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Jim Grant On Inflation: "There Will Be A Lot Of It Suddenly" Because Our Interest Rate Structure Is "Beyond Strange"
One of our favorite economic commentators - Jim Grant of Grant's Interest Rate Observer - was on Consuelo Mack continuing his ongoing crusade against Ben Bernanke's lunacy, and the monetary central planning of the Federal Reserve, particularly focusing on the topic of pernicious inflation which for good reason has received much attention of the past year. Grant, who unlike Steve Liesman correctly observes that inflation is now rampant (those who need a reminder can do so at the only objective source for actual inflation tracking, MIT's Billion Price Index), is eating away at the standard of living of the bulk of the population, even as this same population can not benefit from anything beyond minimal rates on their saving deposits. "The Fed is unconscionably complacent about the consequences of what it is doing, and let us not blink at what it is doing: it has imposed the lowest money market interest rates anyone remembers, it has expanded its balance sheet into something grotesque all in the space of a couple of years. These are monetary events that have never before been seen, and indeed, never before imagined...The Fed's policies are certainly great for one class of society: the speculative classes.... We have socialized risk, we have privatized gains, much to the relief of Greenwich, CT where our zillionaires live, and the unconscionable and indefensible fallout of this is that savers get zero on their savings balances, and the speculative classes get to borrow in wholesale markets at zero and get to make their zillions all over again... The Chairman is whistling by the graveyard in this manner of 2% inflation rate being harmless." On Grant's expectations for inflation rates: "there will be a lot of suddenly - 4 or 5% let us say...So much of our speculative apparatus is powered on these zero percent interest rates... Think how hard it is to hold back a cash reserve in this economy... Your stupid neighbor who is watching this program is making a lot fo money in the stock market: how hard is it not to participate? You can't do it... But 4% inflation would mean that the party is over... Everything would fall out of bed... Gold and silver would right themselves, because they are money that would come into their own at the end of the cycle of disillusionment but for a time there would be terrific chaos in investment markets."
As for the gold standard: "If I am right about the dynamics of the Federal debt, not only is the mathematics for a gold standard compelling but so are the politics." In other words, and this should be no surprise to anyone, the transition to real money will continue until the fraud that is unbacked fiat is finally eliminated, with or without the Fed's support.
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"Just buy gold and silver and shut off CNBC"
Did that 2 years ago, and I must say my blood pressure and net worth find it most agreeable simultaneously.
norcini interview on PMs shares at 2001 levels...
http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/4/16_KWN_Weekly_Metals_Wrap.html
Grant is a prince.
But ALL princes live off grants! Otherwise they wouldn't be princes!
It's difficult to disagree with someone like Jim Grant, his type have the personality and skill to fool most of the people most of the time. I remember him from the days when he was a regular chair fixture on Wall Street Week. He always sounded so convincing and articulate, yet always so wrong. He is what you call a dangerous but articulate moron who will convince masses to do just the opposite of what they should be doing. The only other person that I can think of that has the same innate ability to fool many is Robert Pretcher.
The real fraud will happen when Wall Street and CEO crooks turn in their amasssed( for nothing) gold holdings into new gold backed fiat---the fiat money laundering scheme will be then complete. Would China and Brazil follow US lead back into gold standard? Yeah right, they'll laugh right up there with rising living standard while US will be mired in 4th world poverty.
Jim Grant's view expressed here is totally idiotic. US can't go to a gold standard without blowing up some $100 Trillion in dollar denominated debt first.
Yup Buying gold and silver and just kicking back just seems too fucking easy.
im saying they let the market crash and introduce a new currency im calling the "worldo"
you may call it that too..
100T... that's bigger than the combined GDP of the world. When fictitious paper asset wealth meets real deflation...
You are complete, utter, and wholly-formed idiot.
But, then again, it's been said before by many people much more brilliant them me.
You are a supreme loser, and nothing you say can dispute this.
The UN “disappears” 50 million climate refugees, then botches the disappearing attempt
http://wattsupwiththat.com/2011/04/15/the-un-disappears-50-million-climate-refugees-then-botches-the-disappearing-attempt/
Deflation Bitchez!!-
http://www.dailymail.co.uk/femail/article-1371664/Cocaine-middle-class-m...
