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Jim Grant And James Turk Discuss The Endgame Of The Keynesian Experiment

Tyler Durden's picture


Two of our preferred commentators, Jim Grant, of Grant's Interest Rate Observer, and James Turk, of the GoldMoney Foundation, sat down earlier today to discuss the history and mission of the Fed, how mission creep has taken it wildly beyond its initial purpose into the territory of QE, ZIRP and other fiat currency experiments. While not breaking ground on any notably new concepts, they talk about "who benefit from zero interest rates and how savers are
penalized by this easy money policy. They explain that the US have been
off the gold standard since 1913, Bretton Woods being only a shadow of
the classical gold standard." The two also discuss the fiscal profligacy of the US government. Alas, they conclude that
every paper currency in history has eventually gone to zero (see earlier piece on Roman hyperinflation). James and Jim also talk about ZIRP and the absence of the bond
vigilantes after over 30 years of bull market in bonds. How traders no
longer care about fundamentals, like balance sheets, but rather focus on
very short time horizons and the spreads between funding costs and
yields. How this situation is unsustainable. They see gold still as a very under-owned, misunderstood and marginal
asset still shunned by institutional investors, with a few notable
exceptions which indicate that the tide could be turning. They see a
gold standard in the future, although timing is always uncertain. At
the end they talk about the history of US post civil war specie
resumption and parallels to a return to the gold standard in the future.

Courtesy of Gold Money:


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Tue, 05/31/2011 - 13:43 | 1325849 OutLookingIn
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For any meaningful return to a gold standard, the old currency system now in use would have to be completely destroyed.  

Tue, 05/31/2011 - 13:53 | 1325895 luk427
luk427's picture

Why do we have to destroy it? It will implode all by itself.

Tue, 05/31/2011 - 17:48 | 1326682 Alpha Monkey
Alpha Monkey's picture

This green bow tie guy has questions about a standard that fits the criteria of his idea of money?  He should read the Gold Traill, by FOA.




Tue, 05/31/2011 - 15:28 | 1326160 Turd Ferguson
Turd Ferguson's picture

Hmmm... "The End of The Great Keynesian Experiment".

Where have I heard that before? Can't quite place it...

Tue, 05/31/2011 - 19:11 | 1326941 Fiat2Zero
Fiat2Zero's picture

Turd you are officially "Internet Famous"

Tue, 05/31/2011 - 21:44 | 1327294 The Profit Prophet
The Profit Prophet's picture

From me....about two years ago on Business Insider.  Did you run with it Turd and call it your own?

T.E.I.N. everyone!

Tue, 05/31/2011 - 21:33 | 1327265 Gold...Bitches
Gold...Bitches's picture

"We had to destroy the village in order to save it"

Tue, 05/31/2011 - 13:40 | 1325854 Azannoth
Azannoth's picture

A Green bow tie, honestly!!! And people wonder why no1 takes the gold standard seriously

Tue, 05/31/2011 - 13:53 | 1325900 Henry Chinaski
Henry Chinaski's picture

The tie and hornrim poindexters killed it for me.  Can't watch.

Tue, 05/31/2011 - 13:55 | 1325922 Tyler Durden
Tyler Durden's picture

Anyone even remotely familiar with the predictive record of Grant takes him seriously precisely due to this green bow tie.

Tue, 05/31/2011 - 14:28 | 1326020 Bastiat
Bastiat's picture

I'll listen to Jim Grant any day, bow tie and all.

Tue, 05/31/2011 - 15:28 | 1326156 Imminent Crucible
Imminent Crucible's picture

What I have to wonder is, If you're not familiar with Jim Grant and his record, why are you even on this site?

Those who don't recognize Jim Grant would we well advised to do nothing but shut up and listen for the next two or three years.

Tue, 05/31/2011 - 15:26 | 1326162 Turd Ferguson
Turd Ferguson's picture


Tue, 05/31/2011 - 16:11 | 1326303 disabledvet
disabledvet's picture

you got 800 bucks a month?  i think that's GIRO's price.  Plus we have to entertain and be brilliant.  Far harder.

Tue, 05/31/2011 - 15:51 | 1326221 MrSteve
MrSteve's picture

That and the fact Grant has interviewed Sidney Homer, who literally wrote the book on bond trading and yields. Find a copy of Homer's History of Interest Rates and get smart.

Tue, 05/31/2011 - 20:01 | 1327076 Kayman
Kayman's picture


These are the same mental midgets that would tell Einstein to get a haircut.

