Unbalancing the economy. The odd fate of the low interest rate policy

World economy and global finance looks more and more unbalanced despite all the efforts made by Central banks. Whose faith in the low/negative interest rate policy is not only ineffective but probably damaging.

“How successful have they been so far?”. Bill Gross addresses the question to the Central banks. And it is a rhetorical one. The answer is nothing or almost nothing. In his Investment outlook, the portfolio manager of the Janus Global Unconstrained Bond Fund, warns investors and advise them to “stay safe and plain vanilla”. That means “don’t go near high risk markets. It’s not predetermined or guaranteed, but more prosperous outcome should be somewhere around the corner”. If you stay safe and plain vanilla of course. 
Why so? Because “our finance-based global economy is transitioning due to theimpotence of monetary policy which has always, and is now increasingly focused on the elixir of low/negative interest rates. They all seem to believe – explains Gross – that there is an interest rate SO LOW that resultant financial market wealth will ultimately spill over into the real economy. I have long argued against that logic and won’t reiterate the negative aspects of low yields and financial repression”. From here the initial question and also a second one: “Why after several decades of 0% rates has the Japanese economy failed to respond?”.  And a third: “Why has the U.S. only averaged 2% real growth since the end of the Great Recession?”. 
The reason is that “global markets and individual economies are increasingly addled and distorted”. By Central banks’ low interest rate policies. Bill Gross provides some examples of distortion to support his position. 
1)    Venezuela: bankruptcy is just around the corner due to low oil prices and policy mismanagement.
2)    Puerto Rico: default is underway due to overspending, the overpromising of retirement benefit and the inability to earn adequate investment returns due to ultra-low global interest rates. (Is any bell ringing in some European country?).
3)    Brazil: in deep recession due to commodity prices, government scandal and exorbitantly high real interest rates to combact the effect of low global interest rates.
4)    Japan: 260% government debt/Gdp and climbing. But do not worry, Japan will not technically default. Abe and Kuroda (fiscal and monetary authorities) are the same person so, in some future year the debt will likely be “forgiven” via conversion to 0% 50-year bonds that effectively never come due. (Again is any bell ringing?).
5)    Euroland (at last): “Whatever it takes”. Who will invest in these markets once the Ecb hits an effective negative limit that might be marked by the withdrawal of 0% yielding cash from the banking system?
6)    China: Total debt/Gdp ratio ad high as 300% and under the table, capital controls. China lost 1 trillion in reserves to support an overvalued currency and has still a distorted economic model.
7)    U.S: The household sector has delevered, but the corporate sector never did, and with Investment grade and High Yield yields 200-1000 basis point higher now, what does that say about future rollover, corporate profits and solvency in many commodity-sensitive areas?

Source: Bill Gross' Investment outlook