Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Fed Needs to Get Out of Business of Central Planning

Politics / Central Banks Aug 30, 2012 - 03:20 AM GMT

By: Bloomberg

Politics

Best Financial Markets Analysis ArticleJames Grant, publisher of Grant's Interest Rate Observer, appeared on "Bloomberg Surveillance" with Tom Keene and Sara Eisen this morning and said that the Federal Reserve needs to "get out of the business of central planning."

Of the stock market, Grant said, "I think we live in a hall of mirrors in finance thanks to the zero interest rate regime and the chronic nonstop interventions. We do not know exactly where we are." Grant also said that he "would like to see the Fed admit it can't do what it promises to do" at the Jackson Hole Economic Symposium this week.


Grant on what the Federal Reserve needs to do now to get new best practices:

"It needs to get out of the central planning business. The Fed was organized in1914 and opened its doors to conduct a more or less traditional central banking business, meaning it would lend against good collateral to solvent institutions in times of cyclical or seasonal need. It would defend and protect the gold dollar. That was all that its original remit contained. fast forward many decades, and we see the Fed in the business of steering, guiding, manipulating the economy, financial markets, the yield curve. It manipulates and pegs interest rates. It is all over the joint doing what failed in the old eastern bloc."

On whether the U.S. needs a more rules-based central bank to provide discipline and protection:

"What we need is a central bank that has the humility not to do what it cannot do. And the Fed cannot do what others have failed to do, namely to plan an economy from a central desk in the capital city."

On the Swiss national bank:

"The Swiss national bank is a little bit like the Fed in that it is undertaking unproven and truly radical methods. It is also a sign of the times that it has to go in and buy astonishing amounts of euros to suppress the appreciation. What we need is currency stability, and we need objective value in currencies. There's no better way to establish objective value in money than to anchor it to something. "

On whether he would prescribe a gold standard:

"Absolutely...the unintended consequences of massive intervention, and this entails both 0% interest rates and the grotesque enlargement of the Fed's balance sheet, mostly the risks that the Fed introduces are the risks of the suppression of the basic laws of supply and demand. The reason that the shelves of Wal-Mart are full rather than empty is that freely set prices balance supply and demand in this very complex thing called the economy. That's what prices do. Prices are discovered in the marketplace...From 100 years before and after the institution of the classical gold standard the price level was the same. 100 years the same."

On what Krugman gets wrong about presumed disinflation and deflation:

"We Americans spend most of the weekend looking the thing that economists call deflation, but what we call every day low prices. Falling prices are the sign of among other things, falling cost of production. They are, in short, a sign of progress."

On whether the gold standard would lead to economic stability or instability:

"It is a force for growth and stability. It never can be confused with heaven on earth. Paul Krugman ought to consult a book by Charles Goodhart, one of the great eminences of big monetary affairs. He wrote a book about the New York money market in 1900 and 1913, 14 years before the institution of the Fed and Goodhart deemed that period to be the best period on record for New York City banking with regard to stability, solvency and profits, notwithstanding the panic of 1907...What is important is the rules in which these banks operated. The important rule was the owners of the bank were responsible for the solvency. Not the government, the owners. It was a capitalist enterprise."

On when Bernanke should raise interest rates to get back to a normal economy:

"Last year."

[Eric Rosengren of the Boston Federal Reserve] will have a different line of work when I take over the Fed."

On how distorted the stock market is from the central bank intervention:

"I think we live in a hall of mirrors in finance thanks to the zero interest rate regime and the chronic nonstop interventions. We do not know exactly where we are. We have to take a guess. It's the only world we have. I see that many equities are cheap. They are all relatively cheap with respect to the bond market. Some are absolutely cheap. As it were by virtue of default, I am equity guy rather than a bond guy."

On what he'd like to see accomplished at Jackson Hole:

"I would like to see the Fed admit it can't do what it promises to do. That and that alone would do. Bernanke would get up and say, 'ladies and gentlemen, we have erred. We have blundered into the central planning business when we ought to be in the central bank business. I am going to make things simple. We are going to make the dollar sound. We're going to let the price mechanism work, and we're going to go home.'"

On Ackerson's management practices at GM:

"They are improving. The thing for investors to know about GM is that it is an extraordinarily cheap equity. A great deal of upside. It's very well financed out of bankruptcy. Chances of permanent capital impairment are probably very low. The chances of gain are pretty good."

On whether he believes in manufacturing renaissance of America:

"That's a pretty big phrase. I believe in GM at five times the estimate."

bloomberg.com

Copyright © 2012 Bloomberg - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in