• 287 days Will The ECB Continue To Hike Rates?
  • 287 days Forbes: Aramco Remains Largest Company In The Middle East
  • 289 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 689 days Could Crypto Overtake Traditional Investment?
  • 694 days Americans Still Quitting Jobs At Record Pace
  • 696 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 699 days Is The Dollar Too Strong?
  • 699 days Big Tech Disappoints Investors on Earnings Calls
  • 700 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 702 days China Is Quietly Trying To Distance Itself From Russia
  • 702 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 706 days Crypto Investors Won Big In 2021
  • 706 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 707 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 709 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 710 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 713 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 714 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 714 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 716 days Are NFTs About To Take Over Gaming?
Trade In Counterfeit Goods Hits Half A Trillion Dollars

Trade In Counterfeit Goods Hits Half A Trillion Dollars

The counterfeit market has breached…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

  1. Home
  2. Markets
  3. Other

James Grant Says Fed Needs to Get Out of Business of Central Planning

James Grant, publisher of Grant's Interest Rate Observer, appeared on "Bloomberg Surveillance" with Tom Keene and Sara Eisen this morning and said that the Federal Reserve needs to "get out of the business of central planning."

Of the stock market, Grant said, "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." Grant also said that he "would like to see the Fed admit it can't do what it promises to do" at the Jackson Hole Economic Symposium this week.

 

Courtesy of Bloomberg Television

 

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."

 

Back to homepage

Leave a comment

Leave a comment