While hopes of another round of quantitative easing from the Federal Reserve have boosted the stock market, PIMCO’s Bill Gross says such a tact is fraught with dangers.

In his latest market commentary, Gross says the Fed’s expected announcement of more easing next Wednesday “represents a critical inflection point in determining our future prosperity.” He says that huge check writing by the Fed and years and years of fiscal deficits has resulted in a giant Ponzi scheme, and an incredibly difficult situation. “We are, as even some Fed Governors now publically admit, in a ‘liquidity trap,’ where interest rates or trillions in QEII asset purchases may not stimulate borrowing or lending because consumer demand is just not there,” Gross says (his emphasis). “Escaping from a liquidity trap may be impossible, much like light trapped in a black hole. Just ask Japan. Ben Bernanke, however, will try — it is, to be honest, all he can do.”

Gross says it’s unclear whether another round of easing will even work, but he actually says PIMCO gives its “qualified endorsement” to more easing. He adds, however, that it will be trouble for bonds — the firm’s bread and butter. “Bondholders, while immediate beneficiaries, will likely eventually be delivered on a platter to more fortunate celebrants, be they financial asset classes more adaptable to inflation such as stocks or commodities, or perhaps the average American on Main Street who might benefit from a hoped-for rise in job growth or simply a boost in nominal wages, however deceptive the illusion,” he says.

Gross also bashes the current two-party political system, saying Republicans and Democrats alike have run up huge debts with little to show for it. And, he explains how he expects PIMCO will continue to produce solid returns even though the Fed’s announcement of more quantitative easing will likely sound the death knell of “a great 30-year bull market in bonds”.