The Fed Is in the Business of Making Things Worse (Video)
Following the Federal Reserve’s monthly meeting, the financial media has been making the rounds to get everyone’s opinion of the economy. Jim Grant agrees with Peter Schiff: it looks like radical monetary policy “is pretty much here to stay.” As usual, Grant shares his contrarian views with CNBC in his dry, witty, and disarmingly honest style.
Highlights from Grant’s interview:
“[The Fed’s statement] seems awfully familiar, doesn’t it? You mentioned when, if every – I think the ‘if ever’ is a very important part of this question – [the Fed will raise rates]. The Fed is in the position of a central planning body that must take all things into consideration. It must levitate prices such us to give us 2% inflation. It must create prosperity through the improbable agency of money printing. It must assure financial stability. These are hard things to do, otherwise they would have been done many centuries earlier. I think what the Fed never gets around to saying is that finance is symmetrical. There is an asset line and a liability. There is supply and demand. They want to magnify or enlarge aggregate demand. But inadvertently, through these zero-percent rates and through more and more quantitative easing, they also enlarge aggregate supply. Witness the bear market in energy…
“The Fed is in the business of making things worse as it seeks to make things better… My view is that radical monetary policy is pretty much here to stay. For example, zero-percent rates have allegedly been part of the solution for our woes in Europe and here. Except zero-percent rates mean that you must have a great many more assets in order to generate income. This is starving, for example, the German life insurance companies…
“We must have failure in capitalism in order to allow new things to come and develop. The minimization of failure is paradoxically a problem with the ruling monetary regime…”
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