‘With average prices falling by £45 to £50 a gram over the past 20 years, cocaine has shed its exclusivity but retained some of its glamorous image,’ he explains
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Street prices of cannabis, ecstasy and cocaine at an all-time lowBy Jonathan Owen
http://www.independent.co.uk/news/uk/crime/street-prices-of-cannabis-ecs...
The price of cocaine, ecstasy, cannabis and other drugs is at an all-time low, clearly indicating that efforts to stem the spread of illegal drugs on Britain's streets are failing.
The data, based on a survey of more than 2,300 people last year, shows that cannabis resin sold for an average of £43 per ounce, down from 2004's figure of £45 - and a big drop from the 1994 average price of £120 per ounce. Even at this low price, the profit margin for the dealer remains high, at 169 per cent.
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Aspartame too
$60/LB delivered Aspartame sweetener 16 oz pure powder on eBay!
used to be $90/lb in 1983 i think
Widespread Use of Aspartame Stymied By Its High Cost - Chemical & Engineering News (ACS Publications)
somehow its now cheaper than sugar cause otherwise why would they put it in Wrigley's gum?
and oh, and weed is not cheaper these days. Today it runs between $400 and $650 an oz,
im sure you remember in high school when it was at most $10/gram.
Where are you buying your weed!? $240/oz in California, braaa!
what is going to happen when the moment of reckoning comes, is Ben just going to say ooops, some of you were right and i was wrong, SORRY ......will he be allowed to just walk away from the carnage or will he be hanged ?
I just want to thank Jim Grant for this interview.
I personally found it enlightening and informative.
So Jim, if you happen to be reading the comment section of zerohedge.com, I thank you for your perspective.
Bernenke is whistling happy tunes in the graveyard. He's burying the middle class and building a temple for his billionaire buddies. Mark my words, when he leaves the Fed he will land hundreds of millions of dollars in the first three years - just like Greenspan.
Inflation, at least the kind the USA "produces" and thus far has managed to export mostly, is like smoking cigarettes. The Fed started out smoking once or twice a week, only when they were out for a drink with friends. Suddenly The Fed started to cough more, but thought nothing of it and continued, and also added a cig every morning when they woke up. After a few more years the coughing got worse and it was a bit harder to breathe...you get the idea. I liken QE to simply switching from Pal Malls to Marlborough Reds. And at this point, The Fed is hooked up to an oxygen machine and combating the problem by adding a second pack per day, claiming the smokes have nothing to do with the hospital bill they keep running up.
Lesson: Inflation doesn't always "show up" right away, just like cancer doesn't show up overnight when you smoke cigs. But keep smoking long enough, and adding more and more cigs to your routine, and the ending will be the same: massive suffering, pain, and ultimately, death.
bummer
Something I was thinking about the other day and Jim touched on this idea of mine inadverantly....
The silver/gold bugs constantly bash on Ben Bernanke for creating this environment of excessive liquidity and low interest rate policy. However, from Ben Bernankes perspective it doesn't really matter because his sole purpose in life is to put liquidity into the system. So...if you have stocks OR if you have silver it doesn't really matter because the silver/gold holder feels a lot richer today right? So the gold/silver holder loves Bernanke the same as the 401k stock holder...if you have stock, or gold, you are the same person, benefiting for the same reason. The only people/people who are feeling poorer are the people holding dollars.
So really Bernanke has been very succesful in that sense.
Where Bernanke fails is that this is not permanent and he has forced productive capital into unproductive assets (silver is not productive; only against the printing of money) So the longer this continues the more you will see society break down. I'm not going to get into anymore than this but you will see a degradation of society that will be incredible....this is truly an illusory form of wealth that will lead to the collapse of society.
....even Jim said he was buying CRE for the yield, so Ben got his way, at least with Jim.
THIS, is what our schools are producing...no worries, our future is secure.
http://www.youtube.com/watch?v=wyrFWbGiGOc&feature=youtu.be
Actually it's also producing sheeple like you, who just mindlessly take everything at face value. This was a prank to illustrate the possible bubble emerging in the VC funding world.
no - really?
