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Must Read: Jim Grant Crucifies The Fed; Explains Why A Gold Standard Is The Best Option
The Federal Reserve Bank of New York has invited some of its public critics to visit the bank to unburden themselves of their criticisms. On March 12, it was Jim Grant's turn. The text of his remarks follows. (highlights ours)
Piece Of My Mind
My friends and neighbors, I thank you for this opportunity. You know, we are friends and neighbors. Grant’s makes its offices on Wall Street, overlooking Broadway, a 10-minute stroll from your imposing headquarters. For a spectacular vantage point on the next ticker-tape parade up Broadway, please drop by. We’ll have the windows washed.
You say you would like to hear my complaints, and, on the one hand, I do have a few, while on the other, I can’t help but feel slightly hypocritical in dressing you down. What passes for sound doctrine in 21st-century central banking—so-called financial repression, interest-rate manipulation, stock-price levitation and money printing under the frosted-glass term “quantitative easing”—presents us at Grant’s with a nearly endless supply of good copy. Our symbiotic relationship with the Fed resembles that of Fox News with the Obama administration, or—in an earlier era—that of the Chicago Tribune with the Purple Gang. Grant’s needs the Fed even if the Fed doesn’t need Grant’s.
In the not quite 100 years since the founding of your institution, America has exchanged central banking for a kind of central planning and the gold standard for what I will call the Ph.D. standard. I regret the changes and will propose reforms, or, I suppose, re-reforms, as my program is very much in accord with that of the founders of this institution. Have you ever read the Federal Reserve Act? The authorizing legislation projected a body “to provide for the establishment of the Federal Reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper and to establish a more effective supervision of banking in the United States, and for other purposes.” By now can we identify the operative phrase? Of course: “for other purposes.”
You are lucky, if I may say so, that I’m the one who’s standing here and not the ghost of Sen. Carter Glass. One hesitates to speak for the dead, but I am reasonably sure that the Virginia Democrat, who regarded himself as the father of the Fed, would skewer you. He had an abhorrence of paper money and government debt. He didn’t like Wall Street, either, and I’m going to guess that he wouldn’t much care for the Fed raising up stock prices under the theory of the “portfolio balance channel.”
It enflamed him that during congressional debate over the Federal Reserve Act, Elihu Root, Republican senator from New York, impugned the anticipated Federal Reserve notes as “fiat” currency. Fiat, indeed! Glass snorted. The nation was on the gold standard. It would remain on the gold standard, Glass had no reason to doubt. The projected notes of the Federal Reserve would—of course—be convertible into gold on demand at the fixed statutory rate of $20.67 per ounce. But more stood behind the notes than gold. They would be collateralized, as well, by sound commercial assets, by the issuing member bank and—a point to which I will return— by the so-called double liability of the issuing bank’s stockholders.
If Glass had the stronger argument, Root had the clearer vision. One can think of the original Federal Reserve note as a kind of derivative. It derived its value chiefly from gold, into which it was lawfully exchangeable. Now that the Federal Reserve note is exchangeable into nothing except small change, it is a derivative without an underlier. Or, at a stretch, one might say it is a derivative that secures its value from the wisdom of Congress and the foresight and judgment of the monetary scholars at the Federal Reserve. Either way, we would seem to be in dangerous, uncharted waters.
As you prepare to mark the Fed’s centenary, may I urge you to reflect on just how far you have wandered from the intentions of the founders? The institution they envisioned would operate passively, through the discount window. It would not create credit but rather liquefy the existing stock of credit by turning good-quality commercial bills into cash— temporarily. This it would do according to the demands of the seasons and the cycle. The Fed would respond to the community, not try to anticipate or lead it. It would not override the price mechanism— as today’s Fed seems to do at every available opportunity—but yield to it.
My favorite exposition of the sound, original doctrines is a book entitled, “The Theory and Practice of Central Banking,” by H. Parker Willis, first secretaryof the Federal Reserve Board and Glass’s right-hand man in the House of Representatives.
Writing in the mid-1930s, Willis pointed out that the Fed fell into sin almost immediately after it opened for business in 1914. In 1917, after the United States entered the Great War, the Fed set about monetizing the Treasury’s debt and suppressing the Treasury’s borrowing costs. In the 1920s, after the recovery from the short but ugly depression of 1920-21, the Fed started to implement open-market operations to sterilize gold flows and steer a desired macroeconomic course.
“Central banks,” wrote Willis, glaring at the innovators, “…will do wisely to lay aside their inexpert ventures in halfbaked monetary theory, meretriciousstatistical measures of trade, and hasty grinding of the axes of speculative interests with their suggestion that by doing so they are achieving some sort of vague ‘stabilization’ that will, in the long run, be for the greater good.”
Willis, who died in 1937, perhaps of a broken heart, would be no happier with you today than Glass would be—or I am. The search for “some sort of vague stabilization” in the 1930s has become a Federal Reserve obsession at the millennium.
Ladies and gentlemen, such stability as might be imposed on a dynamic capitalist economy is the kind that eventually comes around to bite the stabilizer.
“Price stability” is a case in point. It is your mandate, or half of your mandate, I realize, but it does grievous harm, as defined. For reasons you never exactlyspell out, you pledge to resist “deflation.” You won’t put up with it, you keep on saying—something about Japan’s lost decade or the Great Depression. But you never say what deflation really is. Let me attempt a definition. Deflation is a derangement of debt, a symptom of which is falling prices. In a credit crisis, when inventories become unfinanceable, merchandise is thrown on the market and prices fall. That’s deflation.
