Jim Grant Refuses To Get Lost In A "Hall-Of-Mirrors" Market

Tyler Durden's picture

The bow-tied-and-bespectacled bringer-of-truth was on Bloomberg TV this morning providing his own clarifying perspective on what we should hope for (and what we should not) from J-Hole this weekend. Jim Grant's acerbic comments on Krugman's view of the world, on the gold standard as a "force for growth and stability", and the "unproven and truly radical methods" of the SNB and Fed, pale in significance when he is asked about the stock market distortions: "I think we live in a hall of mirrors in finance thanks to the zero interest rate regime and the chronic nonstop interventions," and when asked when Bernanke should start raising rates, the simple (yet complex) response is "Last Year! And Eric Rosengren would be in a different line of work." Must watch to understand the central-banker-meme-du-decade.



Grant on what the Federal Reserve needs to do now to get new best practices:

“It needs to get out of the central planning business. The Fed was organized in1914 and opened its doors to conduct a more or less traditional central banking business, meaning it would lend against good collateral to solvent institutions in times of cyclical or seasonal need. It would defend and protect the gold dollar. That was all that its original remit contained. fast forward many decades, and we see the Fed in the business of steering, guiding, manipulating the economy, financial markets, the yield curve. It manipulates and pegs interest rates. It is all over the joint doing what failed in the old eastern bloc.”

On whether the U.S. needs a more rules-based central bank to provide discipline and protection:

“What we need is a central bank that has the humility not to do what it cannot do. And the Fed cannot do what others have failed to do, namely to plan an economy from a central desk in the capital city.”

On the Swiss national bank:

“The Swiss national bank is a little bit like the Fed in that it is undertaking unproven and truly radical methods. It is also a sign of the times that it has to go in and buy astonishing amounts of euros to suppress the appreciation. What we need is currency stability, and we need objective value in currencies. There’s no better way to establish objective value in money than to anchor it to something. “

On whether he would prescribe a gold standard:

“Absolutely…the unintended consequences of massive intervention, and this entails both 0% interest rates and the grotesque enlargement of the Fed’s balance sheet, mostly the risks that the Fed introduces are the risks of the suppression of the basic laws of supply and demand. The reason that the shelves of Wal-Mart are full rather than empty is that freely set prices balance supply and demand in this very complex thing called the economy. That’s what prices do. Prices are discovered in the marketplace…From 100 years before and after the institution of the classical gold standard the price level was the same. 100 years the same.”

On what Krugman gets wrong about presumed disinflation and deflation:

“We Americans spend most of the weekend looking the thing that economists call deflation, but what we call every day low prices.  Falling prices are the sign of among other things, falling cost of production.  They are, in short, a sign of progress.”

On whether the gold standard would lead to economic stability or instability:

“It is a force for growth and stability. It never can be confused with heaven on earth. Paul Krugman ought to consult a book by Charles Goodhart, one of the great eminences of big monetary affairs. He wrote a book about the New York money market in 1900 and 1913, 14 years before the institution of the Fed and Goodhart deemed that period to be the best period on record for New York City banking with regard to stability, solvency and profits, notwithstanding the panic of 1907…What is important is the rules in which these banks operated. The important rule was the owners of the bank were responsible for the solvency. Not the government, the owners. It was a capitalist enterprise.”

On when Bernanke should raise interest rates to get back to a normal economy:

“Last year.”


[Eric Rosengren of the Boston Federal Reserve] will have a different line of work when I take over the Fed.”

On how distorted the stock market is from the central bank intervention:

“I think we live in a hall of mirrors in finance thanks to the zero interest rate regime and the chronic nonstop interventions. We do not know exactly where we are. We have to take a guess. It’s the only world we have. I see that many equities are cheap. They are all relatively cheap with respect to the bond market. Some are absolutely cheap. As it were by virtue of default, I am equity guy rather than a bond guy.”