Tue, 05/31/2011 - 20:23 | 1327127 baby_BLYTHE
baby_BLYTHE's picture

Jimmy Rogers rolls with the bow tie quite well. More of a signature for him than Grant, IMHO

Tue, 05/31/2011 - 14:08 | 1325969 Medea
Medea's picture

Good argument.

Tue, 05/31/2011 - 14:11 | 1325975 Cynthia
Cynthia's picture

The green tie may not be appropriate, but the gold curtains are.

Tue, 05/31/2011 - 14:16 | 1325982 JW n FL
JW n FL's picture

I have a Ralph Luaren Purple pant and jacket with a green silk shirt!


if you dont get how gangster green and purple are you are just not a gangster! no 2 ways about it!

Tue, 05/31/2011 - 14:29 | 1326014 ISEEIT
ISEEIT's picture

A gentle slap:

Perhaps it could be that the 'modern' infatuation with appearences and focus on the messenger, rather than the message is part of the problem? America today has maybe been dumbed down to the highschool level of social intercourse?

When all of the 'right talking, rightlooking' people have so miserabely failed you...

Insanity is repeating the same action and anticipating a different result. (garbled, I know).

Love ya.

Tue, 05/31/2011 - 15:12 | 1326126 plata pura
plata pura's picture

There be a pamphlet "The World as it is" by one chris hedges

Tue, 05/31/2011 - 15:34 | 1326163 Monedas
Monedas's picture

My favourite people wear bow ties.....Jim Rogers, Pee Wee Herman (?), Soupy Sales (?), Marc Faber (?), Krudlow (?) ! I'd wear one myself but since I don't wear shirts it might be a problem ! Just cut offs and poor man's baja sandals (old loafers with the toes cut off)! Monedas 2011 A good box cutter works fine for cutting out the toe of the shoe....what a versatile little tool !

Tue, 05/31/2011 - 15:43 | 1326199 spekulatn
spekulatn's picture

 Marla is that you?

In any event, well said ISEEIT.

Tue, 05/31/2011 - 20:00 | 1327065 ISEEIT
ISEEIT's picture

My very first ZH validation! I'm excited (really, thank you)

No Marla here though.

I will push it however and state that if Marla doesn't show up shortly after walking through the 'gates', I'm going to get suspicious and ask for a link to ZH.

Tue, 05/31/2011 - 20:08 | 1327084 Kayman
Kayman's picture

Somehow a bit of cleavage is supposed to make the MSM bullshit taste better.

Tue, 05/31/2011 - 13:55 | 1325925 PulauHantu29
PulauHantu29's picture

I suggest Andrew Gause's book on the monetary system for a good grip on history of money. It's old but thorough. He has some sort of radio show and has a detail knowledge of the history of money.

Tue, 05/31/2011 - 13:59 | 1325928 Cynthia
Cynthia's picture

Paul Krugman and other Keynesian economists are right to argue that using monetary policy to depreciate the dollar has the effect of boosting exports, thus boosting domestic employment.  But they are wrong to assume that this always works. This only works if our multinational corporations are penalized for shipping jobs overseas and if we were still producing more than we consume, as was the case throughout most of the Industrial Revolution. So until we restore our producer economy and get back to treating our workers as assets rather than as liabilities, no amount of depreciation of the dollar by the Fed will get our employment numbers back to pre-recession levels!

Tue, 05/31/2011 - 14:21 | 1325993 Scarlo
Scarlo's picture

Makes sense.

Tue, 05/31/2011 - 14:29 | 1326013 Libertarian777
Libertarian777's picture

the SHORT term effects of a depreciating dollar on exports works for a while until the inflation boomerang circles back and hits you in the face.

Why? Depreciate the currency (that oil and commodities are priced in), so your exports get boosted. You make excess profits while your input prices are locked in. However the inflation in commodities (inputs) rises globally, and since its priced in US$, its price goes up (in US$). Since its a global commodity marketplace, producers, even in the US will have to compete with the global markets to purchase those inputs, at now higher prices (as a copper producer, will you sell to a US manufacturer at below a price a guy in China is offering?)

So eventually the input prices have to factor in the inflation that has just occurred due to the depreciaton.

In fact this is exactly what TD has been mentioning about Apple's (and SP500 companies') margin compression.

It's like a HELOC on a house that you own free and clear. Feels good in the short term, because you get a cashflow, until the cashflow stops, then you have no asset (house) and no cashflow, plus you now owe interest.

Currency depreciation never works. If it did, why don't we just debase the US$ and reissue a new US$ at 1:100, then exports will go up 100 times! everything will be solved!

