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Jim Grant On Gold's Recent Drop: "Confidence In Bernanke Is Utterly Misplaced"

Tyler Durden's picture




 

"Inflation is a state of affairs in which there is too much money," Jim Grant notes in this Bloomberg TV interview, however, "It's not too much money chasing too few goods," he corrects the misnomer, "the thing this money chases is variable." Whether it is Iowa farmland, housing, stocks, or bonds, central banks are stuffing us with it. Yes, equities are high, but Grant explains, "beneath the surface of things or not so far beneath the surface of things," it is not at all good, adding that, "Central bank 'original sin'," is akin to Revolutionary France, and he shows no concerns over Gold's recent dip, noting "a general fatigue animus towards gold," that seems predicated on more confidence in central bankers; to Grant, "that confidence is utterly misplaced!"

 

 

On Inflation:

Inflation is a state of affairs in which there is too much money. It's not too much money chasing too few goods. It's too much money, the thing that this money chases is variable. And in this particular cycle and for some time, it has chased commercial real estate, bonds, stocks, financial assets of all kinds. Iowa farm land. There is a huge excess of liquidity in the world. Central banks furnish this, they stuff us with it. In the interest of levitating markets that will, they think

On the Equity rally:

Yes there are terrific companies generating terrific cash flows. That is certainly true. But beneath the surface of things or not so far beneath the surface of things, as far as central banks, practicing not original policies but original sin. This is these policies are not so original. They go back to the time of Revolutionary France. You know the idea of creating currency with which to create human happiness is as old as the hills.

On Gold:

Gold has been in a bull market for 12 years. Gold is this rare thing in which you can be bullish and yet contrary and also with the trend. There is I think a general fatigue animus towards gold. The gold prices are reciprocal of the world's view of the competence of central banks. The greater the world's confidence in the Ben Bernanke's of the world, the weaker the gold market. The less the world holds confidence in the institution of managed currencies, the stronger the gold market. And to me the confidence is utterly misplaced,

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Thu, 05/09/2013 - 21:33 | 3546802 markmotive
markmotive's picture

Mixed messages out there...

Why is Texas University selling the bullion Kyle Bass advised it to buy?

http://www.planbeconomics.com/2013/05/texas-u-sold-375-million-in-gold-b...

Thu, 05/09/2013 - 21:37 | 3546813 seek
seek's picture

They sold the bars and reinvested in gold futures. Mixed message indeed.

Notice they don't say what the price per ounce was. I'm willing to bet those bars didn't go for anything close to spot.

Thu, 05/09/2013 - 23:27 | 3547126 Scritchy
Scritchy's picture

Spot on, seek.  The day is coming when paper gold is worth about seven cents an ounce, if that. I mean, if you could pay your clients off instead of providing them actual gold, wouldn't you say that "gold is worthless, and here's your paper money" instead?

Thu, 05/09/2013 - 23:57 | 3547190 Say What Again
Say What Again's picture

"James Grant -- Former gunner mate for the navy..."  This guy just get more hip every day!

Fri, 05/10/2013 - 02:32 | 3547374 DoChenRollingBearing
DoChenRollingBearing's picture

There has been a lot of interesting gold material hitting the interwebs lately.  No single item is BIG enough for an article, but I put together a few of these items for a pretty piece (includes small gold coins, Freegold, kilo bars, gold alloys and gold porn <-- please don't tell the SEC or the CFTC; or that matter the usual MDBs, Praetorian Guards, etc...).  ;-)

"Gold: Bits & Pieces"

http://tinyurl.com/cleer6y

Fri, 05/10/2013 - 05:05 | 3547486 MythicalFish
MythicalFish's picture

Good stuff, thanks. I think there is a certain ceiling for gold prices for practical reasons, in the short to medium term, after (financial) SHTF.

20 million kilos that could end up with the Indian mafia are a problem, and so are foreign owned gold mines in "precarious places". My guess is that north of $4000 it would stop being a sensible currency in today's dollars (or "non-hyperinflated"), as long as there is still any concept of 'balance of power' at play. So, IMHO the biggest argument for gold is other shit coming down rather than gold going up massively. Gold, therefore, can be a deflation play, if you define deflation as an implosion of prices - which has the exact same effect as an explosion, i.e. the thing not being there anymore afterwards..

 

Fri, 05/10/2013 - 05:44 | 3547506 Gringo Viejo
Gringo Viejo's picture

He usually has pertinent info to share.
That Mr. Rogers The Early Years persona he's cultivated is somewhat odd.....I Grant you that.

