Could central banks’ near-zero interest rate policies actually be hampering growth rather than stimulating it? PIMCO’s Bill Gross says that may well be the case.

In an op-ed piece for the Financial Times, Gross says that “Historically, central banks have comfortably relied on a model which dictates that lower and lower yields will stimulate aggregate demand and, in the case of financial markets, drive asset purchases outward on the risk spectrum as investors seek to maintain higher returns. … [But] now, with policy rates at or approaching zero yields and [quantitative easing] facing political limits in almost all developed economies, it is appropriate to question not only the effectiveness of historical conceptual models but entertain the possibility that they may, counterintuitively, be hazardous to an economy’s health.”

As an example, Gross points to the money market fund business model, “where operating expenses make it perpetually unprofitable at current yields. As money market assets then decline, system wide leverage is reduced even if clients transfer holdings to banks, which themselves reinvest proceeds in [Federal Reserve] reserves as opposed to private market commercial paper.” Banks also stop major efforts to bring in deposits because they can’t profit from them in near-zero rate environments, he says.

“Conceptually,” Gross says, “when the financial system can no longer find outlets for the credit it creates, then it de-levers.” And with rates near zero and fears swirling around many global economies, the threat of investors yanking deposits from banks is also a reality, he says. “If so, system wide delevering takes place as opposed to the credit extension historically necessary for an expanding economy,” he writes.