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Jim Grant: The Horse of Speculation Is Ahead of the Cart of Enterprise (Video)

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Peter Schiff has said that the Federal Reserve created a phony wealth effect by pumping up stocks and other asset markets. In fact, analysis proves Peter’s contention, showing that 93% of the entire stock market move since 2008 was caused by Federal Reserve policy.

In a recent appearance on CNBC’s Closing Bell, Jim Grant made this same case, explaining how asset prices such as stocks, bonds, and real estate have soared due to central bank monetary policy, while actual economic growth has remained stagnant. As he put it, the horse of speculation is ahead of the cart of enterprise:

I think with respect to the asset markets we can imagine a little kitten up at the top of a tree…We might label this kitten “stocks, bonds, and real estate. And one might imagines a fire-lady named, say Janet, at the top of the ladder saying, ‘Hey little fur-ball, how’d you get up that high?’ So central banks have coaxed and manipulated asset prices higher. They have succeeded not at all in coaxing or manipulating activity higher.”

Grant said the US industrial manufacturing economy is flirting with recession, if it’s not there already, and the Fed’s next move will be in the direction of more easing, not rate increases.

Of course at some point, the bubbles will have to burst. Peter said in a recent CNBC interview the Fed will do everything it can to keep the bubble inflated, to the point of sacrificing the dollar on the altar of the stock market.

Highlights from the interview:

“I think the Fed has missed its market, and I think its next move will be in the direction of ease.”

“I think that the industrial manufacturing economy is visibly entering of flirting with recession. The yield curve is flat and flattening. Inventories are building, notably in autos. I think what is most notable for investors is the notable, maybe singular juxtaposition of sky-high asset markets on the one hand with softening activity on the other. And on the third hand, the existence of this persistent radical monetary experimentation.”

“To a degree, we all live in this central bank constructed hall of mirrors.”

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“I think with respect to the asset markets we can imagine a little kitten up at the top of a tree…We might label this kitten ‘stocks, bonds, and real estate.’ And one might imagine a fire-lady named, say Janet, at the top of the ladder saying, ‘Hey little fur-ball, how’d you get up that high?’ So central banks have coaxed and manipulated asset prices higher. They have succeeded not at all in coaxing or manipulating activity higher.”

“The horse of speculation is ahead of the cart of enterprise.”

“To be sure, things are much better than they were in 2008. But this has been the slowest-motion recovery in living memory or perhaps even in dead memory.”

“I don’t have to tell people of your age how hard it’s been to break into the world of work.”

Mark Light, Signet CEO referenced alleged diamond swapping and credit concerns.

“Mr. Light, with whom I have no personal quarrel, was on brand-x television today saying that there has been an orchestrated campaign of the bears against him. Now that is a charge of collusion and manipulation. It seems to me the Federal Reserve is in charge of market manipulation.”

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