Fri, 05/10/2013 - 00:01 | 3547199 fourchan
fourchan's picture

steers and queers at texas u totally missed the point if they traded real gold for any type of paper.

Fri, 05/10/2013 - 00:10 | 3547216 seek
seek's picture

I seriously doubt they did it without Bass' approval. Remember they're in it for the nominal dollars, not to hold PMs.

Bass knows what's coming with respect to delivery, and probably suggested long futures. Sell the physical at a premium (if Andrew MaGuire is right, perhaps as much as 2000/oz to the LBMA), turn around, put the cash into gold futures at current low price, wait for delivery requests to drive up price, have force majeure declared and get paid in yet more cash. If you care about dollars, it's a pretty slick move.

 

Fri, 05/10/2013 - 00:45 | 3547271 Shell Game
Shell Game's picture

That might be exactly how the play is structured.  But one thing for sure, Bass is very intelligent and has a plan.

Fri, 05/10/2013 - 01:36 | 3547339 macholatte
macholatte's picture

 

Bass is very intelligent and has a plan.

 

Sell gold bullion...... buy nickels.

Fri, 05/10/2013 - 02:29 | 3547380 DoChenRollingBearing
DoChenRollingBearing's picture

@ seek and Shell Game

+ mucho each!  Yes, Bass is no dummy.

I have no idea what Bass has in mind, but I can only think that he knows what he is doing.  Although he did make a controversial recent call on housing (bullish) that has some (inc. me) scratching their heads...

Fri, 05/10/2013 - 02:38 | 3547389 fonzannoon
fonzannoon's picture

Dochen are you willing to play devils advocate here? If Chindit is correct, and it is hard to argue with him, maybe Bass just decided to lock in some gains? As I said on the other thread... My dealer has had gold this whole way down, and was willing to part with it for reasonable premiums. Silver was a very different story, and still is.

But maybe these shortages and separation and vaults being emptied are exaggerated. If buying has tapered off since the slamdown then maybe there is even more supply now. What is interesting is Bass sold pre slamdown. So that tells me he got a tap on the shoulder. Maybe he knows he can get that phyz back anytime he wants it.

Until real stories pop up about delivery failures, we are all just jumping around excitedly with nothing to back this up.

Speaking of which, I wonder if anyone has any comment on this.

http://www.business-standard.com/article/markets/silver-demand-for-investment-falls-over-80-in-2012-113050600884_1.html

Fri, 05/10/2013 - 03:25 | 3547415 Supernova Born
Supernova Born's picture

Jim Grant's too much money and Bass' housing call seem to make sense viewed in tandem. The Fed and .gov would love to push money into easily taxable real property...can't make more, but it can't be hidden/moved either.

I think smart "folks" understand that when paper gold fails it won't just be paper gold that will burn.

Fahrenheit 451, bitchez.

Fri, 05/10/2013 - 03:33 | 3547427 fonzannoon
fonzannoon's picture

what bass call on housing are u referring to?

I should edit to say real stories on defaults occuring, other than abn amro.

Fri, 05/10/2013 - 03:34 | 3547428 DoChenRollingBearing
DoChenRollingBearing's picture

An interesting idea, fonz.  Short answer: I don't know.  And Bass has an agenda I do not fully understand.  Bass is a big enough player to be "eligible" for a tap or two on the shoulder, nice insight!

I have a lot of respect for Chindit, he has provided nice insights to me in Asia, which I have spent maybe a grand total of some 20 days there.

I am getting a sense that gold supplies are easing.  Perhaps NOT for silver right now.  Also, I have read that it is really only the small coins & bars that are most affected by scarcity, although providentmetals.com is quoting out their 1 kilo bars with a three week delivery.

I stopped buying silver over a year ago, as I have "enough" (for spending in a SHTF), so I do not have enough expertise to comment.  Extra funds for me will go to gold, maybe a bit to platinum.  Silver is so bulky when you start to pile it up...

Fri, 05/10/2013 - 07:09 | 3547584 samcontrol
samcontrol's picture

maybe i can get an answer this time .It is just not clear.

I just don't see this paper gold going to zero thing , at least soon any time soon.. I can see a"craze " with 30% but not seven cents.
How would mining companies mine with paper pms at zero..?

if Paper pms lose another 50%. How many mines do you think will actually stay standing?

Sure. Physical will be at 500% premium on paper by then , and then who benefits and who gets smashed ????? How do these mines work, how does the silver mined in Argentina for example travel to you guys at 500 % premuim so my shares can go to 0 ......? And this will happen overnight..in a week?
The fed, the cartels, the banksters, central banks,the
rochchilds of the world , politicians ,investors , miners, markets, me , you, and just about every atm in the world will react how ?

