Stephen Foley: We're being repressed, says bond giant

US Outlook: Mohamed el-Erian, chief executive of the bond investing giant Pimco, is always one of the most perspicacious commentators on economics and markets, but there is just a hint of the conspiracy theorist creeping into his writings. Maybe it is because of the unfolding failure of Pimco's bet that demand for US government debt will collapse and interest rates will jump.

He says there are five ways for governments to deal with their unsustainable debts: austerity, growth, inflation, default or "financial repression, paying creditors a lot less than they deserve".

In his telling, the Federal Reserve has been engaged not in trying to stimulate growth but in the repression of bondholders. This was his characterisation of the central bank's determination to keep interest rates exceptionally low for an exceptionally long period.

And then Mr Erian adds this to his list of repressive tactics: "Under the guise of prudential actions, additional regulatory requirements imposed on financial institutions forcing them to buy more government bonds."

At a stroke, he has recast the vital work of recapitalising and ensuring the safety of the banking system as an attempt to rob bondholders of the returns they deserve.

Now, when Pimco's customers ask why their returns are not what they expected, it can say it's the Fed's fault.