Jeremy Grantham: "We Have Been Conned"

Tyler Durden's picture

The lessons of Jeremy Grantham's recent interview with Charlie Rose seem to be becoming increasingly prescient as the stock market surges to new highs amid a crumbling macro (and micro) economy. "Bernanke is whipping the economic donkey that can only grow at 1-2% as if it was a race horse growing above 3%," and unfortunately he will keep doing it "until the donkey is dead." As Grantham says, it is a "very dangerous situation to have the most powerful man in the world," doing this as simply put, the Fed, "does not have the tools to generate employment." But while Grantham's clarity on Bernanke's actions are unquestionable in their endgame, his views (below) on Keynes, debt, and wealth transfer are even more concerning. "We had this amazing experiment... but we have been conned into believing by the financial world that debt is everything."

Brief clip on Bernanke's actions...

Full interview here (no embed)...

Grantham On Debt...

JEREMY GRANTHAM: Let me tell you something about debt. In 1982, if you added all the debt up it was 1.25 times the size of the GDP. And then, and it had been fairly flat for a long time, drifting slowly up. And then it kinked 45 degrees and it goes shooting up steadily without too much volatility. Just goes straight up.

CHARLIE ROSE: When was that?

JEREMY GRANTHAM: `82, 1982 -- and it goes steadily upwards to 3.5 times. So we had this amazing –

CHARLIE ROSE: That`s when Ronald Reagan was president, `82.

JEREMY GRANTHAM: Yes, right. And so we had this amazing experiment -- the biggest economy in the world almost tripling its ratio of debt over a block of time that really counts -- 30 years. And what happened in terms of the growth rate of the system, it slowed way down. Now there are other reasons I grant you that. But there`s no room in that equation to believe that increasing debt has anything to do with long-term growth. Is there?

That you triple it, what more can you do, and the growth rate of our system slowed materially? It`s so contrary, isn`t it?

They are the facts. They are so contrary to the general belief. We have been conned into believing by the financial world that debt is everything. Let a bank go, oh my God it would be the end of the world.

CHARLIE ROSE: Would Keynes have agreed with you about debt?

JEREMY GRANTHAM: I don`t know. I really don`t know. It`s such a different world now. The levels of debt are so much higher. He would probably have some ingenuous new theory.

CHARLIE ROSE: OK but I mean most people believe that we do have, I mean they look at the percentage of GDP to debt or debt to GDP.

JEREMY GRANTHAM: I can prove that debt does not generate long-term growth. I have given you the numbers.

CHARLIE ROSE: It does not prevent.

JEREMY GRANTHAM: It doesn`t cause long-term growth it doesn`t create it. Debt, we triple the debt and GDP growth rate went down. There is no evidence that increasing debt increases GDP. And yet that mandate has been given to Bernanke who thinks apparently that it does.

By keeping interest rates low, you`re transferring money away from retirees who spend every penny and are really hurting. And by the way, there`s far more of them every year now than there ever was when economic theories were being panned out. You take money from them, and who are the beneficiaries -- the guys who run the hedge funds and the banking system in general and speculators and corporations theoretically can use it to build. But they`re building less now than practically in history. There is no major league capital spending boom going on.

JEREMY GRANTHAM: We`ve gotten into a bit of a rat hole and we should be careful getting out of it. But it is not the overwhelming thing that will dominate our future. What it does is it distracts us from the real world.

Debt is an accounting world. It`s paper. The real world is the quantity and quality of your people, and the quantity and quality of your capital spending. Are you building new machines? Are you being inventive? Are you training your people? Is your high school system delivering the same education that it used to relative to the South Koreans, relative to the Norwegians? No it`s not. We should worry more about the real world and less about the paper world.

And somehow we`re in this death grip that only paper things matter.   And so there is much too little attention spent on education, training, capital spending, finding a way to beef it up. And also I would rather stimulate the economy directly through government spending than I would like to play games with the monetary system and games with the interest rate inflicting great wounds on retirees and so on and transferring wealth to people who won`t spend it
We’re transferring wealth from the poor to the rich by keeping interest rates low. I`m not even sure the economy gains at all by a low-interest rate. And furthermore no one is established convincingly that it is a good idea. It`s a tradition that is a good idea. That`s not the same.

