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Jim Grant Discusses The Fed's 'Backward Shooting Gun', And Black Walnut Tree Treasury Replacements

Tyler Durden's picture




 

Yesterday, when discussing the forthcoming implications of the Libor scandal, we said that in the barrage of coming lawsuits, "the entity that will be sued by proxy is the Federal Reserve, whose Federal Funds rate is really the setter for the baseline Libor rate." This claim came at an opportune time, just hours before one of the Fed's most vocal critics (and gold standard advocates), Jim Grant, appeared on TV to discuss precisely the same thing. Best summarizing his position is a cartoon that appeared in a recent issue of Grant's Interest Rate Observer in the context of Lieborgate, and who is really at fault here.

What follow next are some of the traditionally brilliant bullet point that we have come to associate with Grant.

On the Fed's arsenal:

The Fed is not out of bullets; the trouble is its gun shoot backwards. These massive interventions in the marketplace distort the price we call interest rates.

On Liebor and the Fed:

The banks fixed Libor. The Fed fixes rates. The banks do this surreptitiously and opportunistically. the Fed does it for a living.

On whom anger should really be focused:

The idea that these guys talking about what they might finance their bank, that they are in charge of manipulating interest rates is absurd. The central banks do it all the time, they do it massively. The outrage ought to be directed at them...

On the Fed's centrally-planned "reality show":

Ever see the Truman Show where Jim Carrey's character finds out
he is living in a TV set: he finds out because he rows his boat into the painted canvas sky: that is life under the rule of central banks.

On the paradoxical perfect storm which everyone sees:

Everyone is talking about the "perfect storm": the fiscal cliff, and China, and Greece, and Europe, there is a constellation of bad news: the Wall Street Journal is the grimmest reading in years. How can this be a perfect storm if we can see it coming?

One observation which our European readers will likely not find too palatable:

The trouble with Europe is they work 5 hours a day, nothing to do with a shortage of Euros.

And finally, where people should get "yield":

You plant black walnut trees, and in 30 years they flower to $1000 each, you pay $5 for them, that's a zero coupon tree, that's where you get yield.

Full clip below:

 

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Fri, 07/13/2012 - 00:44 | 2611944 Arnold Ziffel
Arnold Ziffel's picture

Oakland, Californai in trouble?

 

The Ripple Effect of California's Bankruptcies

 

In the latest sign that some U.S. cities are barely making ends meet, the city of Oakland, California Thursday priced a $211 million taxable bond which will help it cover pension obligations. Yes, borrowing money to cover retiree pay.

Moody's Investor Service has proposed adjusting its U.S. public sector pension data to put the unfunded liabilities at $2.2 trillion, nearly triple what they were two years ago.

While market reaction to San Bernardino's pending bankruptcy has been "much calmer than expected," Envision Capital's Marilyn Cohen added, "people are asking 'Is Riverside next?'" referring to the other major city in California's Inland Empire.

Compton's auditors just quit and refuse to sign off on the city's financial reports.


http://finance.yahoo.com/news/ripple-effect-californias-bankruptcies-203... 

 

Holy crap!

Fri, 07/13/2012 - 01:45 | 2612009 IAmaMeatPopsicle
IAmaMeatPopsicle's picture

It appears that Mr. Grant has woken up and smelled the Matrix...

 

As others here have stated: the game has been totally rigged for quite some time and it is only the rapid spread of information that is waking people up to that fact...  Why do you think that the PTB are putting the implementation of their surveillance/police state into high gear?

Fri, 07/13/2012 - 03:06 | 2612056 nathan1234
nathan1234's picture

So if they have shot themselves can we be witnesses at the funeral.

Date and time please

 

Fri, 07/13/2012 - 03:17 | 2612060 Johnk
Johnk's picture

Jim Grant is the greatest pundit of the past 30 years, bar none.  Who's better than Jim? I'll tell you who. No freakin' one.

 

He's just a little early.

 

 

Fri, 07/13/2012 - 03:58 | 2612073 Johnk
Johnk's picture

It's late, but I hope to find a dumber person than Rich Bagg before I sleep. It shouldn't be hard.

Fri, 07/13/2012 - 04:58 | 2612089 Sandmann
Sandmann's picture

Bob Diamond and John Corzine share attorney Andrew Levander

http://www.dechert.com/andrew_levander/

Fri, 07/13/2012 - 05:51 | 2612101 Xue
Xue's picture

Black walnut trees bitchez!

Fri, 07/13/2012 - 06:28 | 2612102 PulpCutter
PulpCutter's picture

ROFL.  Grant is full of shit.  If you're getting anywhere near 1K/tree, they've been growning a hell of a lot longer than 30 years - and there's no way every one is going to qualify as a peeler (veneer).  Not a chance.  30 years from seed, if you can find anyone who's interested in buying the twigs at all, you'd get around $100/thousand board feet at the mill: just about what it costs to have an efficient crew log them.  Net: $0.

Not the first time I've heard someone lay out the "grow black walnut" plan, though.  First, off you need to plant or select what grows best in your area; e.g., here in New England the top priced logs are hard maple and red oak.  Overall the best long-term plan is to continually groom the woodlot.  Takes a long time (e.g., 75 years) but done right you can sustainably pull ~$300/acre/year out of it (very rough number).  If a windstrom/fire/bugs/taxes don't get in your way.  We had an early snow, last October, when the red oaks still had their leaves on - probably lost 50% of their value.  Wish I had a dollar for every time somebody came up with a get rich quick scheme on their woodlot. 

I hope Grant's stock picks are more accurate than his woodlot management advice.

 

Fri, 07/13/2012 - 06:26 | 2612107 I am Jobe
I am Jobe's picture

Here's Jeff Gundlach's New Epic Presentation On 'Financial Expressionism' And The State of The Economy

http://www.businessinsider.com/jeff-gundlach-presentation-financial-expr...

I guess Christmas is going to be fucked for years. Yeah go out and shop till you drop crap failing. Enjoy the fucking ride.

Fri, 07/13/2012 - 07:23 | 2612185 latentdissident
latentdissident's picture

"The trouble with Europe is they work 5 hours a day, nothing to do with a shortage of Euros."

Helloooo?!? Have you ever been to Europe or do you just read what US papers write about Greece? Working hours in Europe are on average the same as in the US. Yes we have more vacation, but also our productivity is much higher than Americans', who often sit around doing nothing!

 

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