By Tom Bradley

In his June Investment Outlook, PIMCO’s Bill Gross says that the Quantitative Easing policy (QE) of the U.S. Federal Reserve hasn’t worked. He points out that over the last 5 years there hasn’t been a 12-month period when the economy has grown faster than 2.5%. Thus his conclusion: QE hasn’t worked.

Now, let me first state that I too am of the view that the Fed has gone too far in trying to manage/stimulate the economy. They had to act during the 2008/09 crisis, and thank goodness they did, but they’ve continued to micro-manage ever since. Like Mr. Gross, I think the Fed has got in the way of economic healing, which has to occur before the next up cycle can start. I suspect we’re now behind where we’d otherwise be if the Fed had pulled back and let the cycle play out.

Having said that, I find Mr. Gross’ comment interesting. Yes, the economy has been growing slowly, but it has been growing while the rest of the western world (Europe and Japan) has not. How can he (along with many others who share his view) say it hasn’t been working if he doesn’t know what would have happened without the QE trilogy? It seems to me that the U.S. economy has done surprisingly well in the face of all its challenges. I’d say that the Fed’s meddling has enhanced GDP growth. Unfortunately, it’s borrowed the growth from a time in the future when the necessary healing will need to occur.