We’ve had lots of traditions like the market would look after itself. People wouldn`t be crooks because economic theory assumes that they`re not. But they often were crooks, and greedy and short-term oriented and willing to dance until the music stopped. Although Soros said the music had actually stopped long before.

(h/t M.O.)

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
mikla's picture

It hurts when you wake up.

The very idea that paper-printers can create "wealth" for society is ludicrous on its face.

It's merely a transfer; we pick winners and losers; and, we merely steal from the losers.

This is the same as with any Central Planner system.

Big Slick's picture

“That`s when Ronald Reagan was president, `82”

A pretty sharp guy, that Chuck Rose.

SafelyGraze's picture

it's especially nice when he interrupts his guest

and also .. when he asks a question and then the guest begins to answer and then chuck interrupts the beginning of a response in order to embellish the question

because mostly we want to hear chuck talk

Precious's picture

Sorry but this guy is a luddite.  Everything he says is flawed because he has no clue about how technology across every industry is actually making the world more livable, more sustainable, and less costly.  Hey Jeremy, are we going to run out of carbon?  I hear they can make airplanes from that.  So I guess we won't need all that indeustrial metal you're worried about depleting. Carbon is only the most abundant material on earth, for God's sake you fund management, stupid tool. There is just as much progress in store across the board.  Agriculture.  Medicine.  Energy. On and fucking on.

For all Grantham claims about doomsday scenarios, there are 100 more signs of progress like this and orders of magnitude efficiency here or coming.  Wireless technology alone has the potential to eliminate hundreds of billions of cost -- just like the semiconductor chip has for the past 30 years.

Let me put it more bluntly.  This fucker is a eugenicist and he would love it if every one of you needless fuckers were dead or dying so his fucking planet can be safe for his little asswipe tribe, whoever they are.  You can be 99.999 sure you're not included.

ZerOhead's picture

Iron. oxygen, magnesium and silicon are the biggies...

Carbon doesn't even crack the top 10.


Precious's picture

Oh fucking prove it, carbon based life form...

You can spend the next zillion years of your life digging a hole to that fucking iron buried in the center of the planet. 

ZerOhead's picture

The American edumacation system is doomed... DOOMED I say...

Precious's picture

You're too fucking smart for ZH.  You should head over to HP.

HulkHogan's picture

But he misspelled DUMED.

TwoShortPlanks's picture

Discussing the finer points of the US Economy at this stage of the game is akin to discussing the literacy improvement of a Death Row inmate.

I only need time to warm the Popcorn.

Stackers's picture

Charlie Rose is a complete idiot

Ranger4564's picture

Charlie Rose is a cleaner for the Oligarchic mafia. He's there to sanitize all topics / guests and to plant the meme of greed and servitude to the benevolent if sometimes hapless masters.  Every guest he has on is some sort of power broking scumbag, coddled and made to look decent.

And that lovely statement from Jeremy Grantham where he proclaims that low interest rates are transferring wealth from the poor to the rich... what a fucking crock of shit... pay attention to the switch... we go from elderly folks who have savings, to all people who do not have money... he forgets to mention that high interest rates also cause the same effect, becuase the poor often don't have a slush fund or savings, the poor often borrow money and end up having to pay extortionate rates, transferring wealth to the fucking parasites who stole the god damn money in the first fucking place, so they could lend it and steal more.

That's another reason I really really hate micro loans... or better known to me as bleeding the poor sap dry. It's not enough that you devastate the poor with regular loans... once they get below a certain threshold, issue micro loans and take every last fucking cent from them.

Anyway, more propaganda and misinformation from the oligarchy... just babble... baffle them with blahter. It seems to be working.

Buzz Fuzzel's picture

What we have here is another example of the ignorance of the leftist media.  No Mr. Rose, Mr. Grantham does not agree with Krugman or Bernanke.  He is arguing the opposite and your are apparently too dense to recognize this.

francis_sawyer's picture

Yeah but... He's got an 'unobtanium ship' with a kick ass impeller & is on a high protein diet... ROTF...

Supernova Born's picture

I just checked the PE ratios of Cramer's "top six" (per the net) recommendations. They are WAY above Grantham's nosebleed bubble level yet Cramerica is still raking in the Bernanke bucks.