What deflation is not is a drop in prices caused by a technology-enhanced decline in the costs of production. That’s called progress. Between 1875 and 1896, according to Milton Friedman and Anna Schwartz, the American price level subsided at the average rate of 1.7% a year. And why not? As technology was advancing, costs were tumbling. Long before Joseph Schumpeter coined the phrase “creative destruction,” the American economist David A. Wells, writing in 1889, was explaining the consequences of disruptive innovation.
“In the last analysis,” Wells proposes, “it will appear that there is no such thing as fixed capital; there is nothing useful that is very old except the precious metals, and life consists in the conversion of forces. The only capital which is of permanent value is immaterial—the experience of generations and the development of science.”
Much the same sentiments, and much the same circumstances, apply today, but with a difference. Digital technology and a globalized labor force have brought down production costs. But, the central bankers declare, prices must not fall. On the contrary, they must rise by 2% a year. To engineer this up-creep, the Bernankes, the Kings, the Draghis—and yes, sadly, even the Dudleys—of the world monetize assets and push down interest rates. They do this to conquer deflation.
But note, please, that the suppression of interest rates and the conjuring of liquidity set in motion waves of speculative lending and borrowing. This artificially induced activity serves to lift the prices of a favored class of asset—houses, for instance, or Mitt Romney’s portfolio of leveraged companies. And when the central bank-financed bubble bursts, credit contracts, leveraged businesses teeter, inventories are liquidated and prices weaken. In short, a process is set in motion resembling a real deflation, which then calls forth a new bout of monetary intervention. By trying to forestall an imagined deflation, the Federal Reserve comes perilously close to instigating the real thing.
The economist Hyman Minsky laid down the paradox that stability is itself destabilizing. I say that the pledge of a stable funds rate through the fourth quarter of 2014 is hugely destabilizing. Interest rates are prices. They convey information, or ought to. But the only information conveyed in a manipulated yield curve is what the Fed wants. Opportunists don’t have to be told twice how to respond. They buy oil or gold or foreign exchange, not incidentally pushing the price of a gallon of gasoline at the pump to $4 and beyond. Another set of opportunists borrow short and lend long in the credit markets. Not especially caring about the risk of inflation over the long run, this speculative cohort will fund mortgages, junk bonds, Treasurys, what-have-you at zero percent in the short run. The opportunists, a.k.a. the 1 percent, will do fine. But what about the uncomprehending others?
I commend to the Federal Reserve Bank of New York Financial History Book Club (if it doesn’t exist, please organize it at once) a volume by the British scholar and central banker, Charles Goodhart. Its title is “The New York Money Market and the Finance of Trade, 1900-1913.” In the pre-Fed days with which the history deals, the call money rate dove and soared. There was no stability—and a good thing, Goodhart reasons. In a society predisposed to speculate, as America was and is, he writes, unpredictable spikes in borrowing rates kept the players more or less honest. “On the basis of its record,” he writes of the Second Federal Reserve District before there was a Federal Reserve, “the financial system as constituted in the years 1900-1913 must be considered successful to an extent rarely equaled in the United States.” And that not withstanding the Panic of 1907.
My reading of history accords with Goodhart’s, though not with that of the Fed’s front office. If Chairman Bernanke were in the room, I would respectfully ask him why this persistent harking back to the Great Depression? It is one cyclical episode, but there are many others. I myself draw more instruction from the depression of 1920-21, a slump as ugly and steep in its way as that of 1929-33, but with the simple and interesting difference that it ended. Top to bottom, spring 1920 to summer 1921, nominal GDP fell by 23.9%, wholesale prices by 40.8% and the CPI by 8.3%. Unemployment, as it was inexactly measured, topped out at about 14% from a pre-bust low of as little as 2%. And how did the administration of Warren G. Harding meet this macroeconomic calamity? Why, it balanced the budget, the president declaring in 1921, as the economy seemed to be falling apart, “There is not a menace in the world today like that of growing public indebtedness and mounting public expenditures.” And the fledgling Fed, face to face with its first big slump, what did it do? Why, it tightened, pushing up short rates in mid-depression to as high as 8.13% from a business cycle peak of 6%. It was the one and only time in the history of this institution that money rates at the trough of a cycle were higher than rates at the peak, according to Allan Meltzer.
But then something wonderful happened: Markets cleared, and a vibrant recovery began. There were plenty of bankruptcies and no few brickbats launched in the direction of the governor of the New York Fed, Benjamin Strong, for the deflation that cut an especially wide and devastating swath through the American farm economy. But in 1922, the first full year of recovery, the Fed’s index of industrial production leapt by 27.3%. By 1923, the unemployment rate was back to 3.2%. The 1920s began to roar.
And do you know that the biggest nationally chartered bank to fail during this deflationary collapse was the First National Bank of Cleburne, Texas, with not quite $2.8 million of deposits? Even the forerunner to today’s Citigroup remained solvent (though for Citi, even then it was a close-run thing, on account of an oversize exposure to deflating Cuban sugar values). No TARP, no starving the savers with zero-percent interest rates, no QE, no jimmying up the stock market, no federal “stimulus” of any kind. Yet—I repeat—the depression ended. To those today who demand ever more intervention to cure what ails us, I ask: Why did the depression of 1920-21 ever end? Given the policies with which the authorities treated it, why are we still not ensnared?