On what he’d like to see accomplished at Jackson Hole:

“I would like to see the Fed admit it can’t do what it promises to do. That and that alone would do. Bernanke would get up and say, ‘ladies and gentlemen, we have erred. We have blundered into the central planning business when we ought to be in the central bank business. I am going to make things simple. We are going to make the dollar sound. We’re going to let the price mechanism work, and we're going to go home.’”

On Ackerson’s management practices at GM:

“They are improving. The thing for investors to know about GM is that it is an extraordinarily cheap equity. A great deal of upside. It’s very well financed out of bankruptcy. Chances of permanent capital impairment are probably very low. The chances of gain are pretty good.”

On whether he believes in manufacturing renaissance of America:

“That’s a pretty big phrase. I believe in GM at five times the estimate.”

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diogeneslaertius's picture

Holographic Economic Deathstar constructed by NWO madmen = HOM


the goal of course should be obvious to any student of the NWO, planned deindustrialization of the west et al.


but hey, get out your fucking checkbook



what? the entire global economy's input/output matrices switched over to a synthetic amalgamation of algorithms and unicorn sparkles?


is this Real-World or Exercise?



Pladizow's picture

My favorite Grant analogy:

When asked how high can the price of gold go.

He answered 1/T, where T is trust!

HoofHearted's picture

When the people finally get smart enough to vote in someone from ZH for president (and they find someone here who is sucker enough to take the job), Jim Grant will be in charge. Heading branches of the Fed will be people like Peter Schif, Klye Bass, Ann Barnhart, Jim Rickards, et al. (but you have to force those people to take the jobs too.)

Face it. We're screwed six ways to Sunday.

LawsofPhysics's picture

Price discovery is key, one of many problem the "market" has is mark to fantasy accounting.

Price discovery died along with the gold standard some time ago.

Mr Lennon Hendrix's picture

Central Planning is bad....

Buy GM!

merizobeach's picture

"Buy GM!" I think he's implying that at this point, central planning is a given.

AldousHuxley's picture

what's needed is a massive deflation.


lower housing costs.

bankrupt wall st. and banksers who gave out loan bondage like candy and collected commission

no more tax revenue for government to waste.

lower 50% of Americas will wake up hungry and will be forced to deal with the fact that they are in fact poor.

JimBowie1958's picture

Sometimes when I give you an up arrow, I feel like a fucking anarchist.

Not such a bad thing at times.

merizobeach's picture

"We're screwed six ways to Sunday."

And Sunday's just the start of a new week..

I really like your vision of Schiff, Bass, and Rickards at the helm.  Grant, here, seems to have a place at the table, too.

AldousHuxley's picture

high ROI action is in halls of CONgress, not on the market.




Wealthy donors and corporations are more heavily invested in this presidential election than at any time since the 1972 Watergate scandal led to stricter campaign- finance laws.

A series of court decisions and regulatory changes in 2010 unraveled federal limits on donations, paving the way for a return of the big players. They are pooling their money in nonprofits, which keep contributor names secret, and super- political action committees, which amassed $350 million through the end of July.

One-quarter of that money comes from just 10 donors....all old fuckers who hate young Americans.


private equity tax cheats, casino owners, and koch brothers (energy swaps)

slewie the pi-rat's picture

L0L!!! 1/T! and tyler wants us to watch him on mayorBloomberg's channel online!

last year?  slewie said so too!  the greatCeiling"debate"~~~\:>  let me see if can remember what actually happened thru the bong0BiCheZ...    <:/~~~

1) "we"  elected the Tpartee to get theNacy & theBawney OUTA their chairs & CONTROL of the HOUSE of Represntatives

2)  they were s'posed to throw theimselve BODILY upon the mechanisms of the the raging goobermint spending and risk annihilation for the good of our belovedRepublic

3)  they didn't!  something about campaign "contibutions" from their new "constituents" perhaps?  golly!  who could EVER know for sure WHAT happened, aunt em? 