[can a ZH'er help out and point me to the present index weighted composition of the S&P 500?]

noless's picture

I'm honestly interested in your assertion, what type of carbon are you talking about? How is it processed? Are you talking about nanotubes and sheeting derived thereof? Any particular articles or studies you could point me towards?

Salah's picture

Just come visit us....and stay for a few years, you'll get all the info you care to absorb

GoinFawr's picture

B b but I thought you could only obtain that unobtainable stuff from that moon off Pandora by courageously droning off all the indigenous giant lanky war-smurfs?

noless's picture

Interesting yes, a few years no. The majority of the information seemed to be along the lines of further refinement of alloys and materials on their current observable/mailable scale, although this could(and will) yield great results, the overall efficiency and range implied by their development does not yet rule out an apocalyptic timeline given current resource return rates.


If you were offering me a job, then maybe i would "stay a few years", but i operate in theoretical circumstances, and because of my botched education would not qualify based on the necessity for constant recursive searches for basic terminology.

I'll probably look at that site again, but its rudimentary nature (necessary probably on a state secret basis) leaves little that would actually benefit me.

tradewithdave's picture

The type of carbon he's talking about is the type of carbon that behavioral economics (read Cass Sunstein) is based on.  It's a type of carbon based in technological scarcity rather than the genuine abundance.  It's a a squeeze play that comes from the libertarian side and the progressive side simultaneously squeezing out the middle (libertarian paternalism).  It's how Ron Paul and Ralph Nader found common ground.  It's how you get a guy like Charlie Rose and Tyler Durden singing off the same page "End the Fed...end the Fed". 

Ending the Fed is one thing when you upstream the assets to a sovereign wealth fund while ending the Fed when the gold has been foreclosed upon by private foreign interests is something altogether different. The "equitable distribution" agreement that is essentially a divorce of liquidity from risk is being put into force, but not until the wealth component has been completely hollowed out... which appears to be nearing the synthetic end game... just ask Blythe.



W T F II's picture

n P,

I come out somewhere between you and Jeremy on innovation and resource repletion.

Since you obviously loathe the guy, he'll be long dead when any of his projections actually play out, if any do....So, you got THAT goin' for you...!!

ebworthen's picture

"...he has no clue about how technology across every industry is actually making the world more livable, more sustainable, and less costly."

Oh sure, all those electricity sucking I.T. devices; not to mention modern agriculture completely reliant upon petroleum.

The "technology will save us" meme is the most dangerous one of the past 2,000 years or more.

Precious's picture

OMG what a fucking moron.  I'm sure you have a parking space for your shit though.  It's just the non-you part of the human species you lying sack of shit earth-first fuck losers don't give a shit about.  Go grow a carrot you fucking cunt.

ebworthen's picture


I thought you were talking about tech. not carrots?

noless's picture

I fucking lolled at the reversal.

Precious's picture

For your aptitude, carrots and tech are the same problem.

noless's picture


You realize that i almost most certainly agree with you on just about every thing right?

skipjack's picture

Yeah, because Frankenfood is just as good as organic, right ?  Hamburgers made from feces are just as healthy can make them.  Then there are the technological wonderlands of automated license plate scanners, drones, surveillance cameras, electronic surveillance and databases of all your communications, and on and on and on.  


Technology is making a slave of you, and the rest of us.  WAKE THE FUCK UP, people.  YOU are not on the A list.

Precious's picture

How fucking hard is it to find real food?  You probably fucking have a can of Pringles in your pantry and then complain using some media-sponsored hyperbole about "frankenfood".  How about that "franken shampoo" you surely use every week for your entire life so far.  Keep rubbing that putrid shit on your head, dumb ass.  That ain't "technology".  That's fucking poison that you're too stupid to differentiate, just like all of the fucking sheep.

Himins's picture

I presume you are getting paid to shill ZH, the words Fuck, Cunt, Sack of Shit, kind of a dead givaway. Getting paid to shill is ok I guess as I do have faith in the Capitolist system as far as it goes..BUT..if you are doing it for embarrasing is THAT

Precious's picture

This thread just proves what fucking brainwashed tools people have become.  You call me a shill?  I'm not the one shilling for Jeremy Grantham, the phony brit stooge.  You obviously don't know your ass from an apple.  And as far as the color goes, WTF do you care?  Get your own fucking blog, and then you can censor however you want, shit for brains.

