"Bill Gross of PIMCO appeared on Bloomberg Television's "Surveillance Midday" with Tom Keene this afternoon to discuss the impact of the Fed's asset purchases and the outlook for market reaction to tonight's speech by President Obama.
Gross said that QE by the Fed "destroyed" credit creation, that he'd like to "see something bold" from Obama and that the markets will be "disappointed" if stimulus is below $300 billion.
Gross on credit creation:
"This is really a cost of credit versus a creation of credit type of argument. There is no doubt that by purchasing longer-dated Treasuries that they would probably lower the cost of credit. My argument is the creation of it would it be destroyed and has been destroyed over the past several years during QE1 and QE2. To bring the point specifically to what occurred the past several months with a two-year Treasury extension and the conditional freezing of interest rates at 25 basis points for two years, you have that basically flat yield curve destroys systemic leverage...Credit is basically destroyed in the process of lowering and freezing interest rates."
at http://www.marketoracle.co.uk/Article30330.html
Gross said that QE by the Fed "destroyed" credit creation, that he'd like to "see something bold" from Obama and that the markets will be "disappointed" if stimulus is below $300 billion.
Gross on credit creation:
"This is really a cost of credit versus a creation of credit type of argument. There is no doubt that by purchasing longer-dated Treasuries that they would probably lower the cost of credit. My argument is the creation of it would it be destroyed and has been destroyed over the past several years during QE1 and QE2. To bring the point specifically to what occurred the past several months with a two-year Treasury extension and the conditional freezing of interest rates at 25 basis points for two years, you have that basically flat yield curve destroys systemic leverage...Credit is basically destroyed in the process of lowering and freezing interest rates."
at http://www.marketoracle.co.uk/Article30330.html
