US savers are being "cooked alive" as the country's central bank obsesses about "non-existent inflation", according to global bond guru Bill Gross.
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Mr Gross, the former head of Pimco and now portfolio manager at Janus Capital Group, said although ultra-low interest rates and quantitative easing (QE) - or bond buying - by the US Federal Reserve had helped rescue the economy from the ravages of the global financial crisis, it had also discouraged business investment, left the liabilities of insurers and pension funds uncovered and hurt average savers.
"The developed world is beginning to run on empty because investments discounted at near zero over the intermediate future cannot provide cash flow or necessary capital gains to pay for past promises in an ageing society," Mr Gross wrote in his latest Investment Outlook.
"And don't think that those poor insurance companies and gargantuan pension funds in the hundreds of billions are the only losers; mainstream America with their 401Ks [tax-efficient retirement plans] are in a similar pickle.
"Expecting 8 to 10 per cent to pay for education, health care, retirement or simply taking an accustomed vacation, they won't be doing much of it as long as short-term yields are at zero.
"They are not so much in a pickle barrel as they are on a revolving spit, being slowly cooked alive while central bankers focus on their Taylor [economic] models and fight non-existent inflation."
His withering broadside comes just one week after the Fed opted to maintain short-term rates at between 0 and 0.25 per cent, despite growing expectations that it would finally announce its first 25 basis point increase in almost a decade.
Fed policy decisions are normally based on the health of the job market and the force of inflationary pressures, but recent market volatility and concerns about slowing growth in China appeared to have weighed heavily on its most recent call.
Markets have once again become jittery following the decision to keep interest rates on hold. This, added to concerns about China's slowing demand for raw materials, has sent investors back into safe-haven assets such as bonds.
Australia, a big commodities exporter, has been caught up in the tumult, with the sharemarket down heavily on Monday and Wednesday, and likely to see only modest gains on Thursday.
QE programs by Japan, the US, Britain and the European Union since the GFC has flooded the world with cheap money looking for decent returns, helping to pump up the price of assets such as shares and property.
After years of calm, bond markets, too, have proved volatile in the past few months as investors look increasingly to trade on price movements to compensate for low nominal yields. This has intensified already heightened concerns about liquidity in times of heavy sales.
Mr Gross joins a growing chorus of investment experts and policymakers calling for the Fed to initiate what has become known as "lift-off" to its tightening cycle.
"Low or zero interest rates, it seems, do wonders for asset prices and for a time even stabilise real economies," he wrote, "but they come with baggage - and as zero or near-zero becomes the expected norm, the luggage increasingly grows heavier."
Low interest rates had undermined one of the main pillars of capitalism, he said, by making company balance sheet consolidation more attractive than capital expenditure.
"How so? Because zero bound interest rates destroy the savings function of capitalism, which is a necessary and in fact synchronous component of investment," Mr Gross wrote.
"If companies can borrow close to zero, why wouldn't they invest the proceeds in the real economy?
"The evidence of recent years is that they have not.
"Instead they have ploughed trillions into the financial economy as they buy back their own stock with a seemingly safe tax advantaged arbitrage."