We have established i am fucked but can someone please explain why my miners will go to 0? Thanks.

Thu, 05/09/2013 - 23:35 | 3547145 NotApplicable
NotApplicable's picture

Jamie asked real nice like?

Thu, 05/09/2013 - 21:33 | 3546809 Debeachesand Je...
Debeachesand Jerseyshores's picture

So true.

Thu, 05/09/2013 - 21:37 | 3546811 fonzannoon
fonzannoon's picture

nice to see Jim Grant is confused.

Central banks are stuffing US with money? Who is US?

Who has confidence in Bernanke? No one does.I guess Grant is missing the phyz/paper seperation.

Thu, 05/09/2013 - 22:05 | 3546879 kito
kito's picture

Oh fonz...trust me when I tell you there are many who think Bernanke can walk on water.....keeping in mind that if 99 percent of the population were asked who he was.....they would have no clue.....

Fri, 05/10/2013 - 00:02 | 3547203 Say What Again
Say What Again's picture

I think the fonz missed the reference to the Mississippi scheme (a.k.a. John Law)

Thu, 05/09/2013 - 23:38 | 3547149 nomorebuyins
nomorebuyins's picture

Confused why the Phyz/paper seperation was not mentioned. 2 totally different markets right now, looks like paper is going to zero.

Fri, 05/10/2013 - 00:02 | 3547204 chindit13
chindit13's picture

As I wrote in the one of today's other gold threads, in many parts of the world far away from LCSs and on-line dealers, "paper" and "phyzz" are for all intents and purposes identical, especially for size.  You should be more skeptical of gold promoters, who might have an interest in having you believe what they tell you.  Another poster in that same thread (Duke of Doubt) wrote something similar.  You may or may not choose to believe what he and I experienced, but it wouldn't hurt to give it a little thought.  Might get you more bang for your BBBux.

Fri, 05/10/2013 - 06:49 | 3547548 All Risk No Reward
All Risk No Reward's picture

"Us" doesn't include you are I.

Grant doesn't mention that currency is debt...  and that exponential debt growth is unsustainable, BY DEFINITION.  The cost of carrying the debt eventually breaks the will of the debtor to take on more debt.  This has already happened at the personal level.

The government needs to point a gun at people and force them to take on more debt every year or else they wouldn't do it.

That is also unsustainable.

If Grant had any humanity, he'd be exposing the fraudulent Debt Currency System...

http://www.keepandshare.com/doc/4768883/debtmoneytyranny-6-1-pdf-60k?tr=77

He'd be exposing the criminal Federal Reserve debt bubble (literally, against the law)

http://www.keepandshare.com/doc/3324744/wmdebt-graph-3-79k?tr=77

But, alas, he doesn't.

Which either means he's ignorant or he's in on it. 

"The few who understand the system, will either be so interested from it's profits or so dependant on it's favors, that there will be no opposition from that class." — Rothschild Brothers of London, 1863

Which is it, Grant?  Ignorance or alliance?  The former can be fixed, the latter is working quite nicely.

After the international banking cartel's "First Bank of the United States" was shut down in 1811

"Teach those impudent Americans a lesson. Bring them back to colonial status."
~Nathan Mayer Rothschild

The nation held captive by the Rothschild interests, Britaiin, attacked America in the War of 1812.  See how that works?

“When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.”
~ Napoleon Bonaparte

Fri, 05/10/2013 - 07:58 | 3547598 Ranger4564
Ranger4564's picture

http://www.zerohedge.com/article/jim-grant-and-james-turk-discuss-endgam...

 

Well, capitalism is the transfer of wealth from the poor to the rich, and because of the extent of exploitation is limited by the willingness of the poor to tolerate the extraction, debt facilitates the extraction without so much objection because it is extracting the wealth from a future you, a you that is as yet unaware of the future condition, and therefore less intolerant.  The reason debt is so popular as the mechanism of destruction today is because the lender is able to avoid the tumult to a greater extent than if they had imposed a levy right now.

Of course, the situation for most citizens is that they're being pressed in the present and in the future. The reason today that the tumult is understated is because the offense against the citizens is often not personal, it's broadly multinational, abstracted / generalized, and because the people have been beaten down for so long, we're like the 2 women in that 4 women kidnapping case... even when the door is open, people choose to stay inside because they're afraid of being punished. So cowardice keeps most people trapped. We tolerate the torture because we're afraid the punishment would be worse if we objected. And indeed, the government / bankers are making the punishment worse for those who choose to act now. Eventually, we'll have to stand up against them. If we don't, they will just make life a living hell for our children and grandchildren.