If you object to using the template of 1920-21 as a guide to 21st-century policy because, well, 1920 was a long time ago, I reply that 1929 was a long time ago, too. And if you persist in objecting because the lessons to be derived from the Harding depression are unthinkably at odds with the lessons so familiarly mined from the Hoover and Roosevelt depression, I reply that Harding’s approach worked. The price mechanism is truer and enterprise hardier than the promoters of radical 21st-century intervention seem prepared to acknowledge.
In notable contrast to the Harding method, today’s policies seem not to be working. We legislate and regulate and intervene, but still the patient languishes. It’s a worldwide failure of the institutions of money and credit. I see in the papers that Banca Monte dei Paschi di Siena is in the toils of a debt crisis. For the first time in over 500 years, the foundation that controls this ancient Italian institution may be forced to sell shares. We’ve all heard of hundred-year floods. We seem to be in a kind of 500-year debt flood.
Many now call for more regulation— more such institutions as the Treasury’s brand-new Office of Financial Research, for instance. In the March 8 Financial Times, the columnist Gillian Tett appealed for more resources for the overwhelmed regulators. Inundated with information, she lamented, they can’t keep up with the institutions they are supposed to be safeguarding. To me, the trouble is not that the regulators are ignorant. It’s rather that the owners and managers are unaccountable.
Once upon a time—specifically, between the National Banking Act of 1863 and the Banking Act of 1935—the impairment or bankruptcy of a nationally chartered bank triggered a capital call. Not on the taxpayers, but on the stockholders. It was their bank, after all. Individual accountability in banking was the rule in the advanced economies. Hartley Withers, the editor of The Economist in the early 20th century, shook his head at the micromanagement of American banks by the Office of the Comptroller of the Currency—25% of their deposits had to be kept in cash, i.e., gold or money lawfully convertible into gold. The rules held. Yet New York had panics, London had none. Adjured Withers: “Good banking is produced not by good laws but by good bankers.”
Well said, Withers! And what makes a good banker is more than skill. It is also the fear of God, or, more specifically, accountability for the solvency of the institution that he or she owns or manages. To stay out of trouble, the general partners of Brown Brothers Harriman, Wall Street’s oldest surviving general partnership, need no regulatory pep talk. Each partner is liable for the debts of the firm to the full extent of his or her net worth. My colleague Paul Isaac, who is with me today—he doubles as my food and beverage taster— has an intriguing suggestion for instilling the credit culture more deeply in our semi-socialized banking institutions.
We can’t turn limited liability corporations into general partnerships. Nor could we easily reinstate the so-called double liability law on bank stockholders. But what we could and should do, Paul urges, is to claw back that portion of the compensation paid out by a failed bank in excess of 10 times the average wage in manufacturing for the seven full calendar years before the ruined bank hit the wall. Such a clawback would not be subject to averaging or offset one year to the next. And it would be payable in cash.
The idea, Paul explains, is twofold. First, to remove the government from the business of determining what is, or is not, risky—really, the government doesn’t know. Second, to increase the personal risk of failure for senior management, but stopping short of the sword of Damocles of unlimited personal liability. If bankers are venal, why not harness that venality in the public interest? For the better part of 100 years, and especially in the past five, we have socialized the risks of high finance. All too often, the bankers who take risks don’t themselves bear them. By all means, let the capitalists keep the upside. But let them bear their full share of the downside.
In March 2009, the Financial Times published a letter to the editor concerning the then novel subject of QE. “I can now understand the term ‘quantitative easing,’ wrote Gerald B. Hill of Stourbridge, West Midlands, “but . . . realize I can no longer understand the meaning of the word ‘money.’”
There isn’t time, in these brief remarks, to persuade you of the necessity of a return to the classical gold standard. I would need another 10 minutes, at least. But I anticipate some skepticism. Very well then, consider this fact: On March 27, 1973, not quite 39 years ago, the forerunner to today’s G-20 solemnly agreed that the special drawing right, a.k.a. SDR, “will become the principal reserve asset and the role of gold and reserve currencies will be reduced.” That was the establishment— i.e., you—talking. If a worldwide accord on the efficacy of the SDR is possible, all things are possible, including a return to the least imperfect international monetary standard that has ever worked.
Notice, I do not say the perfect monetary system or best monetary system ever dreamt up by a theoretical economist. The classical gold standard, 1879-1914, “with all its anomalies and exceptions . . . ‘worked.’” The quoted words I draw from a book entitled, “The Rules of the Game: Reform and Evolution in the International Monetary System,” by Kenneth W. Dam, a law professor and former provost of the University of Chicago. Dam’s was a grudging admiration, a little like that of the New York Fed’s own Arthur Bloomfield, whose 1959 monograph, “Monetary Policy under the International Gold Standard,” was published by yourselves. No, Bloomfield points out, as does Dam, the classical gold standard was not quite automatic. But it was synchronous, it was self-correcting and it did deliver both national solvency and, over the long run, uncanny price stability. The banks were solvent, too, even the central banks, which, as Bloomfield noted, monetized no government debt.
The visible hallmark of the classical gold standard was, of course, gold—to every currency holder was given the option of exchanging metal for paper, or paper for metal, at a fixed, statutory rate. Exchange rates were fixed, and I mean fixed. “It is quite remarkable,” Dam writes, “that from 1879 to 1914, in a period considerably longer than from 1945 to the demise of Bretton Woods in 1971, there were no changes of parities between the United States, Britain, France, Germany—not to speak of a number of smaller European countries.” The fruits of this fixedness were many and sweet. Among them, again to quote Dam, “a flow of private foreign investment on a scale the world had never seen, and, relative to other economic aggregates, was never to see again.”
