James Grant

Robert Heller, former Federal Reserve governor, explains why the chances of a Fed taper this week are better than ever. And James Grant, Grant’s Interest Rate Observer, provides insight on how the Fed’s QE policy is impacting the economy. We are in a regime of price administration, rather than price discovery, adds Grant.


well, i suddenly think they should be doing it right now. there’s no reason for it to keep putting all tha money into the market. the economy’s performing very well, industrial production is at an all-time high again. so why not taper right now? all the stars are lined up. you know, bob, you’ve been in the room before, the two issues they can point to are the idea that the jobless numbers they’d like to see more months of improvement before they do something. the second would be the inflation numbers are running so low it gives them cover. how big of a factor do you think those issues play? well, they always are. and i think they’ll be very stimulative discussion around the table. and the magic of the federal reserve board meeting really is that at the end there’ll be a consensus. you’ll have an almost unanimous, i don’t think totally unanimous, but almost unanimous view that will crystallize around the issue. one key person is janet yellen. does she want it off the table. jim, i know you think this is long overdue. a move to taper, the effectiveness of qe stopped a long time ago and there are serious problems that could come up from extending this, correct? you see it all over the economy. you see it in health care, of course, on swal street. ben bernanke addressing the students of george washington university. he seemed not to have the self-awareness to recognize what the fed is doing is exercise in price control. this is stocks.gov, bonds.gov. you know, you hear these medications advertised on tv and they say, you know, for heart condition. then they tell you what they’ll do for you. then in the end, they say, well, it could also induce hair loss, nausea, impotence, weight loss, weight gain. those are good things. cancer. then you think, heart attack, what’s so bad about that. right. the unintended consequences of this exercise are much more interesting than the very meager results to date. and the unintended consequences will roll out over the years