Gresham's Law

Marc Faber & Jim Grant appeared on Bloomberg TV today and yesterday (respectively). See below for the videos & summaries:

 

 

 

Summary of the Marc Faber Interview:

 

• Chinese fraud companies reveal that there has been a bubble.
• Locals are the ones who make money out of the China story.
• We’ve probably seen the high for this year.
• The Fed will wait before QE3 et al.
• Commodity bull market still in tact. Gold & Silver are still good – though they may go down now.
• To not own gold is to trust central bankers – which is something you should never do!

 

Summary of the Jim Grant Interview:

 

• The Fed has two remits (that of maximizing employment & that of keeping prices stable). This objective of levitating stock prices is new.
• What happens when these fake prices come down? QE3…
• The Fed is trying to ‘impose’ prosperity through its manipulation of money.
• Either the Fed owns the stock market, or the stock market owns the Fed.
• Deflation is the great point of confusion.
• MMMFs are taking quite ponderable risks in Europe for just a few basis points.
• This trend in MMMFs is one of the unintended consequences of the QEs.
• We have substituted the gold standard for a ‘PhD standard’.
• The difficulty with the Fed is that it is imposing false values on various markets.
• The difference today is that you’re not getting compensating for taking considerable risk.
• We don’t need PhDs at the Fed, but rather people with plain old bachelors degrees in the laws of unintended consequences.
• The enterprise of quantitative easing is that of monetary debasement.
• We are going to get QE3 because the Fed has no intellectual or theoretical grounds upon which to deny it.
• The Fed is now a prisoner of its own muddled thinking.
• The housing bubble was an unmeasured inflation problem that the Fed instigated.

See here for our collection of rare historical economic data.

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