Jim Grant: "Gold Is The Ultimate Inoculation Against Harebrained Central Bankers"

Tyler Durden's picture




 

"The central bank imposed interest rates are the source of global financial instability now and in the future," warns Grant's Interest Rate Observer's Jim Grant, adding that "The Fed... has manipulated us into a period of quite eerie stability and measured volatility." Grant believes, given the values (and aware of the risks) that Russian "stocks stand to do very well," and also likes mining stocks as he warns credit markets are overvalued (especially sovereign debt). His conclusion, own gold as "it stands to benefit from the demonstrated, as opposed the theoretically likely, crack up of the [current] monetary arrangements."

 

Gold, he explains, "is the ultimate inoculation against the harebrained doctrine of modern central bankers."

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Tue, 07/29/2014 - 17:35 | 5019671 Groundhog Day
Groundhog Day's picture

Until the fed prints even more and naked shorts the miners out of existence

Tue, 07/29/2014 - 17:37 | 5019680 TheSecondLaw
TheSecondLaw's picture

That will just reduce the supply and push up the price.  And indeed, that's exactly what the Fed is doing and will do even more aggressively. Which is, I think, the point this post is making.

Tue, 07/29/2014 - 17:40 | 5019687 Four chan
Four chan's picture

bow tie journalism>cheerleading journalism.

Tue, 07/29/2014 - 17:58 | 5019756 DoChenRollingBearing
DoChenRollingBearing's picture

I respect Jim Grant a lot.  I believe he is right.  If ever there is a time for anyone not having physical gold now, then this is the best time to buy some.

Tue, 07/29/2014 - 18:03 | 5019760 whotookmyalias
whotookmyalias's picture

I'm sure all the talking heads think they know otherwise.  Gold, silver, and lead bichez.

 

edit - +1 for Scrooge McDuck reference

Tue, 07/29/2014 - 18:41 | 5019906 SoberOne
SoberOne's picture

Gold, once you get it, you get it,  - me

Wed, 07/30/2014 - 06:03 | 5021622 GetZeeGold
GetZeeGold's picture

 

 

 

The best thing about gold is.....it's anonymous.

 

If I want to be tracked....I'll buy Bitcoins.

Tue, 07/29/2014 - 19:26 | 5020089 DavidC
DavidC's picture

DoChen,
Agree about Jim G, a hero! The video a month or two ago with him about Hazlitt and the depression of 1921 was brilliant.

DavidC

Tue, 07/29/2014 - 20:22 | 5020317 Pareto
Pareto's picture

I still think this quote: "The FED can change what things look like, but, the FED can never change what things are." (Grant, on the set of CNBC handing Liesman his ass, December 2013)......is the about the smartest most succint thing anybody has ever said about Central banking EVER.

Wed, 07/30/2014 - 01:17 | 5021309 Kirk2NCC1701
Kirk2NCC1701's picture

JG has it bass ackwards:  It's not the CBs who are hare-brained, but their minions.

The CBs are the hare farmers, we (i.e. 95% of th Pop.) are the hares.  ZH excepted, for the most part, insofar we stack, pack and rack.

Tue, 07/29/2014 - 19:53 | 5020193 Argos
Argos's picture

Kind of sexually provacative from her, "where do you keep your gold?  Under your BED?"

Tue, 07/29/2014 - 20:31 | 5020370 Crazed Smoker
Crazed Smoker's picture

Haha.   I missed that.   So then he should have said "your welcome to come have a look".

Tue, 07/29/2014 - 17:50 | 5019733 michaelbrownira
michaelbrownira's picture

they can print as much as they want... gold price will go up as more they print.

Michael Brown

Tue, 07/29/2014 - 17:35 | 5019672 TheSecondLaw
TheSecondLaw's picture

As history has shown time and again.

Tue, 07/29/2014 - 17:38 | 5019678 Dr. Engali
Dr. Engali's picture

Yep, sure is. It will even protect you from bald bearded central bankers too.

Tue, 07/29/2014 - 17:39 | 5019684 Dazman
Dazman's picture

How about from a  little gremlin called Yellen?

Tue, 07/29/2014 - 17:59 | 5019724 Dr. Engali
Dr. Engali's picture

You mean grandma? How can you be so awful to grandma? I think there is something seriously wrong with you. That's it, no cookie for you.

Tue, 07/29/2014 - 18:42 | 5019908 Four chan
Four chan's picture

you mean woodie allen? listen to her stand up its hilarious.

Tue, 07/29/2014 - 17:44 | 5019701 saints51
saints51's picture

Well,yeah!!!!

Tue, 07/29/2014 - 17:44 | 5019702 giorgioorwell
giorgioorwell's picture

Oh, gee, another one from Jim Grant. Well, eventually they'll be right about gold...but good lord, you better be very patient and have blinders on.  

Tue, 07/29/2014 - 17:58 | 5019759 malek
malek's picture

Better be very patient?

It's all about doing the right thing, without waiting to get rewarded for doing so.

