty triggered by the new Health Care bill, possible tax changes to close the budget deficit, anti-business rhetoric, dangers of anti free trade rule changes. The Fed has limited remaining stimulatory monetary policy tools to work with because interest rates are low, and credit is effectively tight at the bank level because of mortgage loan losses, pressure by regulators to build equity capital and limit further loan losses. Consumer confidence and spending need repair by consistent pro-growth economic policies, icluding a positive pro business growth policies and actions.

What a slanted article! The writer drank the Fed's Kool-Aid. First, there is no deflation - prices are basically flat. Second, that is a good thing. More inflation does not create more growth or employment. The Fed's policies - printing larger and larger amounts of money - will end in tears.[/quote]