Incidentally, the source of my purchased copy of “Rules of the Game” was the library of the Federal Reserve Bank of Atlanta. Apparently, President Lockhart isn’t preparing, as I am—as, may I suggest, as you should be—for the coming of classical gold standard, Part II. By way of preparation, I commend to you a new book by my friend Lew Lehrman, “The True Gold Standard: A Monetary Reform Plan without Official Reserve Currencies: How We Get from Here to There.”
It’s a little rich, my extolling gold to an institution that sits on 216 million troy ounces of the stuff. Valued at $42.222 per ounce, the hoard in your basement is worth $9.1 billion. Incidentally, the official price was quoted in SDRs, $35 to the ounce—now there’s a quixotic choice for you. In 2008, when your in-house publication, “The Key to the Gold Vault,” was published, the market value was $194 billion. Today, the market value is $359 billion, which is encouraging only if you personally happen to be long gold bullion. Otherwise, it strikes me as a pretty severe condemnation of modern central banking.
And what would I do if, following the inauguration of Ron Paul, I were sitting in the chairman’s office? I would do what I could to begin the normalization of interest rates. I would invite the Wall Street Journal’s Jon Hilsenrath to lunch to let him know that the Fed is now well over its deflation phobia and has put aside its Atlas complex. “It’s capitalism for us, Jon,” I would say. Next I would call President Dudley. “Bill,” I would say, pleasantly, “we’re not exactly leading from the front in the regulatory drive to reduce the ratio of assets to equity at the big American financial institutions. Do you have to be leveraged 89:1?” Finally, I would redirect the efforts of the brainiacs at the Federal Reserve Board research division. “Ladies and gentlemen,” I would say, “enough with ‘Bayesian Analysis of Stochastic Volatility Models with Levy Jumps: Application to Risk Analysis.’ How much better it would please me if you wrote to the subject, ‘Command and Control No More: A Gold Standard for the 21st Century.’” Finally, my pièce de résistance, I would commission, staff and ceremonially open the Fed’s first Office of Unintended Consequences.
Let me thank you once more for the honor that your invitation does me. Concerning little Grant’s and the big Fed, I will quote in parting the opening sentences of an editorial that appeared in a provincial Irish newspaper in the fateful year 1914. It read: “We give this solemn warning to Kaiser Wilhelm: The Skibbereen Eagle has its eye on you.”
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Im confused with the now in that paragraph, but back in the roaring twenties it was golds fault that it could not be counterfeited to meet the demand of greedy credit expansion by the bankers. After the 29 contraction, and subsequent pain that the bankers had bestowed upon the masses, gold was blamed and then repriced. Credit of gold expansion and contraction is to blame, not the gold. Bernanke, Armstrong, Krugman, Kramer etc can only lie to and fool the uninformed about gold and its role as sound money.
lets get the bernank to lecture nest to this guy next time he does the propaganda tour!!
The FED is a criminal drug oops bank cartel.
With the Irish Famine in mind (Skibbereen has a mass grave because it suffered so badly from it), I hope people are stacking jars of food as well as PM's.
Jim Grant is correct about the original charter of the Fed. But his admonishing is pointless, as the electorate of this country and the business and banking interests, through our Congress and POTUS, have asked for, and gotten, an activist FED. The moment unemployment rises, or stocks fall, the populace of this country shouts for "Do something!" from the government and the FED, and they oblige, happily, with more control.
I don't have the solution for the greed and laziness of the something-for-nothing-from-the-government masses in the U.S.
The "electorate" of this nation is the business and banking interests. Isn't fascism great?
This is why Paul even if he can somehow rig Diebold will be assasinated before he can pass anything. Nice words though.
I wonder if the US has any gold reserve left.
They probably have about 50-100 million real ounces left tops. Every other western central bank was selling starting in the 80's until recent times. I see no reason to think the US government, which likely orchestrated the mass selling, did not also sell.
A gold standard is a tool used by the people and the economy for capitalism. Fiat is a political tool used by the government on the people and the economy for control.
Here is another 2 point jump in consumer confidence coming with more great news.
http://blogs.marketwatch.com/thetell/2012/03/30/gas-in-northeast-to-rise-15-to-25-cents-a-gallon-in-coming-weeks-analyst/
See if they invite him again...
yapyapyapyapyap
Like I've said before--they're all gonna fuckin' yap until "normal" stops and heads start rolling and there's blood on the streets.
All this is fucking group therapy of pusses who don't want to accept the fact that the world IS GOING TO SHIT and if you do not prepare, blame no one but yourself.
Ok, so gold will go to $30k and they'll move the decimal place over one to the left to make it look better. Hang on to those nickles.
http://www.sharelynx.com/chartstemp/GoldeWave.php
Interesting piece which fell on deaf ears.
The reason for this is that the underlying cause has nothing to do with history, except as it shows the evidence of the underlying cause of the repeat of this problem through the centuries.
The cause is spiritual.
GREED knows no sense of time or history, no sense of morality (other than immorality), no sense of restraint, logic, or other encumbrances such as man might try to enumerate or allocate.
GREED cannot be legislated out of any system. It is rooted in the nature of man and will always return this self same problem:
That there are men who will stop at nothing to acquire as much power in the form of money that they can.
All else regarding this is irrelevant.
The answer?
Here history DOES have the answer. The GREEDY must be beaten down, removed from office, chastised, punished openly and otherwise castigated and derided. ACTION to do so will beat the evil that is GREED back to slink into the shadows, for a time, from whence it came.
But, it does not die.
