Contact us
CALL US NOW 1-888-GOLD-160

Jim Grant: The Fed Is Playing With Fire

  by    0   2

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.

In an earlier interview with Barron’s, Kaplan said, “the unintended side effects of the asset purchases are starting to outweigh the benefits.” This is a bit of an understatement. Grant categorized quantitative easing as a “net harmful policy.”

We’re talking about the risks of COVID; how about the risks of unlimited QE?”

The Federal Reserve is gearing up for its annual Jackson Hole meeting. They have titled the gathering “Macroeconomics in an Uneven Economy.” Grant said he would title it “Gasoline on Housefire,” or “Hoses in a Hurricane.”

Because $120 billion dollars a month [in asset purchases] in an economy that is bounding and running with good health – the stock market is at all-time highs, 4,000-year lows in interest rates, and on and on – you wonder why is the Fed still in crisis mode?”

Indeed, even as the markets speculate about the possibility of a Fed taper, the central bank continues QE infinity it launched at the beginning of the pandemic. Every week or so, the balance sheet climbs to a new record. Meanwhile, pundits obsess over COVID or if Fed Chairman Jerome Powell will appear in Jackson Hole in person.

But the biggest thing to me is the persistence of this unexamined premise the Fed must be on full ahead, flank speed at all times. Why do we need this? Why? Why?

According to the Goldman Sachs Financial Conditions Index, financial conditions are at the “easiest” level since the gauge was created in 1984. Stocks are significantly overvalued. And Grant says interest rates in the bond market are at 4,000-year lows. He has gone as far as to say the threat to life and limb from the COVID-19 Delta variant is far less than the risk of continuing this extraordinary Fed monetary policy.

Grant emphasized that these policies have consequences.

The bond market and the Fed alike are betting everything on this idea that these unique policies will not be inflationary, and to the extent that they are inflationary, the inflation will be ‘transitory.’ All this is seemingly absorbed without dissent. Certainly, there’s no dissent evident in the bond market. But what if that’s not true? What if this inflation, which is no longer a theory but a fact, what if this is persistent? The entire financial world dangles by the thread of these ultra-low interest rates.”

Grant said he didn’t mean to compare life and limb literally with the adverse consequences of this “uniquely reckless set of economic policies.”

But certainly, human health is not unrelated to the state of our economies and to the state of our finances. I say the Fed is playing with fire.”

Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!

Related Posts

Peter Schiff: Why Shouldn’t You Give Up on Gold and Silver?

A lot of investors wonder about the lack of movement in gold and silver, especially given rampant inflation. Why haven’t we seen a big rally in precious metals as many expected? Why shouldn’t you just give up on gold and silver? Peter Schiff answers these questions in this video.


Peter Schiff and Brent Johnson Debate: Will the Dollar Rise of Fall in 2022?

Peter Schiff and Santiago Capital CEO Brent Johnson got together on the Rebel Capitalist podcast to debate the trajectory of the dollar in 2022. Johnson is bullish on the dollar. Peter thinks the greenback is going to tank.


Artificially Low Interest Rates? So what?

The Federal Reserve has held interest rates artificially low for decades. Even after pushing rates to zero in the wake of the 2008 financial crisis, “normalization” only managed to raise rates to 2.5% — hardly “normal.”  The central bank began cutting rates in 2019, even before the coronavirus pandemic. But what difference does it make? […]


Peter Schiff: What’s Going on With the Price of Gold?

Gold has been rangebound of late, bouncing between $1,750 and $1,800 an ounce for several months. Given the inflationary environment, one would expect gold to be soaring. So, what’s going on with the yellow metal? And when will the price of gold go up? Peter Schiff tackled this question during a recent Q&A session on […]


Peter Schiff: There Is Only One Type of Inflation

When talking heads and politicians talk about inflation, they tend to make distinctions between “food inflation,” or “energy inflation,” or “wage inflation.” In this clip from his podcast, Peter Schiff explains that this isn’t the right way to look at inflation. In fact, there’s only one type of inflation. And the Federal Reserve is the […]


Comments are closed.

Call Now