Jim Grant with the Daniela Cambone at KITCO last week.
Particular gems are that he defines the present environment as the “Ph.D. Standard of monetary management”, which is a regime where tenured economics faculty have been given the reigns to set their know-it-all theories loose in the wild via the world’s monetary policy. According to them, it’s OK to override natural price mechanism, and OK to administer financial markets and talk them up to push forth “wealth effects” because lifting asset values make us feel richer and, hopefully, spend more!
He goes on to point out that we are dealing with the extended consequences of artificially benign credit environment and artificially expanded and inflated consumption patterns, especially in automobiles. “The good stuff pulled forward is ending, and the bad stuff pushed out is now upon us.” When chastised sarcastically for his optimism, he corrects Cambone. This has nothing to do with optimism or lack of it. It’s about understanding the facts!
He also points out that the chatter among the monetary avant garde is negative interest rates will save us. Yet with 29% of the world’s sovereigns at less than zero, we’re already there. Combine that with talk about eliminating larger denomination bills under the guise of fighting terrorism, where do you turn to protect yourself, he asks?!?
Grant also commented a few weeks back that he expects the Fed to retreat to zero rates. He points out that regardless of what the Fed wants rates to do, corporate rates have already made choices about where rates need to be.
He notes that recessions creep in on cats feet leaving economists surprised. Today he believes the economy is basically sleep walking, the consequences of the dementia plaguing modern finance.
See that interview with Canadian Bloomberg below.