Jim Grant on Bloomberg

Jim Grant of Grant’s Interest Rate Observer was interviewed by Pimm Fox on Bloomberg TV yesterday. He spoke about the folly of excessive bank regulation, the pitfalls with MMMFs and the prospects for bonds, equities and gold. See below for the video & summary.

 

 

Summary:

 

  • Regulatory forces are ‘Positively Asphyxiating’.
  • Regulators are intent on increasing bank capital (particularly for the ‘Too big to fail’ institutions). The problem is not a lack of bank capital, but rather a lack of bank capitalism.
  • We need owners who own (that is, who benefit from the upside and get hurt on the downside).
  • MMMFs should not be considered as safe as physical cash. As can be seen here, we share this conviction at greshams-law.com.
  • The ‘Search for Yield’ may eventually turn out to be harmful. The problem is not that there’s risk, rather that there is no compensation for such risk (i.e. these MMMFs yield 1-3 basis points). [See here for our take on how to play this.]
  • There aren’t enough T-bills to go around should everyone suddenly want them.
  • The Bond Vigilantes seem to be absent. At the end of the great bear market in bonds (1981), it was widely believed that they would rise up against the confiscation of real wealth that goes on in the Government bond markets. Alas, UK Gilts up to 30 years do not even compensate for CPI increases.
  • At least with equities you’re not ‘playing against the house’. With bonds, you’re being paid back in currencies that central banks are intent on debasing.
  • Gold – the reciprocal of the world’s faith in the dollar – may rise as the trend towards distrust towards fiat currencies continues.

See here for our collection of rare historical economic data.

Posted Jun 21, 2011
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