Ask Belarus how that's working for them. All their problems are solved now since they depreciated their currency. Exports are up 40% (in nominal terms).

Tue, 05/31/2011 - 14:31 | 1326019 PulauHantu29
PulauHantu29's picture

Sounds reasonable. Proding nothing of value seems to result in a false rise in the GDP and predict a bad ending, as many economists have stated.

Tue, 05/31/2011 - 14:32 | 1326038 narnia
narnia's picture

Economics 101: Money & Prices by Murray N. Rothbard


Tue, 05/31/2011 - 15:07 | 1326114 plata pura
plata pura's picture

well post'd; end corporate personhood

Tue, 05/31/2011 - 17:16 | 1326616 gwar5
gwar5's picture

I'd have to disagree. Nobody has been more wrong than Krugman and the Keynesians, especially about Keynes. Keynes is rolling over in his grave at what is going on.

Depreciating the dollar has led to a downward spiral resulting in real wages and living standards going down. On the other hand, a strong dollar is a competitive advantage because we could buy raw materials at lower relative cost to offset the high dollar and low wage competitors in China and Cambodia. We could use any advantage we can get. We can never compete on wages alone.

Imagine if China revalued the Yuan 40% higher, like Geithner wants. A strong Yuan. They could then buy oil and other raw materials at a 40% discount to everybody else, in addition to their already low labor costs. They could still keep prices low enough to offset the higher Yuan values and they could wipe everybody out.

And it's a mistake to-- "Penalize companies for shipping jobs overseas"

Instead, we should REWARD companies for bringing/keeping jobs to America with a low corporate tax rate and a business-friendly environment. We are currently penalizing them for staying not for leaving. We have the highest tax rate in the world and have a business hostile environment that is extreme pro-union and also extremely left wing environmentalist.

Workers are going to have to demand less pay, work harder, or demand that the government tax their corporate employers less and reduce the regulations put upon their employers. Workers can't expect their employers to pay wages more than the company can produce carrying the governmental burderns.

Tue, 05/31/2011 - 20:14 | 1327107 Kayman
Kayman's picture


 "We have the highest tax rate in the world."

You are right about Keynes but the tax loopholes/allowances wipe out the effective tax rate. 

Tue, 05/31/2011 - 14:06 | 1325961 JW n FL
JW n FL's picture



I <3 FIAT PAPER!!!! Bitchez!!! no one will ever come between me and my one true Love Paper!!! all of you ha8terz!!! can just keep all that NON-FED printing to yoursleves!


Hold on to that Paper!

if the Fed Printed $3 trillion in debt.. and another $15 Trillion in Loans (this does Not! include swap windows and TARP / TALF and so fucking on...) over three years..


$18 Trillion divided by 3 years ='s $6 Trillion in New Supply is Printed a Year!


$6 Trillion Dollars divided by 365 days ='s $1,643,835,6164 a Day in in New Supply is Printed a Day!!


$1,643,835,6164 Billion a Day divided by 24 hours in a Day ='s $684,931,506 an hour in New Supply is Printed an Hour!!!  Treasury Direct $14 Trillion Debt   $15 Trillion in Loans  / ='s $29T



so, you hold on to your paper while my Gold and Silver dont rise in price.. Good Luck with that program!


No cash to pay your debts? We'll take your gold, Greece!


Tue, 05/31/2011 - 14:11 | 1325966 luk427
luk427's picture

“Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked: Account Overdrawn.” ~ Ayn Rand, from “Hymn to Money”

Wed, 06/01/2011 - 03:28 | 1327745 Tedster
Tedster's picture

How much you want to bet Alan G. wrote that part? It dovetails nicely with the 1966 article he wrote "Gold and Economic Freedom" and of course everyone knows they hung out together. Seems obvious now.

Wed, 06/01/2011 - 03:25 | 1327746 Tedster
Tedster's picture

How much you want to bet Alan G. wrote that part? It dovetails nicely with the 1966 article he wrote "Gold and Economic Freedom" and of course everyone knows they hung out together. Seems obvious now.

Tue, 05/31/2011 - 14:12 | 1325980 Bay of Pigs
Bay of Pigs's picture

Great stuff. Very informative, educational and spot on. Grant and Turk know their financial history. The Keynesian comics, clowns and retards so prevelant today have no historical grasp on the topics these men talk about. None.

Gold Bitchez.

