"By putting "hundreds of billions" in currency in circulation, the central banks "can produce reflation—that's why we’re seeing the pop in oil, gold" and other commodities."
Bill Gross has been spectacularly wrong for the last 12 months and I think he is wrong again.
The problem with QE1 and QE2 is that the money never made it into circulation. Look at the growth in US M2 (the measure of coins, notes and bank deposits). It remained steady in spite of the QEs when everyone expected it to spike. The money wasn't lent and it wasn't spent. (It sat and is still sitting in the balance sheets of US banks in the place where the regulatory capital used to be.)
The price of gold rose on the expectation of inflation that never happened.
Bill Gross's fund PIMCO missed the boat on the rally in US Treasuries last year because he failed to understand this. It appears that he still hasn't learned.