GoinFawr's picture

Hey eb'y, at the risk of sounding all 'dangerously cornucopian' and everything, have you ever considered examining a cross section of this planet?

And before you start feeding me the old lines about how 'unobtanium' all those juicy megajoules are, and the whole 'last year's man retired in 1967 engineer' bs:

"Well, if it's so damn smart, why isn't everybody doing it already?"

here's a slightly unrelated, but presciently apt all the same quote of Tesla's you might want to to take a gander at

"It is not a dream, it is a simple feat, only expensive -But who knows?  Perhaps it is better in this present world of ours that a revolutionary idea or invention instead of being helped and patted, be hampered and ill-treated in its adolescence—by want of means, by selfish interest, pedantry, stupidity and ignorance; that it be attacked and stifled; that it pass through bitter trials and tribulations, through the heartless strife of commercial existence. So do we get our light.  So all that was great in the past was ridiculed, condemned, combated, suppressed—only to emerge all the more powerfully, all the more triumphantly..."

I'm not trying to sell anyone 'hope's spare change', just saying that when our backs are against the wall that well over 2000 year old tendency towards self interested short sightedness of ours we all whine about can accomplish some pretty amazing shit right smartly when required.

Godisanhftbot's picture

 You're not the big fat broad are ya?

Precious's picture

Your not the fucking NYC mayor are ya?

booboo's picture

so, like advances in medicine has made it so much more affordable? Got it. The problem with your rant is that government seems to suck up that efficiency and magically turn Gold into cellulose and send you a bill for the trouble. They proved this again yesterday when they took the efficiency of the internet and turned it into a stone wheel.

Precious's picture

Sorry I don't get it.

noless's picture

Advancements in medicine gave you chronic diabetes and the hoveround , does that make more sense?

Because government and bleeding heart.

But yeah, we can keep funding the obvious idiocy in place of real advancement, is that preferable to you?

Precious's picture

I don't want to fund jack shit.  I want the elected dickwads, the elites they blow, and the numbnuts they hire, to stay as far the fuck away from me as humanly possible. 

HardAssets's picture

Well Zbigniew Brezinski said they have the technology so now its cheaper to kill a million people than to control a million people.

Its sure gotten cheaper to spy on and drone kill those who are declared 'difficult'.

See, advancing technology is a good thing always !  The future always brings progress.

Precious's picture

Zbigniew Brezinski is one of the greatest criminals of modern history, so fuck what he says.  Of course people with his mentality take anything good and turn it into everything evil.  That's their game. Zbigniew Brezinski can kiss my fucking ass.  I hope he fucking dies of the most painful form of cancer possible, and then goes to hell in a submarine filled with 90 octane.

lewy14's picture

Sanctimonious deontological fuckwits.

Both of them.

Prometheus418's picture

@ Precious

Technology is making the world less costly?

I wish that were true, I really do.  And in some cases, you're absolutely right.  I can buy all sorts of gadgets for pennies on the dollar now- hell, I bought a guitar in February for $80 new- the same instrument from the same manufacturer went for almost $700 the last time I played.  CNC routers made the price plummet.  I've also got a 30" monitor that cost less than $200, and a nice set of Bose speakers that set me back well under $100.

Here's the rub, though- I can't feed my kids or heat my home with those things.  Yeah, they're awesome, provided that the basics are covered- but every year, the basics are becoming harder and harder to fund.  Two years ago, I could buy two carts of groceries and pay all my utilities for well under $400.  This month, the utility bill alone is $677.  With my mortgage (which has also increased due to the local property taxes ratcheting up every year without fail,) that means that over 66% of my post-tax income goes to house, electric and water.  That doesn't leave much to feed my family, purchase gas for my car (even though technology apparently made that cheaper in your argument,) clothe my children and incidentals.  What was a sensible and responsible life decision a decade ago is now an oppressive and unsustainable albatross hanging from my neck- with no alternatives availible.