4) so nothing "happened" FISCALLY except "kickling the can"

5) and the checks are in the mail anyhow, tho...

those of you who will "must-view" this TV clip (not for me thanks, i REALLY do not care for TV) can tell me whether jimG actually understands this or not---not the "economics"
as much as the "politics" 

does he understand what happened politically around this very "issue and legislative can-kicking"?  at that very same time:  last year

somebody who watches TV?  anybody?

is this his point?  or is he too polite to hold anyone responsible?

or just junk me for ?remembering?

europeons understand this, right?  i undertand how your guys & dolls did things last year a little i think;  show us yer tits p_Zow-wee!

talk about memories!  L0L!!!

slewie the pi-rat's picture


this is so difficult for slewie!

1:>  the republicunts-controlled lower house REFUSED to INSTST upon the needed FISCAL discipline

2:>  the e.v.e.l. FED establishes ZIRP via "twist" to keep the checks in the mail

3:> of course correlation is NOT causation in economics

4:> POLITICS lead to very strange bed-"fellows" huh jimG?  but not b/c of m.o.n.e.y.?

this so difficult!  does he "get" this? if you don't MIND watching bloomingOnionTV and letting slewie know his "version", of course, ok?

slewie the pi-rat's picture

those of you who like jimG well enuf to turn on T/V

trust divided by "viewing" (clicks):  that's the ticket?  again?

did he "remember" that contitutionally, all bills of "spending" shall orignate in the HOUSE

and that this one didn't?

it was "attached" to some bullshit crapola-bill from a senate committee and then the House "acceted" the "greatCompronise" of 1012?

and then S&P lowered the USA'a credit-rating too!

isn't this all just 1, 2, 3.14, at his point OR have people become confused about what "happened" again?

anybody?  or did slewie just dream this all?

do people think the e.v.e.l. FED went to ZIRP first?  causing their puppets to raise the debt-ceiling to counter the FED's awesome powers to fuk everything up now matter what anybody does?

and the credit worthiness was "taken down" by DEBT in 1913? or 33-4?  or 72? or '08?

what does a brilliant guy like jimG (on T/V!)  think "happened" last year?  huh?  anybody?

slewie the pi-rat's picture

is tyler's intro reliable here?

is it the "market" which is the "hall f mirrors"?

or one or both of the parties?

the congress and it's "rules" which do not hafta follow the law in its simplest meaning?

the entire elected "elect" + the lobbyists?

the MSM isn't a hall of mirrors?

that's reassuring?

keep watching T/V so you can "participate as a citizenist"" and not get "lost"?

didn't versailles have "hall of mirrors"?



Beam Me Up Scotty's picture

The whole problem is too much spending.  The Fed is nothing more than a conduit for our government to spend WAY beyond its means.  The politicians all love that because they can buy a whole lot of votes with that money.  The sheeple go along because they don't understand how QE dilutes the value of their labor.  They still think a dollar is a dollar and gas is $4 a gallon instead of $2 a gallon because of evil speculators, when its nothing more than money dilution.

Politicians have overpromised on government goodies.  Cut some of these fat lazy Americans off of their handouts and make them work.  That would be a good start to deficit reduction.  When is the last time ANYONE in government EVER talked about reducing waste in the budget?  How many BILLIONS are WASTED every year?  Never a mention about that either.  Just RAISE TAXES!!  Its either tax and spend or borrow and spend. SPEND SPEND SPEND!!

lasvegaspersona's picture

As long as the USG can find someone to buy treasuries there won't be inflation. We appear to be near or past that point. In the past the trade deficit was large enough that countries would take the balance in treasuries and our inflation was shipped away. Now the budget deficit is greater than the trade deficit and only the fed can supply the dough. Once this status is the norm it is over...boom....hyperinflation....

For years inflation has been controlled by our ability to ship it away. We have reached the end of that era unless the whole world starts to grow wnd resume the previous scenario....and that is just not happening.

