"They should, but their September meeting language must be so careful," that "one and done" is an increasing possibility, Gross said. The "one and done" approach represents the Fed raising rates once and not again, at least for the next six months, Gross said.
"The Fed is beginning to recognize that 6 years of zero bound interest rates have negative influences on the real economy – it destroys historical business models essential to capitalism such as pension funds, insurance companies, and the willingness to save money itself."
A decline in saving would lead to other problems like decreases in investment and long-term productivity, he added.
Gross said: "The global economy's finance-based spine is so out of whack that it is in need of a major readjustment. In this case, even the best of chiropractors could not even attempt it. Nor would a one-off fed fund increase straighten it out."
He suggested that major global policy shifts should emphasize government spending as opposed to austerity, adding that countries should recognize that competitive devaluations do nothing but allow temporary respite from the overreaching global problem of too little aggregate demand versus too much aggregate supply.
"It is demand that must be increased – yes, China must move more quickly to a consumer-based economy but the developed world must play its part by abandoning its destructive emphasis on fiscal austerity, and begin to replace its rapidly decaying infrastructure that has been delayed for decades," Gross said.
Overall, Gross said "super-size" August movements in global stocks are but one sign that something may be amiss in the global economy itself, China notwithstanding.