Jim Grant: The Fed is at War With the Price Mechanism

Jim Grant, founder and editor of Grant's Interest Rate Observer newsletter, was on CNBC a few days ago giving his views on the debt ceiling debate. He was also on Bloomberg TV a few months ago giving his views on the Federal Reserve's "war with the price mechanism." I put that vid up as well. He believes we should have gold backed money, the market should be able to clear, and sees higher interest rates ahead.

Check out the chart he provided of the Federal Debt Ceiling vs. 30-year Treasury yield since 1981. Look at the inverse relationship. So is the U.S. going to follow Japan or are rates about to breakout?

Source: Grant's Interest Rate Observer / CNBC.com

Jim Grant on CNBC

Jim Grant on Bloomberg TV on November 29, 2012 with ECRI's Lakshman Achuthan (see his recession call here).

"There is a systematic manipulation of values undertaken and carried out by our central banks world-over. They sit on money market interest rates, they muscle around the yield curve, and they levitate asset prices on the theory that higher stock prices, higher corporate bond prices will make us happier and therefore more inclined to spend."
"Here is one of the more nuanced unintended consequences, a certain consequence of these actions of manipulation and interest rate suppression. And this nuanced consequence is that companies that ought to go out of business don't because they are sustained on the life support of subsidized credit. Now, without companies leaving the scene, newer companies will not enter as they should..." (this happened in Japan)

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