Tue, 07/29/2014 - 18:06 | 5019788 giorgioorwell
giorgioorwell's picture

yes, you heard me, patient, unless you have somehow discovered some way to live for 150 years. If you had told most gold buyers here on ZH back in 2010, that we would still be sitting here in 2014 with gold at 1,300 and the DOW at 16,912 then you would have been told that is impossible and breaks every rule of economics/finance/central banking etc.  

I own gold myself and ain't selling any, it's insurance not an investment, but it is comical how off every single gold commentor of note (Jim Grant, Marc Faber, etc) has been about gold prices in the medium term.   They are no more clued in about where gold is going, than Jim Cramer is about where the stock market is going.

Oh, and don't think Uncle Sammy won't find a way to get his hands on your gold or tax the @#$ out of it, if it does get to $10k an ounce.  

 

 

Tue, 07/29/2014 - 18:25 | 5019860 Spitzer
Spitzer's picture

You can't argue against the laws of economics. I am as bewildered as anyone. But gravity is gravity.

The last bit of capitalism died in 2008. We all know this. The "market" hasn't been able to reign in the Fed but it will. That doesn't make these guys wrong just because it didnt happen yet

Tue, 07/29/2014 - 19:09 | 5020012 FeralSerf
FeralSerf's picture

Or, in other words, "all comes to he who waits".

(Including death.)

Tue, 07/29/2014 - 20:27 | 5020345 Tapeworm
Tapeworm's picture

If you insist on using the words, reign, rein, rain, you should know which one to use and not make an ass of yourself as do so many others that stumble on useage.

Tue, 07/29/2014 - 20:35 | 5020390 robertocarlos
robertocarlos's picture

In the words of JPM. "Oh deer!".

Tue, 07/29/2014 - 23:13 | 5021042 Prisoners_dilemna
Prisoners_dilemna's picture

It's "usage".

 

Keep stacking.

Go Honeybadger.

Wed, 07/30/2014 - 04:43 | 5021544 August
August's picture

Honeybadger knows... always use "rein".  That way you're never more than one letter off, and readers will think it's a typo, rather than a refelection of sub-par edumacation.

Fri, 08/01/2014 - 01:58 | 5024123 MeelionDollerBogus
MeelionDollerBogus's picture

#1 this is what gold's fiat future looks like

http://imgur.com/QuOILO8

http://imgur.com/qXy0cxo

#2 uncle sammy isn't my uncle: he has zero jurisdiction over my life, property, movements, nothing at all. Zero.

#3 no one has ever had to wait 150 years for gold to pay off. Ever. Things aren't different this time. They never are.

Wed, 07/30/2014 - 16:19 | 5024111 MeelionDollerBogus
MeelionDollerBogus's picture

Wrong.

That which has no wait has no reward.

You can get lucky or you can steal but you can't actually get a reward with zero time.

Tue, 07/29/2014 - 17:45 | 5019712 DirkDiggler11
DirkDiggler11's picture

Jim Grant:
Only a fool would fail to need his advice to own gold. Enough said.

Tue, 07/29/2014 - 18:38 | 5019897 DoChenRollingBearing
DoChenRollingBearing's picture

Stronger wording than what I wrote above, but yes, enough said.

Tue, 07/29/2014 - 17:47 | 5019719 AgeOfJefferson
AgeOfJefferson's picture

The magic question though is WHEN does the Fed lose its grip on interest rates?  What event may be on the horizon that will eventually push the 10-year Treasury note above 3% after which it will be game over?

Tue, 07/29/2014 - 17:50 | 5019728 Dr. Engali
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Never. It's not going to happen. The ten year will hit 1% before it hits 4%.

Tue, 07/29/2014 - 18:09 | 5019802 AgeOfJefferson
AgeOfJefferson's picture

Why do you you say so and how can you be so sure? Are u sayin the Fed can print to infinity?

Tue, 07/29/2014 - 19:02 | 5019967 disabledvet
disabledvet's picture

Says interest rate observer not "gold observer." Restoration of convertibility would be nice.  "Buy gold" is just reflexive thinking.

What about interest rates?  The spreads are still massive...borrow short to lend long still looks like a layup to me...even with a compression trade due to the ACA et al.  Does he even mention the sheer scope and scale of the Federal Government and how failed policies create recessions?

If not I would hit the "unsubscribe" button.

Tue, 07/29/2014 - 19:43 | 5020164 nosoeawe
nosoeawe's picture

as long as their are countries, the fed will continue to print.

A - America 
B - Belgium (via EuroClear)

we aren't even at C yet and it's a long way to Z.

interest on 17 trillion is why they can never quit printing 

Tue, 07/29/2014 - 20:42 | 5020425 Pareto
Pareto's picture

I agree with Doc because the Bond market (which used to keep the FED in check), is now over 40% owned by the FED.  The FED is the Bond market.  There is zero chance, in my opinion, that the Bond market will ever be able to exercise the kind of market tell it once did.  Any spike in yields will be quickly and quietly mopped up by the FED janitor - like whistling past the grave yard - and who is going to step in front of that Mac truck.  Nooooooooobody.

