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"The government's pixie dust seems to have lost a bit of its magic," writes Bill Gross, managing director, PIMCO, in his December 2002 Investment Outlook, referring to the current 1.25% Fed Funds rate.

Americans' debt levels have counteracted the benefits expected of the unprecedented 11 rate cuts of the past year, Gross says. Thus, in trying to avoid the stagnation fate of Japan over the past 12 years, "The Fed [could create] even more financial and economic instability than we have seen in recent years.