It simply just waits for the right time again... when evil GREEDY men rise as they have in the United States and the rest of the world today.
That's a compelling comment. Not to get all Gordon Gekko on you but greed is one of the main drivers of man.
Hoping/plotting/acting/whatever to see greed eradicated is as frutiful as trying to do the same with littering. I dislike both but they are here to stay.
Thanks VV.
Agreed.
Jim Grant, if by some possible purient self-interest you are reading this, I'd just like you to know how much we respect and admire your knowledge, perspective, intellect, objective view and amazing high-brow sarcasm. You represent the optimism we have for a better future.
Godspeed.
hmmm
It costs 100$ to produce a widget, which the corporation then goes and sells for 120$, with a net "gain" of 20$ (profit).
The corporation can then use that 20$ profit to -Pay Workers, -Pay Suppliers, - Expand
Inflation will continue to raise the "costs" of material, so the corp. will have to pay say "110$ in the future" to produce the same widget, the corporation offsets this cost by raising the price to 130$.
The corporation still "appears" to be profitable.
The problem arises, when inflation raises the cost of living of the consumer (people buying widgets), and they can no longer afford 130$ for a widget.
Wages do not go up with inflation (thats the problem), so the corporation finds itself in the position of "I can no longer sell my widgets for 130$", so it is forced to lower the price to say 125$.
That is inflation "pricing".
Now the corporation is making "less profit" so it is not able to expand and hire as well as it could in a world where the inflation did not exist.
--------------------
Now if we had deflation.
The corporations cost of producing that same widget could go down , to say 80$, that leaves the corp a higher profit margin which it can use to hire and expand with.
Deflation makes things cheaper for the "consumer" so the consumer gains a higher standard of living, the corporation gets less stress to keep up with "inflation".
The problem with this is, that people/governments/corporations that are in "debt" find it harder and harder to "pay down" the debt because of the INTEREST on the debt.
Deflation "adds value to the amount owed" and since there is never enough money in circulation to actually have the entire population pay their debts off.... it creates currency destruction that runs away (deflation) out of control.
A gold standard has none of these problems, because 1 oz of gold will have the same value today as it had 30 years ago.
The fluctuation in the value of PM'S is so small and takes such a long time line to change that it makes the perfect currency.
Now how does this impact debt? well if I "borrow" 1 oz of gold and promises to pay back 1.2 oz of gold.
The lender makes a profit, the borrower hopefully used the capital to make a profit greater than his borrowing cost.... and everyone is happy.
The bank makes money and thus can grant larger loans/afford to take a little more risk and still have a safety net, and since the bank is actually "responsible and accountable and the people working at the banks continued employment are dependent on the bank making good decisions" you have less volatility and more careful lending.
Opposed to our current system where your local bank "extends your credit" aka counterfeits money for you out of thin air to help you "borrow" money.
They shouldn't even be allowed to use the word "borrower" in mortgage contracts, because thats not really whats happening! the "borrower" hasn't "borrowed" anything! the "borrower" has simply REQUESTED that the institution PRINTS money in their NAME @ NO RISK to the institution.
(you visiting the bank and getting a "loan" is no different than you calling the mint and asking them to "print you money")
What the company does is try to make the widget cheaper.
They fire all their local workers and make widgets in China.
They make the widget from cheaper materials.
They design it to be throwaway. "Value engneering" and planned obsolescence.
Inflation is characterised by "landfill products" which are barely functional cheap crap. Just like the debased coinage used to pay for them.
Death to thieves ; both those who wear hoodies and those who wear $3k suits. Looters must be shot - or hung , depending on whether rope are a rifle are nearest to hand. Rope, since it is reuseable, has a lower cost per looter.
Wow. What an amazing, inteliigent speech. Too bad he was talking to a society of rapists. Grant is one of the smartest, personable and reasonable economist/investor that I know of.
I agree with all his thoughts. I just wish I was intelligent enough to communicate them to others as he does.
And, don't know why Tyler posted Grant here. CNN will have a full expose, remarks, copies of Grants speech and have it on prime time news. They always bring us the truth.
(sarc)
I never thought a squirrely looking dude in glasses and bowtie would give me a boner.
The Purple Gang spoke more plainly and behaved with more honor.
Zero Hedge. "Maybe not always right, but always... The Truth". Thank you, again and again. Donating to ZH makes my day.
It won't work! All the gold will be hoarded and controlled by the .01%, controlling the metals exchanges, driving the price to infinity, there simply isn't enough of it. Insiders would game it well ahead of Congress' decisions. He's right about everything else though.
Yes because the current system of giving FED member banks money at 0-.25% so they can front run markets while at the same time destroying purchasing power of the avg dude is working quite well.
"Now that the Federal Reserve note is exchangeable into nothing except small change"
Checkmate.
"No TARP, no starving the savers with zero-percent interest rates, no QE, no jimmying up the stock market, no federal “stimulus” of any kind. Yet—I repeat—the (1921) depression ended."
Jim Grant for Treasury secretary! Vote Ron Paul.
Jim Grant for Treasury Secretary. Wow, what a concept! Sorry, just dreaming.
fantastic
It's way too late for the Fed to reverse course NOW; they've gone beyond the point of no return. They have to keep up the pretence until the very end. The Fed has signed on for the whole voyage, and that means steering the ship directly into the iceberg with endless QE as there are no other options at this point!
Now, for sure, the enablers and crooks like rats will jump ship in earnest before the hit and definitely the for hire duo of Obama and Holder will conveniently be looking the other way; but then, at least the slate will be wiped clean.