Tue, 05/31/2011 - 14:22 | 1325994 Piranhanoia
Piranhanoia's picture

situational buying, or, speculation, is the main driving force,  or swimming away from the whirlpool that is the porcelain oracle of flush?

What about a story on what the big players are doing behind the scenes?   Are the rich ready to move to their farms?  are they there now?   Are islands being fortified?  Or is everyone heading for Abu Dhabi and a condo?    Will there be a Serbia section, Berlusconi's Bunga-Bunga retreat?

It would be nice to know who's backing up their statements.

Tue, 05/31/2011 - 14:44 | 1326059 New American Re...
New American Revolution's picture

The real question is whether the next gold standard they are talking about is a 'classic gold standard', or a 'phony gold standard', the difference being one where the average citizen can change his gold reserve certificate (paper dollar currency) for specie (gold coin) being the former 'classic gold standard', or the latter, a phony gold standard (i.e. Bretton Woods or the post WWI English Pound Sterling gold standard).   

The difference is huge as the former leaves the control of money supply in the hands of the Nations citizens and the latter allows for the same ol' money pump built around a 'reserve currency', where everything is all right as long as everyone (nations) inflate their currencies in concert with one another and governments continue to operate the fiat paper money scam until they destroy the phony gold standard, at which time, this time around, all of America's money will be gone and we are forced into a monetary system along the lines of the 3rd Riech.

Maybe Barry Soetoro will stick around for that round by altering the Constitution to extent terms of 'service' ala' Venezuala.

Tue, 05/31/2011 - 15:03 | 1326105 AgShaman
AgShaman's picture

I'm sure it's probably just a "placebo effect"....since I've assassinated a good number of brain cells in my lifetime, but I do feel a few percentage points smarter after listening to these 2 Cats with such a good grasp of monetary history.

Turk has some good interviews indeed. His recent one with Egon Von G. was also quite good I thought.

Thanks ZH for bringing them forth.

Tue, 05/31/2011 - 15:16 | 1326129 GFORCE
GFORCE's picture

Lose the bow tie douche!

Tue, 05/31/2011 - 16:50 | 1326511 Shell Game
Shell Game's picture

Lose being a pawn to visual staging.

Tue, 05/31/2011 - 20:22 | 1327117 Kayman
Kayman's picture

Lose the bow tie douche!

GForce, with that powerful insight of yours, perhaps you could go to the movies with PeeWee Herman, while the adults have an intelligent discussion.

Tue, 05/31/2011 - 15:33 | 1326172 hampsterwheel
hampsterwheel's picture

He presents a good arguement but discounts the master plan - collapse each Country's fiat system (hopefully all at one time) and go to a new and improved global fiat using carbon credits as the taxing mechanisim for wealth redistribution. A new global fiat will kick the can down the road for a good 40 more years; this video series lays it all out...  -

Tue, 05/31/2011 - 15:52 | 1326236 tejbear
tejbear's picture

Austrian Economics works, Keynesian economics works,… for a while... But both fail in a rigged game.   China, by keeping the “value” of Yuan cheaper than the dollar, is doing an end-run around these theories. China’s currency manipulation is essentially economic guerilla warfare against the USA. Heads: China wins, tails, the USA loses. Who can blame China? They just took a winning routine out of Japan’s play book. The USA government either doesn’t have the balls to confront China on this point, or more likely, in an effort towards NWO, doesn’t want too.

Tue, 05/31/2011 - 16:46 | 1326505 Shell Game
Shell Game's picture

Great interview. Thanks, Tyler.

Tue, 05/31/2011 - 16:48 | 1326516 max2205
max2205's picture

Ahhem, bond bubble is just getting started into the last phase TLT 97 vs last spike high of what 110?

Tue, 05/31/2011 - 18:07 | 1326566 Clint Liquor
Clint Liquor's picture

China’s currency manipulation is essentially economic guerilla warfare against the USA.

Now that's funny. The US wants to devalue the USD and stick China with a bunch of worthless (or worth less) Treasuries. China says 'no thanks' and it's economic guerrilla warfare.

When you hear that little shit Geithner say 'China must let their currency float', what he's really saying is the USA need to devalue it's way out of debt.

Tue, 05/31/2011 - 17:05 | 1326574 IdioTsincracY
IdioTsincracY's picture

Who benefit from zero interest rates = not the middle class

... The fiscal profligacy of the US government = the problem in this case is that the government 'investments' and money printing has gone to rescuing the fucking Bankster and Financial 'geniuses'

How traders no longer care about fundamentals = no kidding .... HFT, algos don't give a fuck about fundamentals

 ... focus on very short time horizons= why worry about investing in something real that would actully help the economy, when you can extract wealth at the speed of light (or fiber-optics)

Pearls of wisdom ... right there ... so much to learn ... I'll need some time to reflect on it!

