By doubling down on low interest rates, the Federal Reserve is gambling with the future of American capitalism, investment guru Bill Gross argues.

Central banks, including the Federal Reserve, the European Central Bank and the Bank of Japan, are in essence using a betting scheme called the Martingale System in which they double their bets -- pumping more money into the financial system or lowering interest rates -- whenever an expansive action doesn't yield the economic payoff they want, Gross wrote in his October investment outlook

"Our financial markets have become a Vegas/Macau/Monte Carlo casino, wagering that an unlimited supply of credit generated by central banks can successfully reflate global economies and reinvigorate nominal GDP growth," Gross wrote.

It's the low interest rates and negative yields that "erode and in some cases destroy historical business models which foster savings/investment and ultimately economic growth," he said. In fact, investors and the economy are already suffering, argued Gross, the co-founder of Pimco whose investing acumen earned him the nickname "Bond King" before he moved to Janus Capital (JNS)

JPMorgan Chase (JPM) - Get Report , Wells Fargo (WFC) - Get Report , Citigroup (C) - Get Report , and Bank of America (BAC) - Get Report , the four biggest U.S. banks, have all seen revenue curbed by eight years of interest rates below 1%, while pensions funds and insurance companies grapple with lower returns.

"Central bankers cannot continue to double down bets without risking a 'black' or perhaps 'grey' swan moment in global financial markets," Gross wrote. "At some point investors -- leery and, indeed, weary of receiving negative or near-zero returns on their money, may at the margin desert the standard financial complex, for higher-returning or better yet, less-risky alternatives." 

Wells Fargo and Citigroup are holdings in Jim Cramer's Action Alerts PLUS charitable trust portfolio.Want to be alerted before Cramer buys or sells WFC or C? Learn more now.

In the U.S., after the Great Recession, in an effort to reinvigorate the economy, the Federal Reserve implemented a policy of quantitative easing, repurchasing government debt from financial institutions to loosen credit.

Despite the Fed's best efforts, however, inflation is below the central bank's 2% target, while gross domestic product gains are 1.4% short. The lackluster growth and uncertainty in the global markets are the primary reasons the Fed has kept interest rates low -- Its 25 basis-point increase in December was the first since rates were cut to nearly zero to bolster the economy during the 2008 financial crisis.

"Central bankers have fostered a casino-like atmosphere where savers/investors are presented with a Hobson's Choice, or perhaps a more damaging Sophie's Choice of participating (or not) in markets previously beyond prior imagination," Gross wrote. "Investors/savers are now scrappin' like mongrel dogs for tidbits of return."

Other examples of central bank policies that he considers gambles, are the European Central Bank's negative interest rates and the Bank of Japan's recent decision to cap the yield on 10-year government bonds at 0%.  

Ultimately, he argues, "it is capitalism itself that is threatened by the ongoing Martingale strategies of central banks. As central bank purchases grow, and negative/ zero interest rate policies persist, they will increasingly inhibit capitalism from carrying out its primary function -- the effective allocation of resources based upon return relative to risk."