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Bill Gross: If A Global Recession Happens, You Can Blame Central Banks

Bill Gross: If A Global Recession Happens, You Can Blame Central Banks

Who will take the blame for a global recession? The answer, at least according to famed bond investor Bill Gross is central banks across the world.

Gross, head of the $2.1 billion Janus Henderson Global Unconstrained Bond Fund, said in a letter to investors that central banks across the world have now shifted towards a tightening policy and raising interest rates. Doing so would merely increase the cost both consumers and corporations have to pay to finance their debt.

In the U.S. alone, households are sitting on nearly $15 billion worth of debt while businesses aren't that far behind at $13.7 trillion, CNBC noted. While many companies can afford the incremental cost of servicing debt, many more individuals and smaller companies simply cannot.

Meanwhile, it isn't a fluke that the three recessions observed in the U.S. in 1991, 2000 and 2007–2009 coincided with a flat yield curve between three-month Treasury bills and 10-year Treasuries.

"Today's highly levered domestic and global economies which have feasted on the easy monetary policies of recent years can likely not stand anywhere close to the flat yield curves witnessed in prior decades," he said. "Central bankers and indeed investors should vie additional tightening and 'normalizing' of short-term rates with caution."

Related Links:

Is Canada's Rate Hike A Cautionary Tale For Other Central Banks To Learn From?

A Layman's Guide To The Beige Book


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