And then it's 'Hello Gold Standard !!!
http://implode-explode.com/viewnews/2012-03-29_TUNGSTENFILLED1KILOGOLDBARDISCOVEREDINUK.html
Amazing speech. Jim Grant has to be one of the brightest and most articulate people in our country. It is a shame that this disqualifies him from being involved in government.
On the other hand, I wonder if Jim has ever worked an honest day in his life and added any value through his labor?
It is an odd world that we live in.
It is an odd and sad world where those who use to organize and apply capital to cooperatively INVEST in productive enterprise are no longer seen to have worked an honest day, and that it is generally true. Don't lump Jim Grant in with your generally true criticism.
I always love Jim Grant's commentaries. Wisdom clothed in wit and with just the rignt touch of irony.
Compare them to the talks Ben Bernanke recently gave. Grant is miles above Bernanke in intellect.
Brilliant.
Bravo!
A valiant and gutsy presentation in the heart of the lion's den.
Grant vs. the Fed. A scheduled 15 round fight over in Round 1.
The privately held federal reserve was formed about 98 1/2 years ago and the fiat Federal Reserve Note has lost 98.5% of its value in that time frame. The next 18 months might get real ugly?!!!!!!!
http://www.dailymotion.com/video/xism1z_fight-of-the-century-keynes-vs-h...
Sorry, double post.
http://www.dailymotion.com/video/xism1z_fight-of-the-century-keynes-vs-h...
I wonder....when the undeniable mega-inflation hits (and it WILL come....it's starting already)...will the average person look back at Ban's printing that he did to "save" the economy, like the "maestro" did before him, and place the blame where it truly lies? Or blame rising prices on companies and such? Judging by the lecture circuit that Ben is currently doing, I am not that optimistic.
What a BREATH of fresh air. It must have made them Fed Res BNY squirm. Or they slept. Grant is one of the men in black.
"it [Federal Reserve Note] is a derivative that secures its value from the wisdom of Congress and the foresight and judgment of the monetary scholars at the Federal Reserve."
And since both of these have neither wisdom nor foresight... FRN value is rather negative (i.e., utterly destructive).
Nothing short of abolishing the criminal syndicate will suffice. Do you not understand this!!
Congressman Louis T McFadden charges the Federal Reserve with High Crimes
http://home.hiwaay.net/~becraft/mcfadden.html
You can also listen to the charges this here:
https://www.youtube.com/watch?v=2_JDeaA5Gmc&feature=related
President Andrew Jackson stated in reference to the bankers at the state of his administration:
"You are a den of vipers and thieves. I intend to rout you out, and by the Eternal God, I will rout you out."
I hope yo gold bugs get your guts handed to you on the trading floor. I hope the Silver bugs pull your eyes out and rip off your head.
Yo suckah - Is "hope" your strategy?
no
I own gold dude. I just stopped buying in at $260/oz. When I stopped buying gold I switched my focus to Silver. That was all back in 2001. It's worked out pretty good so far. I wasn't even hoping. Platinum is a big fat zit waiting to pop. I hope you got some of that.
Uh, if you own gold and you think it is overvalued, why not just sell it? Rather than sitting around hoping it will decline in value??!
Are you also hoping that your house will burn down and your car's transmission will give out?
Or is it possible that you bought one quarter ounce coin back when gold was $260/oz, and now you are envious of and angry at people who had the foresight to buy significant amounts of it?
No shit.
Especially if you are buying silver- why not buy silver with it, given the current ratio, and buy the gold back later with fewer silver ounces, if you're so inclined?
Four letters: DGLD
"Beauty is Truth, truth beauty - that is all"
We, the choir, salute you Jim Grant. Ben hasn't a clue what you're talking about.
When old age shall this generation waste,
Thou shalt remain, in midst of other woe ...
I submit that every member of Congress that voted in favor of the Federal Reserve Act knew what they were getting. The language of the Federal Reserve Act means nothing in practice when license to print money out of thin air is granted to a few private interests. It should take an act of Congress to debase the money supply.
"Classic Grant", Bravo!!!
wonder no more chairsatan - it tis a foundation of solid granite that sir grant takes his stand, refusing to roll
http://www.youtube.com/watch?v=7YZb8s7Kxa4&feature=related
The gold standard doesn't solve the conundrum of infinite growth in a finite world.
It doesn't have to solve that conundrum. Leave that problem to the Kurzweil Singularity. It just has to assist in the fair accounting and storage of value until ~2045. www.singularity.com
Oh, well if Ray Kurzweil says the singularity will be here by 2045, why have this gold/fiat discussion at all? Unlimited material abundance for everybody!
But ending fractional reserve lending does. Its the basis of both inflation and interest on debt. Borrowing against an uncertain future. Or a false certainty of unlimited growth.
Fiat currency by definition is not convertible into coin. FRN's then are by definition not fiat currency. You and I are free to convert our FRN's into Gold and Silver at our own whims.
That is a sophomoric and pedantic comment. Except in Utah, and maybe the gray market, gold and silver are not currency "legal tender for all debts public and private". FRNs are created at the will (whim, "fiat") of the Fed. It is by every practical definition fiat.
We all know that the FED charges a floating percentage rate for their efforts or not to be pedantic a sinking percentage rate. We are free to react to such monetary policy by putting our money into hard assets. If FRN's were true fiat currency the government would forbid its citizens from converting their FRN's into real money. Do you change the definitions of words to suit your ideology on all subject matter?