Beam Me Up Scotty's picture

There has been inflation.  They have just changed the method that they use to compute it.  Gas was .99 cents in 1999 or 2000.  How is that for some inflation?  Remember how happy everyone is when they raise your chocolate ration from 30 grams to 20 grams.  Its all propaganda.

jerry_theking_lawler's picture

I explained real MONEY to my parents this weekend.

Scenario: 1962, bottle of soda:0.05, bag of potato chips 0.07, my mother worked as a no-skilled laborer at $35.00/week.  look up the price of gold then and compute prices from today. i did and explained it to them and how the .gov (along with fed) was diluting the money and siphoning off the excess for buying POWER (votes). they understood it fairly quickly.


and in turn, got pissed off that 'they' allowed this to happen because they were sheeple. they actually thought the Constitution would protect them....how naive.

MiltonFriedmansNightmare's picture

The kingpin bankster  prefers that we borrow and spend and borrow some more, and we are more than willing to accommodate. It's all going according to the plan, *the* master central plan.

Anusocracy's picture

Government, through the creation of the FED, has turned into the ultimate moral hazard.

fonzannoon's picture

The last few times I saw Jim Grant on he was actually bullish on the stock market. It actually blew my mind.

Deep79's picture

He better be bullish on stocks


he has got ASS Raped on his bond calls last few years




CrashisOptimistic's picture

Why should it?  He has to generate subscription revenue and to do that he needs free advertising.  Media outlets will provide that to bulls far more so than to bears.

kito's picture

there are two types of "bulls"...one who is a believer in the sham system and its ability to push ever higher based on "fundamentals"...the the other is one who recognizes the broken system but believes that the market will be manipulated ever higher by the fed continuing to force the herd into stocks through debasement and zirp.............just because one is a "bull" doesnt mean they are part of the delusional group of lemmings who cant see past their nose..............

fonzannoon's picture

Agreed but he was a bull in the sense that freaked me out. Also anyone, especially him, advocating the hell out of the gold standard knows the pain that would come along with it initially. It's the reset you speak of.

kito's picture

so he is a confused bull.........hmmm...................in other news, i couldnt help but wonder if this was actually you who put this wager in.........i vaguely recall you mentioning your conversations with some one (or five) percenters recently....i have a feeling that this is fonz........click on the first post.........



fonzannoon's picture

I read the post. A few thoughts. My friends talk about important things like how each of their kids are fractionally more developed at age 2 than everyone else's kids. If you try to throw them off topic dinner is ruined.

More importantly I was banging the QE drum until you and SD1 steered me in the other direction. But I was still vulnerable when you and Dr. Engali made a turkey sandwich bet and I did not have the balls to throw a turkey sandwich out there.....and you think I throw around a grand here and there like it's nothing while at dinner parties?

kito's picture

i always enjoy when parents start blathering about how their child can recite poetry and tackle complex algebraic equations at age 1..............re: the dinner bet, i figured you finally lost your patience with them......once you start to see the truth, other peoples insensible economic outlooks become intolerable...........................

fonzannoon's picture

Every once in a while I lose my patience on here and end up getting my ass handed to me. It's much more fun.

OneTinSoldier66's picture

Just my opinion here: Gold isn't painful. What's painful is the debauching, debasement, and devaluing of 'paper money' and its accompanying legal tender laws. And then watching market-to-model(myth) paper money bankers get bailed out. It's painful, knowing that a huge DEBT BOMB has been built. It's painful to believe that GOLD is the CURE, but have to watch it get marginalized and disparaged by Debt Slave-masters.


Going to Gold wouldn't have to be painful. Gold would simply have to be revalued first. Well, okay, perhaps it would be painful for the paper pushing debt is wealth bankers that would have to actually make their money based upon something I haven't seen in a long time called... 'capitalism'. Bankers would have to actually create wealth rather than debt, what a concept. And it would be painful for the current political mindset because they wouldn't be able to pander for votes based upon stealing from the future so that they can get elected today.


What's with the fear of a Government being debt free? Is it that the Government would know that it is then unable to produce a debt-based currency and therefore can no longer enslave the people? Is that the pain you speak of?