So I'm willing to concede your point- I work in manufacturing, and we do far more with far less every year.  The problem is that before your beloved singularity comes, I will be forced to rob the gas station to fill my tank and feed my kids Corn Nuts so they don't starve to death because the shits that own my company needed to have ultra-low profile rims on their new Escalades.

Don't mistake this for hyperbole.  You may be 100% right, and still be wrong.  There is a time factor to all of this, and I'm damn near out of can-kicking time- I am not talking years here.  If things aren't better by the middle of this summer, I will be forced into kinetic action.  Even if all the rainbow fart theories could come true, they're not coming soon enough- and, so sorry, if the advances aren't shared now, we barbarians are going to burn the whole rotten house of cards to the ground.  

The clock is running, tick-tock, tick-tock.  There is very little time left for me to even listen to solutions and reparations for what was stolen from me.  Even now, I think I'd rather kill, and kill on an epic scale, just to exact revenge.  The time is coming when reason won't matter- all that will matter is shattered health and broken dreams that can never be repaired, leading to a world where extraordinary violence is the only coin of the realm.

I'm at the age where I should have been saving for retirement for years- but instead, all my savings have been stripped from me.  What used to be a healthy 401K and a few hundred oz of silver has become a stunted number on a screen with no new contributions, and just enough coin to bribe a border guard (I hope.)  There's no time left to "recover" from that, and I know it.  They have tried to kill me and mine, and I will repay that in kind- the difference is, I never needed the ones who did this, but they have always leaned on men like me.

Tell that to your masters, boot-licker- and advise them to get better locks on their doors, not that it will matter.

Precious's picture

I never said the wealth was evenly distributed.  However, it is clearly more widely distributed.  Of course the system is completely distorted of the wealthy, by the wealthy, for the wealthy.  But that's a different problem.  Certainly the wealthy moved fast to outsource all manufacturing to China, and didn't give a shit what happened to the American worker.  On the other hand, for example, military people who are raising their families are running around in SUVs and eating lobster. Healthcare workers have never been paid more, and it's going up every year.  For these market distortions you can directly thank your government regulators, who have priced everything but captive interests out of the US labor market and overseas.

I see your issue everywhere.  Jeremy Grantham isn't your fucking answer though.  He's another one of these fucks who want's everything to stand still or go backwards.  All I'm saying is that there is plenty of opportunity.  The problem is the greedy fuckers who keep getting bailed out or leveraged by the same political asswipes everybody voted for.  You think America cannot compete?  Certainly it can.  But not with every fucking nanny, candy-ass, doucebag on the state and federal dole making up rules that hand the future of work to the Chinese, who by the way don't give a shit about our problems.

Harbanger's picture

"For these market distortions you can directly thank your government regulators,"

Blame the Govt? they give the candy.  It's always easier to blame the rich.  It's the same story in every banana republic.

Marco's picture

In banana republics if you aren't in (control of) government you don't stay rich ... there is no functional difference.

Prometheus418's picture

It's not a different problem.  Not to me.

I could give two shits about the guy in that interview- I was talking to you, not defending him.  

The long and short of the matter is that reduction in cost due to technology, which is a reality, means nothing if those gains are hoarded by a handful of psychopaths.  If they intend to force me into feudal serfdom, then as far as I'm concerned, we may as well tear the whole house down, and they can live as the feudal kings they so obviously admire- scientists and engineers won't staff their courts as slaves.  Technology will stop advancing, and they will return to the good ol' days when their kids fought with the dogs for scraps on the floor of the banquet hall, and they died in their 30's- and the Chinese, for whatever reason, aren't going to step in to fill that innovation void.  They make things cheaper by using psuedo-slave labor, but I don't recall a single instance newer than gunpowder or the mechanical clock where China lead the march of progress.

No matter how competent a manager or banker may be, they're not the people who make technology advance, and they've forgotten that.  I don't want technological advance to stop, but I'm certainly not on board with continuing to work to advance it for the benefit of people who very evidently would prefer that my family and I die.  

Precious's picture

I have no love for the "singularity".  Singularity is another fucking fraud by your typical self-appointed piece of shit futurist, this particularly disgusting one also having a belief that the universe teams with life, although not one fucking sign of it has ever managed to reach Earth for some extraordinary unexplained reason.  Same caliber as all their other contrived heros like "Freud", the cocaine addict.