 

I own gold not because things will normalize (rates rise, stocks shit the bed, rush to safety etc....rinse wash and repeat).  I own gold because things are NEVER going to normalize.  And I doubt ZH'ers are accumulating it hand over fist - you have to live too.  But its a part (significant part not just 5% Jim Kramer part), of an overall strategy of trying to protect and preserve savings in something other than stocks and savings accounts.  Farmland and related assets are another part.  Other businesses as well, because I think investing in people who have an idea and have demonstrated a market need for a product or service they are offering.  As my math prof used to say, "there is more than one way to get to the party."

Tue, 07/29/2014 - 17:48 | 5019722 slaughterer
slaughterer's picture

Gold is about to enter a 10 year Bear market.  I expect it to drop to $600 within two years.  

Tue, 07/29/2014 - 17:54 | 5019744 Clint Liquor
Clint Liquor's picture

Let me guess, Elliott Wave?

Wed, 07/30/2014 - 06:06 | 5021625 GetZeeGold
GetZeeGold's picture

 

 

In two years we should be in debt another 6 trillion.......gold should be around zero by then.......jist cause.

Fri, 08/01/2014 - 02:00 | 5024089 MeelionDollerBogus
MeelionDollerBogus's picture

Those elliot wavers are no good at math.
http://imgur.com/vf4HAK3,v7kuaQN
Mind you my equations aren't showing here either, but there are equations mapping gold price & date to log values & re-mapping it back.
I was a bit lazy, I messed with an image overlay until I got dates & prices to fit under the stretched image fragment.
I'll get to the final details later :) It won't be hard but it is time-consuming. I need only to take the older data & apply a linear transform to the date (log values) and the price (log values) until it fits the existing 2011 to 2014 data (R2 > 0.98 should snap into place when I get it right).
Then graph ahead on the same patterns to apparently 2024.
Then simply render the graph inverting the choice of base (1.45 for date, 1.80 for gold, in this case, after dates were adjusted down so the excel/unix date values were a ratio of 100:1 for last_date:first_date).

http://imgur.com/QuOILO8 http://imgur.com/qXy0cxo

So far still no R2. To do this I need to raster-sample out of the scatterplot for old & new prices, then re-scatterplot the overlapping prices (real vs predicted for back-testing) and get the R2 for the equation. Honestly... I don't have the time.

Tue, 07/29/2014 - 17:59 | 5019764 techstrategy
techstrategy's picture

Of you believe that, you haven't thought about it too clearly.  What's on the Fed balance sheet?  Long duration MBS and UST... And gold.  When either interest rates move up (fairytale growth scenario) or debts cannot be serviced by cash flows (current path), that which underpins fiat gets whacked.  Only gold can reliquify the system.

Tue, 07/29/2014 - 18:02 | 5019773 malek
malek's picture

 Gold is about to enter a 10 year Bear market

You mean the last 1.5 years were still a bull market?

Fri, 08/01/2014 - 02:00 | 5024067 MeelionDollerBogus
MeelionDollerBogus's picture

Bear/bull markets don't last less than 5 years or so, gold's bull market being since 2001 & ongoing.

Preview to come... http://imgur.com/v7kuaQN

updated : http://imgur.com/QuOILO8 http://imgur.com/qXy0cxo

Tue, 07/29/2014 - 18:03 | 5019776 Pareto
Pareto's picture

I will agree whole heartedly if and only if central banks were to actually steward their currency.  Given that not only will this NOT happen, but also because it CAN'T happen (if interest rates were to normalize - even a little bit - debt servicing costs will crush most government's ability to honor their obligations given sub 2% GDP (most require 4% under a normalized interest rate environment - all else equal.....ummmmmm not going to happen)), then Gold is your ultimate hedge against runaway central bank inflation (not to be confused with the new Keynesian definition of inflation (rising prices)). 

I like ya slaughterer but don't like the observation.

cheers to ya

Tue, 07/29/2014 - 18:07 | 5019799 sus sapientiae
sus sapientiae's picture

If by "gold" you mean paper proxy for gold, then you could very well be correct.  But I presume that should the fiat exchange rate for that paper proxy drop to $600, there will not be any physical gold available for purchase at that price.

Tue, 07/29/2014 - 19:26 | 5020092 Dazman
Dazman's picture

My instincts tell me gold will go up, so it will probably therefore go down.

 

And I assure you, if the paper price goes to $600, there WILL be physical sellers at that price... a stop run in the physical sense.

Tue, 07/29/2014 - 20:26 | 5020340 MeelionDollerBogus
MeelionDollerBogus's picture

Nope.

http://imgur.com/vf4HAK3,v7kuaQN

Gold is about http://imgur.com/v7kuaQN

to have a 10 year addition to the 14 year bull market and exceed 4500/oz USD.

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