What would probably be painful, at least for some, is if the 'paper' government bond market collapses.

BlackSunshine's picture

I agree Kito. And I find myself in the broken system catagory. A large part of me wants to see how this will all go down, as an experiment. Forgive me for injeccting politics here, because I firmly believe both parties are impotent in serving the people, but if the fiscally radically Republicans get any momentum, they may force the nation back on a fiscally disciplined path, but that's not interesting.

A portion of me wants to see how much more in the hole we can get before we actually see the system detiorioate into chaos (20T USD?, 30 T USD?, 100 T USD?), and the only way to get there is to give power to the socialist spenders, and plan an exit out of the country while chaos insues.

This is much more interesting, taking the family down the Panamerican highway to a South American ranch in Argentina to live out the chaos. Or, the coast of Peru, Lima, decent surfing, etc....

Or have a sailboat at the ready and do the same. That way I can transport guns, gold, medicine, and food, without going through customs.


kito's picture

the republicans are neither fiscal nor radical.....................paul ryan talks about small government but voted for tarp, ndaa, bailout of gm, two wars, debt ceiling increases....etc............BOTH PARTIES EXIST MAINTAIN THEIR EXISTENCE, NOTHING MORE...........................

check out ecuador, great surfing as well.......................

resurger's picture

And he was mostly bullish on GM

CrashisOptimistic's picture

Far too much economic pontification takes place very carefully, or without thought at all, realizing that oil decides all of this and money nothing.

Hell, it's understandable.  How can an economist who was a master of the universe on Wall Street grasp that he is nothing and the dirty, jeans wearing geologist decides what is going to happen, and soon?



Stoploss's picture

Don't forget the primary reason behind the gold/dollar peg. was to control runaway gov't spending, which in turn served to stabilize the dollar, since the biggest deflationary threat to the dollar was / is gov't spending alone.

fonzannoon's picture

Tyler I hope one of you guys is working on something big with regards to this. Or Maybe Reggie already is. This is going to be a big deal and in my opinion it ain't going to be the banks that go down again it is going to be these guys. Big bets gone bad (the anti nirp trade?)

"They’re not trying to garner yield simply by going out further on the yield curve,” said Joel Levine, an associate managing director at Moody’s. “Many companies view the direction of rates ultimately to be going up and you don’t want to be long.”


CH1's picture

Tyler is already doing a big job. (Same for Reggie.)

You should jump in and do it. It is obviously important to you.

fonzannoon's picture

For whatever it;s worth that's not me with the down arrow. I get your point. I can see things pretty well but I am way out of my league around here and I know it.

CH1's picture


I think Sunstein's drones look for opportunities to ding me. Ah well... that's apparently the price of saying the truth as I see it.

AlphaDawg's picture

Mate, rates CANNOT go up, or everything is fucked

AlphaDawg's picture

if rates go up, US will default sooner rather than later

if rates go down, pension funds default


Get with the system man!

madcows's picture

Aye, they're figuring on how to get rates negative right now.  They need the savers to pay off their debt for them.  I'm thinking QEn is in the making.  A little reverse psycology tactic.  Put fear into the stock market to drive them into the bonds at NIRP rates.

Glass Steagall's picture

Central planning, bitchez!

lemonobrien's picture

fuck'n chaiknees; saving money, i think we needs to nuke some motherfucker to get theirs mind straight.

"Damn straight. Leroy"

you know if they'd buy our products we wouldn't have no eco-nomical depression; but, they puts up that chia-knees wall ans hoards it all for themselves.

"Wanna go hunt'n this weekend?"



TruthInSunshine's picture

Those sonofabitches!

In the name of liberty, everyone knows you're supposed to go all-out on a debt/credit (that won't/can't be re-paid) fueled buying spree acquiring useless shit one doesn't need or even really want (and can't afford)!

Storage Wars (the reality & reality TV), bitchez!!!

Anusocracy's picture

Government is a high time preference entity.

It tries to create a high time preference reality for everyone.