Dallas Federal Reserve President Robert Kaplan has been one of the more hawkish Fed members. On Aug 11, he said the Fed should announce a quantitative easing taper in September and begin slowing asset purchases in October. But two weeks later, Kaplan backed off that assertion, saying that with the surge of COVID-19, he was open to adjusting his view. In an interview on CNBC’s “Squawk Box,” financial analyst Jim Grant explained why the Fed is playing with fire.
Federal Reserve Chairman Jerome Powell insists inflation is “transitory.” As prices have spiked throughout the economy, Powell’s messaging has essentially been, “Move along. Nothing to see here.”
Peter Schiff has been saying the central bankers at the Fed can’t actually tell the truth about inflation because even if they acknowledge it’s a problem (and it is) they can’t do anything about it.
In a recent talk, Jim Grant, investment guru and founder of Grant’s Interest Rate Observer, echoed Peter, saying the Fed can’t control inflation.
Back in December, Peter Schiff said the Federal Reserve’s was about to do the last rate hike of the cycle. He went further and said the “Powell Pause” wouldn’t be enough and the next step would be rate cuts and another round of quantitative easing. Fast forward to today and nearly everybody expects that the Fed will cut rates at least once this year.
Jim Grant appeared on CNBC Markets Now on June 17 and shocked the panel when he said he thinks the Fed will actually cut rates during this week’s meeting. Most analysts expect the central bank to hold pat during this meeting and then possibly cut in July.
Whether or not he’s right about the timing, Grant offers a good explanation as to why the Fed will cut and the likely results. He says the central bank is pursuing a dual mandate of arsonist and fireman.
When the Federal Reserve artificially manipulates interest rates, it’s messing with our minds by distorting important signals that prices provide in a free market. As investment guru Jim Grant put it in a recent article in Barron’s, central bank interest rates are nothing but crude price controls.
Like all price controls, the Fed’s interest rate mechanizations create some winners and some losers. But in the long run, the distortions caused by the central bank’s interventionist monetary policy makes us all losers.
Jim Grant recently appeared on the Santelli Exchange on CNBC and the conversation quickly turned to this notion that “intellectuals” have the wherewithal to run the economy. Friday Gold Wrap host Mike Maharrey recently explained two very important economic principles that make it impossible for central planners to ever truly succeed. As he put it, they might be smart, but they aren’t smart enough to know they’re not smart enough. Nevertheless, this doesn’t seem to dampen the fatal conceit and hubris of central bankers who think they can micromanage a complex economy.
Grant put it another way. He called it the ignorance that knows not it’s ignorant.
In a recent interview with CNBC’s Rick Santelli, investment guru Jim Grant talked about the Fed’s sudden about-face when it comes to its balance sheet reduction program, as well as the phenomenon of negative interest rates. In short, Grant said the central banks have done us “no favors.”
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The Federal Reserve bases its monetary policy decisions on where it thinks the economy is heading. The $64,000 question is how does it know? Or to put it another way, what makes us think a panel made up of a few economists and policy wonks can accurately predict the future and then make the “right” decisions?
During an interview on CNBC Squawk Ally, Jim Grant said we shouldn’t put this kind of faith in the Fed and that its monetary manipulations have created an environment of tremendous uncertainty.
I think people are too certain about things about which they should not be certain.”
Speculation continues to swirl around the question of who President Trump will appoint as Federal Reserve Chair when Janet Yellen’s term comes to an end in February.
Trump will reportedly meet with Yellen this week to discuss the possibility of her staying on as the head of the central bank. During the presidential campaign, Trump was highly critical of Yellen, saying she is “obviously political,” and accusing her of “doing what Obama wants her to do.”
The following article by Ryan McMaken was originally published on the Mises Wire and is reprinted with permission
Earlier this month in the Wall Street Journal, James Grant explored the latest academic attack on the gold standard — this time in the form of One Nation Under Gold by financial journalist James Ledbetter.
Not that the establishment economics profession needs another book trashing gold. Among the university- and government-employed PhDs who hand down their wisdom about economics from on high, few have anything but disdain for the yellow metal.
Grant knows this all too well.