The fed's whistling past the graveyard will most likely be felt late Q2 and beyond most acutely in Asia. I suspect this festering inflation tsunami will sweep away many misconceptions concerning the effects of the dragon chasing hallucination induced by hopium snorting, smoking and slamming by every anti rising inflation sub-punk and its effects upon rapidly deteriorating regional political & economic stability. In this we will see lots more of chefs Janet, Bill, Ben and their hoes at the BOJ, and elsewhere, whistling while fluffing the "inflation problem is transitory and contained" cock until the money shot of the rise of the metals as the heir apparent to the $US as the global reserve currencies.
Meanwhile, Jamie's Pinky Organ, Golden Sachs of pixie dust, Barkingays, Dousche Bank, its Landesbakenmuffins and the rest of the riskless risk menage will continue to mutually infest themselves and their political & intellectual yard birds with the ever viral venereal disease of raging consumption.
Meanwhile, these dwarfs and their fluffin' muffin just can't enough of their fools gold medicine ...
http://youtu.be/ci6RYBDLYbg
Hi Miles-- are you sure you aren't Dennis Miller instead of Miles Kendig?
Hope all is well for you and God bless!
My dear agrotera, aka LeBronna, sooo very good to see you.
My apologies and regrets, but Dennis would need the services of Chaz Sheen as tour guide to figure out how to spend 10K on a weekend excursion at the Mustang Ranch. One day Dennis will elevate to Chaz, and in another decade, if Chaz lives, he may elevate to my level of uberdementedness.
I do so hope my adolescent good humor doesn't reflect poorly on the fine Christian teachin's I have otherwise received. In this regard I provide my compliments to one of the finest teachers I have ever had the pleasure of knowing. Always a pleasure to revisit your classroom, and reacquaint myself with genuine class.
Meanwhile .. a little perspective on our current circumstances ...
http://youtu.be/8yS0rJDxLbo
Peace be yours my friend.
altho jim grant is no slouch, i don't like him here.
why not?
his analysis is ok. i don't hafta agree w/ all his assumptions to give him a passing grade.
tyler fills at the end about the transition to real money.
want real money? go transition and get some! why wait? i say this every day, here.
you can have PM's, cat food, private jets, whatever you want, ok? just choose and buy or lease it. i don't care if you like ETF's or futures contracts. whatever "money" is to you, go for it! who cares? but i advise getting out of banks and markets. getting to PMs via US gold & silver coins, having cash, food, supplies, etc.
what abt the "cycle of disillusionment and terrific chaos in investment markets?"
yup, that's why, too!
well, if one refuses to even consider sending worthless, overpaid and underworked, suplerfluous goobermint employees home, forever, i guess one is entitled to fantastic alternatives, practically endlessly, eh?
if people can't think straight, what good does it do to spend all week scaring the shit outa each other?
The dollar standard is doomed so is America. Its strength is falling to pieces. Greenspan (Grünspan in German) blew it in 2008. The old system is dead. The new is coming in. The old will not go quietly.
Everyone is holding on to the old system which is based on competition not cooperation. We are living in the money system of the Roman empire with double accounting from the 17th century. This system must go or it will eat humankind. Everyone who is for the status quo is an enemy. A system based on money is doomed to fail. It must be based on resources. The early Germans knew it before the Romans settled the lunatic Jews in the Rhineland and the Germans nightmare began which culminated in the Holocaust (with help from Americans).
What Bernanke is doing is inflating the bubble that already exploded in Americas face. It can only get worse. Hes doing the same thing Greenspan did. Doing the same thing over and over again is insanity.
The debt can never be paid back and must be inflated away. If the debt would be paid there would be no money!
This is one big Ponzi scheme where debt must go up forever. But interest rates will rise at one point then what? War!
Europe was forced into this scheme and now see how well it works. Everyone can see the PIIGS falling and the politicians lying. This will go on until THEY have destroyed Germany again. The Germans once a warrior society are dying. We once colonized Europe now we are colonized by Islam. This system must go or we are dead. The Anglo-Saxons are Germans too but they only watch how their brothers die.