My savings ard retirement plan is all in physical metal. So all of the rhetoric aside I would just like to know how the 1% of PM owners find equity in the plan to foist a metal standard upon the 99% who want nothing to do with it? Again where is the equity in the minority foisting a plan on the majority. We have paper currency now. It just shouldn't be controlled by private interests. The money supply should be controlled by Congress and not foreign banks. Metal will always be a good investment in an environment where paper currency is used for transactions. What's so difficult about putting money making power in the hands of Congress?
99% of Americans don't own metal. I don't think that they are all stupid either. Some of them probably watch the news and come to different conclusions about money than some of us here. I think that some people may be morally conflicted about metal ownership considering the fact that we all just watched Qadafi get sodomized for Libya's Gold and oil. Honest money system? There's a lot of blood on this honest money system if you look at it objectively.
One of the most brilliant pieces ever written...Long Live Jim Grant!
[HQ] Jim Croce - You Don't Mess Around With Jim [HD]
http://www.youtube.com/watch?v=njvgjZbjoR4
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almost works?
news flash. folks, clark kent is superman!
jim is a very kind and civil man but he gives the
fed too much credit. they know full well they are accomplices
in the crime of the century, stealing money with impunity.
the overriding logic dictates that they continue because
it is more profitable for the special certain interests.
they don't think they need the genius of the market or the
average man beyond his compliance to their master plans.
he is pissing in the wind on this score, imo. yet, of course,
he is correct and inspiring.
the other things. i would add / say ..
debt as a basis for the money system is a derangement of values
and grace is a universal given and powerhouse.
the other old things that are useful given our current infrastructure
are oil and gas.
innovation and technology combined with globalization did not
bring down production costs so much as transferred them to distant
workers/laborers and notice the problem with borders in the usa and
associated "cheap" labor, housing, crime and deteriorating public education
and resentment among those paying the taxes for immigrants educational
expenses.
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alt. deflation is the loss of faith in the illusion of work free
and risk free financial reward; a sort of fall from grace at
being booted from the garden without even a fig leaf, if you will?
but ... clark kent is superman !
my reading skills have erroded, can you put an audio option?
Tune your TeeVee to CNBC...
No Need to Read
The Silicon Anchorettes, Larry "Cokehead" Kudlow, Steve "Bald&Clueless" Lies-man and Cramer the Clown will explain it to you with audio and pictures...
The gold standard is the honesty standard.
The gold standard is the reality standard.
In gold we trust. In reality we trust.
The bankers view of gold: http://www.youtube.com/watch?feature=player_detailpage&v=ciez9G4cADE
might add very similar to the goldbug's view of gold, no? Move along sheeple
http://www.youtube.com/watch?feature=player_detailpage&v=NnNjUaiumtY
the only safety is safety in numbers.
http://www.youtube.com/watch?v=Z5gdBO6us44&feature=player_detailpage
a little firepower doesn't hurt of course.
The gold standard can be manipulated as well. The sheeple will always get slaughtered
I really like Jim Grant ( I even think he is sexy in a nerd porn type of way) and this post is one of his best. Yet, TPTB would kill us all in a nuclear war before they would allow the world to go back to a gold standard, seriously, they have the power to do it and would not hesitate to wipe out most of humanity to keep the keys to their sybaritic hedonistic feudal kingdom and control over all of us. You can never be part of it, a few of them get out for various reasons to mingle with us dirty hoi polloi, but nobody ever gets in, not even via marriage.
Jim Grant & Nigel Farage are true leaders in offsetting the new gigolo Ponzi scheme. The BRICS are causing premature Obama Care [60 week therapy sessions] by learning how to compensate hyperventilation costs.
Inhaling thru a brown lunch bag or helium filled balloon is the prescribed cure based on 4 out of 5 doctors receiving US government subsided payments @ $1,000 patient billing booking.
**disregard my email. Got back in :)
"Ph.D. standard"
Yes... Cue-Bald Bennie The Bernank does operate under the...
Ph(uck Tar)D. Standard
Yes indeed...
This post is Grant's "pièce de résistance". I forgive him for calling the dot com crash 10 years and billions of dollars too early. I just love the guy and his out of the box ways. He knows and speaks the truth. He is not unlike a typical ZH writer. He can intuitively visualize and understand the bad future ahead, but he is often off on the timing
As the grandson of a founding board member of a pre depression and pre FDIC country bank where the stockholders were totally accountable and well respected local business men and coughed it up during the Great Depression to keep the doors open, Grant totally understands the definiton of sustainable free market banking. I regret that only in my sweetest dreams will he ever be the head of the Fed.
Will the bearded 30's obsesssed Princeton nerd ever understand this system or risk his comfortable position trying to change the current socialized and distorted incentive system? I would not bet my modest gold holdings on it. See ya after the collapse my friends.
Really, it's 'talking dog' syndrome all over. I should be amazed you speak, but instead I'm fixated on how stupid you sound.
--never mind, I intended that to go elsewhere. Three guesses where?
Inardozi, we want to follow your mission of wisdom. Please tell me where we can find you. Don't abandon your troops... LOL
Grant Kisses Fed Ass
There, that should be the title of this nonsense article.
He crucified 'em? What a joke. He kissed ass.
The only thing he attacked was Fed's policy of preventing prices from falling.
But it's not a policy at all. It's a cover story for printing.
The Fed has ONE mission: Help Wall Street bankers and the government loot America dry.
That's it. Fed's sole mission.
Everything else is a cover story for looting. "Prevent price deflation" is a cover story for looting. "Price stability" is a cover story for looting. "Employment stability" is a cover story for looting. Every other Fed policy and program is a cover story for looting.
