Thursday, March 8, 2012

Jim Grant: Stick 'Em Up, This is a Debt Swap

MUST WATCH Jim Grant on CNBC, discussing the Fed's latest plan of 'sterilized' QE, the depression, and MARKET MANIPULATION.
Can we talk about what happened in early 1920s? Ben Bernanke can't stop talking about the '30s. but in 1920, '21, the economy fell off the cliff. nominal GDP was down 29%, wholesale prices collapsed by 40%. You know how the fed and the treasury reacted to this, the treasury balanced the budget and the fed actually raised interest rates. guess what, the depression ended.

We should call this what it is, it is market manipulation, that's what we call it in the private sector. what the fed is doing is manhandling the structure of interest rates to the end of achieving of what it takes to be desirable macro outcomes. if the government would go down to the farmer's market at 14th street and fiddle with the scales, there would be an understandable outcry from the customers. but the fed and central banks the world over are in unprecedented ways of manipulating the value of what they're printing, by a ton. in the latest gambit, the fed wants to manipulate long-term interest rates lower. but in so doing, it is manipulating perceptions of risk, and it is creating a real inflation in the sense that people who want to retire in their savings, need much more cash to do it. and i like your latest cartoon, stick 'em up, this is a debt swap.
Full transcript at CNBC