The world is governed by crooks who are sitting in Switzerland and calling themself BIS. They are above the law and more dangerous than standing armies. Throw the enemies of Germany into jail!
The BRIC countries meet this week end in Hainan and they decide to take collective measures against inflation and USD devaluation. China has 3T USD reserves dominates the global scene. It could be that they push the SDR faster; but...with or without the Yuan...?
Sure. The Yuan is about as trustworthy as the Chinese.
Which is to say, Not At All.
Do your math, they have a growth rate of 9%+, ok CPI is 5%+ but they have 3T USD reserves. They have taken over Africa, the last RM/growth potential frontier. And they are now organising the BRIC monetary strategy to make USD minor partner in new SDR with yuan and rouble potential candidates for basket. If Benocide keeps up his QE shenanigans he could be taken by surprise by interest hikes all over BRIC as inflation hedges and by monetary policy mix that makes even Saudi sell oil in other currencies than USD. Then the shit will really hit the fans for USD!
Everybody listen to Jim Grant, people -- he was among the very first to denounce the Greenspan Fed way back in the late 90s, when Tyler was still in knee pants. Grant kept on the theme ever since and, like Bill Fleckenstein, foresaw the rise and fall of the Greenspan bubble(s).
What's different now from the 70s is that there's no wage-price spiral. Higher commodity prices and (mildly) higher capital costs (interest rates) are putting a squeeze on wages and profits. What all this will do is just squeeze growth, not lead to a general, economy-wide inflation. That's the ultimate joke of QE2: it's backfired. Interest rates are rising, not falling (in spite of the Fed's manipulation of the front end to ultra-low rates). And material costs are rising. Growth will slow, prices will fall again, and this inflation episode will be over. It's not the 70s -- put away those polyester leisure suits.
What saved the USA from the crash of the Late 70's subsequent second oil shock was Volcker/Thatcher who killed the Wage/inflation spiral by interest rate hike/Union bashing. That started off the great Reaganomics supply side, deregulated experiment. That and CHEAP OIL, that Reagan got from Saudi from 1982 onwards as oil demand in west had shrnk. That is NOT going to repeat today! So Ben/USA are debt ridden and oil stays high on EM growth expectations NOT DM needs alone. New paradigm there!
I'll disagree with that. You are looking at an earlier point in the continuum than you think. Once inflation has raged for a while and eased the debt burden a bit, our new Volker will come riding to the rescue.
It worked so well the first time, why change things? It's just much bigger this time.
Inflation can't "rage" long enough to ease the US debt-burden to manageable levels without driving the American standard of living to Bangladeshi levels. And no way things can hold together that long.
As a fun thought-experiment, go ahead and cut the debt in half today with a magic wand, assume current Federal outlays remain fixed, and we still can't generate the revenue to permit interest rates to climb.
We're so far past the point of no-return it's not funny. Either we float a new global currency, or global warfare permits complete financial restructuring around whatever's still passing for the US dollar in a few years. Not much point in betting on the outcome, because either case is probably going to have the same result for most of us.
the meme that we can't pay the debt is crap..
the meme that we can't fix the economy of the USA is crap.
answers are simple to both if your prime concern is the welfare of the American people.
The Fed ( per it's lending and support of Foreign banks via latest data)..has an agenda that is extra national not national..so solutions that would work to save USA are ignored outright.
The Fed gov (per it's trade and tax policy, foreign aid, military posture, border and immigration) has an agenda that is global and extra national, not national. so solutions that would save the American worker are ignored outright.
a one eyed man in the land of the blind.
I totally agree. Float the new currency and be done with it.
If you're suggesting that we can pay the debt AND fix the US economy without radical change of the international financial system, you're talking out of your ass.
.
Wow. It's time to flush some turds (not you Turd) from this site when anyone with a disinguished career in finance and journalism is branded as a hack and thoughts are discarded outright because he doesn't write in the "the world is going to end in the next half hour" rhetoric. He went to Columbia! He must be part of the NWO! Hahahaha. This is the type of thinking that ensconses you in your putrid world of stupidity and fear.