By the way, I am not as big a fan of Grant as it seems everyone else here is. For someone so "intelligent" he seems to mostly demand a return to a bygone era instead of envisioning a more creative future. I'm sick of regressives, I am looking for an insightful but grounded futurist.

Fri, 05/10/2013 - 09:41 | 3547981 Greenhead
Greenhead's picture

Words have power and your phrase "capitalism is the transfer of wealth from the poor to the rich" clearly shows you have no idea what you are talking about.  Drop the agenda, please.  You don't have to buy the stuff if it doesn't have value for you.  I don't have to trade with you if you don't have value for me.  Yes, fear and cowardice are what keeps most people from living but it is a choice they get to make.  The control of the government by the rich and powerful isn't capitalism.  Call it anything else, cronyism, mordida, fascism, etc. and you will be much more accurate.  No doubt we've given up involvement for "whats on Idol?" but bread and circus has been around for a long time.

Sun, 05/19/2013 - 01:03 | 3577297 All Risk No Reward
All Risk No Reward's picture

Agreed.  Socrates considered the meaning of words deeply because he knew that when words had no real meaning it was easy to manipulate the general population.

All governments run a spectrum of authoritarianism.

We can spend all day describing the deception in which the authoritarianist structure wraps itself (communism, socialism, capitalism, etc...), but that's majoring in the minors.

The current government is controlled by financial tyrants and the people they rule over are chumps.  What is that, a Reverse Fascist Chumptocracy?

A use the adjective reverse to describe that the government is not taking over the corporation, rather, the Biggest Finance Capital Cartel has taken over government and the mega corporations.

Every citizen will either 1) become scared of anything big and avoid big or 2) will be ruled by the money power that controls everything big.

Thu, 05/09/2013 - 21:39 | 3546816 suicidalpsychologist
suicidalpsychologist's picture

Someone tell these clowns they have like 5 inches thick of make up stuffed on their faces.

Thu, 05/09/2013 - 21:47 | 3546833 Burt Gummer
Burt Gummer's picture

Marc Faber Says Keep Stacking........ Bitchez.

 

http://www.youtube.com/watch?v=mfXC9T8hzlY

Thu, 05/09/2013 - 22:01 | 3546868 RaceToTheBottom
RaceToTheBottom's picture

Marc was not there.  That one was middle america lamenting their world has changed.  Bring on Marc

Thu, 05/09/2013 - 21:52 | 3546842 ChanceIs
ChanceIs's picture

I saw Jim Grant down at the American Enterprise Institute a few years back.  He was hawking his new book, "Mr. Market Miscalculates."  I bought it in the lobby and got the autograph.  (What can I say?  I have no autographed baseballs but autographed geekish econ books.)  I asked him to write on the inside where the next bubble will be - expecting him to say "bonds."  He chuckled and wrote...."For Mark, who will know much better than I where the next bubble will appear."

I am a big Grant fan.  He gets it.  I am easy.  Anybody who casts aspersions on Bernanke wins my affections.  The pundits were joking about him being the next Fed chair.  We could do worse.  I think he daid something like...I couldn't be Fed chair because the first thing i would do would be to get rid of it.

He is one of the few out there who displays some moral sentiment.  Not just references to history and Black-Scholes models.  You know....Bernanke is killing grandmothers with hs low rates.

Thu, 05/09/2013 - 21:55 | 3546856 Go Tribe
Go Tribe's picture

Obama and bernanke, granny killers.

That could stick.

Thu, 05/09/2013 - 22:06 | 3546882 Alpo for Granny
Alpo for Granny's picture

The sons a bitches haven't gotten me yet but they're trying.

Thu, 05/09/2013 - 23:21 | 3547123 RopeADope
RopeADope's picture

Bernanke is the leading cause of abortions in the US.

Fri, 05/10/2013 - 04:20 | 3547460 Jones79
Jones79's picture

they're not only killing grannies' purchasing power, they're killing other economies, too.  excess investible funds of professional money managers are going into junk bonds (now yielding under 5%, as Grant mentioned and also in wsj on 5/9/13) and southern euro zone garbage debt backstopped by the ECB who will soon be charging customers to keep their own cash in the bank.  everybody is being forced to move out the risk curve.  fondly i look upon the days when this only affected granny.     

