Courtesy of Tyler Durden
One of our favorite economic commentators – Jim Grant of Grant’s Interest Rate Observer – was on Consuelo Mack continuing his ongoing crusade against Ben Bernanke’s lunacy, and the monetary central planning of the Federal Reserve, particularly focusing on the topic of pernicious inflation which for good reason has received much attention of the past year. Grant, who unlike Steve Liesman correctly observes that inflation is now rampant (those who need a reminder can do so at the only objective source for actual inflation tracking, MIT’s Billion Price Index), is eating away at the standard of living of the bulk of the population, even as this same population can not benefit from anything beyond minimal rates on their saving deposits. "The Fed is unconscionably complacent about the consequences of what it is doing, and let us not blink at what it is doing: it has imposed the lowest money market interest rates anyone remembers, it has expanded its balance sheet into something grotesque all in the space of a couple of years. These are monetary events that have never before been seen, and indeed, never before imagined…The Fed’s policies are certainly great for one class of society: the speculative classes…. We have socialized risk, we have privatized gains, much to the relief of Greenwich, CT where our zillionaires live, and the unconscionable and indefensible fallout of this is that savers get zero on their savings balances, and the speculative classes get to borrow in wholesale markets at zero and get to make their zillions all over again… The Chairman is whistling by the graveyard in this manner of 2% inflation rate being harmless."
On Grant’s expectations for inflation rates: "there will be a lot of suddenly – 4 or 5% let us say…So much of our speculative apparatus is powered on these zero percent interest rates… Think how hard it is to hold back a cash reserve in this economy… Your stupid neighbor who is watching this program is making a lot of money in the stock market: how hard is it not to participate? You can’t do it… But 4% inflation would mean that the party is over… Everything would fall out of bed… Gold and silver would right themselves, because they are money that would come into their own at the end of the cycle of disillusionment but for a time there would be terrific chaos in investment markets."
As for the gold standard: "If I am right about the dynamics of the Federal debt, not only is the mathematics for a gold standard compelling but so are the politics." In other words, and this should be no surprise to anyone, the transition to real money will continue until the fraud that is unbacked fiat is finally eliminated, with or without the Fed’s support.