Where's your 30 year career of writing, research, and publications? How many thousands of people are paying you for your insight? How many times have you written something that has caused such a deep, penetrating debate about the true nature of the situation and still reads as fresh as it does in 2011 as it did in 1983? How many people ask you to speak at their national conferences to promote the ideas of sound money and freedom?
Oh yeah. You don't have those things. You have a screen name on ZH and can google "NWO" and you've read like 20 articles on infowars. You're a motherfucking expert! Or you work for the Federal Reserve. Either way, someone who actually has half a brain can't identify if you're a monumental retard or some sort of government scab (this is a constant problem for government scabs in general).
What could we all do/accomplish if we met in person?
I suggest it.
I have a place to host.
I visualize either an awesome event, or mayhem. Who's gonna serve in the SCRAM position?
We should have little underground zero hedge cells all over the country but never talk about it. It would be fun to get together such a non homogenous group of people.
Zionists and those who oppose it.
Capitalists and those who oppose it.
Gold bugs and their opposites.
Eurosnobs and us gun loving rednecks
And of course america haters and america lovers.
Would be.interesting. the.first rule of the club and its meetings are that you never talk about the club.
For the silver bugs out there, you know who you are.....
http://acrossthestreetnet.wordpress.com/2011/04/14/why-silver-is-still-t...
Classic deflationist mistake... the Fed cannot say "the party is over"... because they and all the powers that be will be instantly bankrupt. Accordingly they will just keep upping the ante... until they destroy the entire monetary system... in which case any cash/liquidity held will be instantly worthless.
'These guys always focus a debate on the price level. So prices go down due to increased productivity and the FED creates money ot counter balance that effect'
Would you say the same about counterfeiters who are printing in their basement? That they do this to lift the general price level?
Of course not. The FED and any other counter feiters are printing money not because they want to do anything with the price level, they just want to buy stuff. By printing money they steal the productivity gains made in the free market. You are not getting lower prices, because gvt Schills with funny money buying the fruits of the labour of higher productivity.
The theory is you get faster growth with a mild steady inflation of the money supply because prices and wages are sticky downwards.
There is too much irrational economically nonproductive resistance to deflationary trends and that this resistance or stickiness slows economic growth. This is because of mental accounting and aversion to real losses being greater than aversion to missed gains, which are logically equivalent. In theory they are correct. In practice it has been difficult to avoid excess inflation and perhaps greater frequency of business cycles because it is just to tempting to let inflation start creeping up.
What exactly does it mean to say "gold and silver will right themselves?"
Does he mean there will be a correction at the time the Fed must raise interest rates?
.
He means that once the crash in equities and commodities has bottomed, more people will realize the uselessness of fiat, and fiat via equities - and will seek value in commodities such as gold and silver much faster and in greater quantities.
Look at historical prices of gold in response to market crashes and downturns in both inflationary and deflationary periods. In times of crisis, gold outperforms equities. Silver also, though it has a higher beta (more supply, more buyers/sellers).
Grant's tremendous. It's like having your brain brushed clean.
It is called focus - hammerhead.
Grant is mistaken on one thing--he said, "The Fed is unconscionably complacent about the consequences of what it is doing..." ...complacent implies a lack of awareness. It is completely ridiculous to think that a private company (the Federal Reserve Corporation) paid for by US taxpayer money and supported as an expense to the US taxpayers by an academic network of PhD's across the country and world, does not understand that the zero percent interest rate policy is another give away to their cartel members (banks and their affiliate hedge funds), and all who pay the price (the US taxpayer, the small investor, savers, people on fixed income, people who have no money in the stock market, and anyone whose income goes for their food and daily needs) be damned and ransacked.
They are aware of the risk.
They project calmness and complacency as a way to help maintain stability and further fed aims.
Have a look at governor Palin at Wisconsin Tea party rally yesterday:
http://saposjoint.net/Forum/viewtopic.php?f=14&t=2663&p=31841#p31841
This will be the end result of FEDs game. Third party taking over.
May be that was THE plan. And abolishing FED.
The troll is starting to get really scared again that you guys may be right.
Historically that has been a good.sign that a temporary reversal is near.
In this case a reversal in sentiment from inflationary inevitability to deflationary fears. Will the end of qe2 trigger a selloff of all risk assets such as stocks and precious metals?