Thu, 05/09/2013 - 22:58 | 3547051 Everything_is_j...
Everything_is_just_fine...right's picture

What's the best Jim Grant book to read? Thanks

Thu, 05/09/2013 - 23:20 | 3547120 ChanceIs
ChanceIs's picture

I can't tell you.  The guy is prolific.  Mr. Market is a compilation of his best articles over the years.  It is nice because you can pick it up and start reading in the middle.

He wrote a book on Bernard Baruch - one of my favorite investors.  Odda are only 10% of the denizens of this board have ever heard of Baruch.  It ays a lot about Grant that he would want to write about him.

Per Baruch:

If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he is wrong.

Always do one thing less than you think you can do.

I made my money by selling too soon.

Fri, 05/10/2013 - 09:45 | 3547998 DriveByLurker
DriveByLurker's picture

IMHO, "Money of the Mind: Borrowing and Lending in America from the Civil War to Michael Milken"

Thu, 05/09/2013 - 21:51 | 3546843 blindman
blindman's picture

the man is a genius, ignore him.

Thu, 05/09/2013 - 21:52 | 3546848 Diablo
Diablo's picture

"the thing this money chases is variable."

By Jim Grants reasoning can you not say that this money was chasing gold too? 

Thu, 05/09/2013 - 22:00 | 3546865 ChanceIs
ChanceIs's picture

Grant is one of the few who makes that rather obvious insight - that the thing money chases is variable.  Is the price of US Treasuries cranked into the CPI???  That wasn't a joke on my part.  Who would utter such sacrilege?   But....it's true.  Used to be that $1K would get you 500 Bic Macs or $40 annually from a T Bond with 50 Big Macs to spare.  Now you get 450 Big Macs and $2 per annum with the Treasury and NO Big Macs to spare.  Treasuries cost too much.  Why is that not inflation?

Sure you can say that it is chasing gold.  By the same token you can say that it is being used as margin to short gold - for those would don't believe in good old naked shorting, especially when th regulators are looking the other way.

Fri, 05/10/2013 - 00:10 | 3547217 chindit13
chindit13's picture

There is no "naked shorting" in futures markets.  The very nature of their structure allows two sides to a trade.  Longs don't have to prove a need for the good, and shorts don't have to own it to sell it.  Don't get confused with naked shorting of stocks, where one must borrow stock to cover a short sale.  Stocks are for immediate delivery, futures are a contract for, well, future delivery.

Two very different things.

I agree Jim is a down-to-Earth, beautifully witty, plain old good guy.  The world of finance has a lot of clowns, but only a few really good comedians.  It takes more talent to be funny than rich.

Fri, 05/10/2013 - 09:23 | 3547917 ChanceIs
ChanceIs's picture

Quite correct.  I was trying to suggest that some folks have to post the proscribed amount of margin while others don't.  Or at least until the end of the day when the stops have all been triggered and the position you took w/o any margin at all has developed its own margin due to its intraday profitability.

Fri, 05/10/2013 - 07:30 | 3547623 hootowl
hootowl's picture

.....Not yet......But soon!

 

STARVE THE BEAST!!!

Thu, 05/09/2013 - 21:55 | 3546855 Diogenes
Diogenes's picture

Why do people keep saying gold is in a bull market? It has been dropping in value for almost 2 years and is now almost $500 below its peak?

Thu, 05/09/2013 - 22:03 | 3546874 blindman
blindman's picture

the human life span exceeds 2 years to any where from
2 to 100, more or less, years and then gold will remain.

Fri, 05/10/2013 - 00:56 | 3547280 Shell Game
Shell Game's picture

@Diogenes  http://www.ritholtz.com/blog/wp-content/uploads/2013/05/0503chart.jpg

it's all about perspective and strong hands..

Fri, 05/10/2013 - 09:13 | 3547890 Diogenes
Diogenes's picture

Good example. If houses, or stocks, or any other investment dropped 20% they would call it a bear market. Why not gold?

Fri, 05/10/2013 - 10:06 | 3548077 Shell Game
Shell Game's picture

I'm not one for strict definitions, so won't be musch help.  But when housing was in a bear market it was supported by bearish fundamentals.  Gold, on the other hand, still has bullish fundamentals that grow every month the Fed prints $100B.  Additionally, gold's 11 year run needs corrective cooling to sustain further upward momentum. 

One more thing, I am convinced of price suppression/manipultion simply because in terms of pricing gold according to historical inflation it should be at $2,500-$3,000/oz by now.  This is strong evidence of manipulation.

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