Tue, 05/31/2011 - 18:29 | 1326827 newworldorder
newworldorder's picture

You have hit the nail on the head.

The markets no longer function as a reflection or measure of economic reality. At one time they rewarded hard work, value addition, education and smarts. Today, they are set up as an extraction mechanism of wealth from those that are not as well informed or connected to the ponzi scheme.

You cannot change or reform these banking institutions. The only thing you can do is destroy them and make sure they never rise again. This however will not happen as they control all the levers of power, influence and total control. The path of least resistance, IS the path of least resistance. This will be maintained as long as possible or until the safety net crumbles for most Americans.

Tue, 05/31/2011 - 21:11 | 1327236 sellstop
sellstop's picture

What the banks do is a reflection of our society as a whole. Speculation and finance has assumed a prominent role in our society. When our needs on the Mazlow hierarchy are met, we move on to other pursuits.

Most of the working class is invested in the stock and bond markets. It is no wonder that the political class makes the equity markets the focus of their attention. It is the focus of the monied and the working classes.




Tue, 05/31/2011 - 21:51 | 1327304 sellstop
sellstop's picture

When have HFT's and algos ever cared about fundamentals.

How are the fundamentals. Corporate profits. How are they?

And MOMO is nothing new. Mr. Livermore was a MOMO. A hundred years ago..


Tue, 05/31/2011 - 20:33 | 1327146 Fiat2Zero
Fiat2Zero's picture

Great stuff.  I've never seen Mr. Grant so animated.  It was good to have someone with such a command of the facts take the "other" position on the dollar (that it has a lot more life in it).

Tue, 05/31/2011 - 22:45 | 1327439 Hulk
Hulk's picture

Turk needs a life injection...

Wed, 06/01/2011 - 00:32 | 1327637 homecinemax
homecinemax's picture

He has a calm and poised personality, but it does not mean that he does not know what he is talking about

Tue, 05/31/2011 - 23:25 | 1327537 oldman
oldman's picture

Do any one of us truly believe that anything is ever going to 'go back to the way it was'? The Machine is down.


Mon, 06/20/2011 - 08:39 | 1384479 forexskin
forexskin's picture


Wed, 06/01/2011 - 04:57 | 1327814 Youri Carma
Youri Carma's picture
Dutch Central Bankster Wellink Lied About Gold (google trans from Dutch)
Wed, 06/01/2011 - 09:59 | 1327967 cranky-old-geezer
cranky-old-geezer's picture

Jim Grant And James Turk Discuss The Endgame Of The Keynesian Experiment

It never has been a "Keynesian Experiment".

Keynesianism is the cover story for seizing every possible opportunity to justify printing money and putting governments further in debt.

Bankers stealing the wealth of nations via currency printing, debt, and debasement is the real story.

The Fed was created by bankers to steal America's wealth. 

When FRNs gained world reserve currency status, the Fed could now steal the wealth of other nations too.

The EU, ECB, and Euro were created by bankers to steal all of Europe's wealth we now see happening in Greece.

If Greece stays in the EU they're going to lose everything. The nation will be owned by bankers ...the long-term plan. 

Ditto for Ireland, Italy, Spain, Portugal, and so on till every nation in the EU is owned by bankers.

Getting out of the EU is Greece's only hope. Tell the bankers fuck off, cancel the debt, regain their sovereignty ...and kill the treasonous politicians putting Greece in debt.

Same thing needs to happen in America. Terminate the Fed, cancel the $15 trillion debt, regain America's sovereignty ...and kill the treasonous politicians putting America in debt.

Wed, 06/01/2011 - 11:56 | 1329003 oldman
oldman's picture

cranky old geezer

"Getting out of the EU is Greece's only hope. Tell the bankers fuck off, cancel the debt, regain their sovereignty ...and kill the treasonous politicians putting Greece in debt.

Same thing needs to happen in America. Terminate the Fed, cancel the $15 trillion debt, regain America's sovereignty ...and kill the treasonous politicians putting America in debt."

Isn't it easier than the above?

i mean, really, who is going to pay for it? No blood in a turnip! Life just goes on and all of us are criminals who can't pay their taxes which means that we all go to jail, but begs the question: what do the jailers do except pay for everything in the end?

Much ado about nothing as the englishman said


by the way--------nice handle!

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