TARP and QE and "stimulus" were cover stories for looting. Euro currency swaps to prop up the Euro is a cover story for looting. IMF contributions is a cover story for looting.
Every single reason Fed comes up with for printing currency and giving it to Wall Street bankers (or the government) is a cover story for looting.
Fed loots the economy and loots the people two ways: Currency debasement and pump & dump operations.
Currency debasement steals puchasing power (wealth) from people directly and gives that purchasing power (wealth) to Wall Street bankers or the government. Currency debasement is achieved by printing currency and expanding the money supply beyond GDP. More dollars chasing fewer goods & services. Purchasing power (wealth) is transferred to bankers or the government by giving that printed currency to bankers or the government.
Pump & dump operations help Wall Street bankers steal wealth from people via markets. The 1929 crash and depression was a huge multi-year pump & dump. Wall Street made money on the way up and on the way down. The '87 crash was another pump & dump. Wall Street made money on the way up and on the way down. The '90s tech bubble and '00s housing bubble were pump & dump operations. In both cases Wall Street made money on the way up and on the way down.
In each one of these pump & dumps Fed expanded the money supply and credit (pump phase) then contracted the money supply and credit (dump phase). Wall Street bankers knew what the Fed was doing (in fact planned these operations) and made money during the pump phase and the dump phase. During the housing bubble buildup Wall Street bankers made boatloads of money. When the housing bubble burst Wall Street bankers made more boatloads of money. Because they knew what the Fed was doing. In fact they told the Fed what to do, because they own the Fed and have every legal right to tell the Fed what to do.
Guess what pump & dump operation is happening right now? Student loans. We're in the pump phase of the student loan pump & dump operation.
The Fed has NEVER done ANYTHING to help the economy nor the American people.
EVERY SINGLE THING the Fed has done since it was created in 1913 has been to help its Wall Street banker owners LOOT the economy and the people.
THESE are the things Jim Grant SHOULD HAVE told those pirates and criminals he was addressing.
Instead he got up there and KISSED THEIR ASSES.
i think you get the main plot geezer. well said!
thanks for cutting to the chase aand saying it.
CIA Secret Prison: Polish Leaders Break Silence About Black Site
By VANESSA GERA 03/31/12 08:01
http://www.huffingtonpost.com/2012/03/31/cia-secret-prison-polish-_n_139...
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cia= bankers boyz.
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30 March 2012
Who Captured the Fed?
http://jessescrossroadscafe.blogspot.com/2012/03/who-captured-fed.html
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"Future generations will look back and ask themselves, 'How could they not see what was happening? Were they blind?'
The Fed is not the only problem here, but a key enabler. White collar crimes and fraud flourished amongst the robber barons even in the days of the gold standard. It just was not as convenient, as easy, to defraud the people en masse through the debasement of the currency.
The Fed has merely proven to be as vulnerable as the regulators and the Congress to the power of the monied interests. If the political campaign process had not been corrupted by money, if the fairness doctrine in the media and Glass-Steagall in banking had not been overturned by the mindless impulse to cast aside the best of the laws, many of the problems we have today would not be so great.
These fellows creates crises, and then 'save us' from them, while lining their own pockets and perpetuating the swindle for their less publicly visible puppet masters.
There is little doubt in my own mind that Greenspan knew exactly what he was doing, and made his fateful decision after a meeting with Robert Rubin in the 1990's shortly after his famous 'irrational exuberance' speech. What was said, what was promised or threatened, I cannot say. But the change in direction became clear. It became open season on the voices of reason and restraint in Washington.
What Clinton hatched, Bush brought to full fruition, particularly with his tax cuts, stock bubble, and unfunded wars. And when the Great Reformer came to Washington in the midst of the collapse, he brought back the very advisors who had helped to create the problem in the first place and betrayed the mandate of those who had elected him, prosecuting no one.
And in the aftermath of the financial collapse, the first popular reform movement that rose up in anger against the bailouts, The Tea Party, was quickly turned into a corps of willing tools that turned on the weak and the least among us, the very victims of a corrupt system, in their petulant pride and misdirected anger.
I only fear that the Fed, and some of the perpetual outsiders of history, will be made the scapegoats by the real culprits when the time of reckoning comes, and that genuine reform will be thwarted once again as it has been so many times in the past. Their hypocrisy and shamelessness knows no bounds." ....
The gold standard is not the best option: Sovereign fiat money is. The problem is not that the money is not backed by anything: The problem is that the money is debt-based FRN money.
End fractional reserve banking, end the Fed, and force the government to issue debt-free, sovereign money.
Bill Still has it right: http://www.youtube.com/watch?v=swkq2E8mswI
Fiat currency.. Fiat currency.. why is everybody so into cheap cars recently?? How about Bentley currency ey? or Ferrari currency hey?? Now That would give the economy a boost.. Unfortunately it Could go from 0 to 100 in 3.1 seconds
FIAT owns Ferrari, and Maserati.
Mr. Grant,
We're up to 6 billion brains, and collectively we have decided to WEAR half of your "money".
This is more reasonable than trusting fewer brains to adjust the money supply according to apparent economic activity?
Do you also wear a diamond grill like all my rap heroes?
My guess is that you didn't pay for your bow ties with gold flakes.
"There isn’t time, in these brief remarks, to persuade you of the necessity of a return to the classical gold standard. I would need another 10 minutes, at least."
Can anyone point me to a more full-form case Grant makes elsewhere for the classical gold standard? Thank you (if that exists).