Jim Grant: Fed Intervention Setting Dangerous Course

Jim Grant: Fed Intervention Setting Dangerous Course
Image source: CNBC Video Screenshot

Jim Grant sees financial market prices as being distorted by the Federal Reserve .. on the extreme low volatility in many financial markets: “The Federal Reserve, with a lack of self-awareness, is deploring the complacency of the markets .. the Federal Reserve has administered the sleeping potion.”

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Jim Grant: Fed Intervention Setting Dangerous Course

Morningstar Investment Conference: What To Do During The Fed Rate Hiking Cycle

Federal reserveThe U.S. Federal Reserve is treading carefully with raising rates amid the widespread economic, macro and geopolitical uncertainties sweeping around the world. The Fed raised its target level as high as 20% in the early 1980s to deal with runaway inflation, but we're a far cry from that today — a time when inflation threatens Read More

Jim Grant on Fed Intervention: Transcript

the fed is in the course of the price mek simple. the wisdom that presumably conjures from the meetings. not to over simplify what you said but stock prices should not be where they are now? bond prices aren’t where they should be. oil prices? every price exists in the fed’s world of suppressed or manipulated interest rates. equities are valued. one factors by a suitable rate of interest. if it is unsuitable it stands to reason equities are aren’t where they ought to be, i presume because they are zero at the short end. asset prices are generally higher than they would be. doesn’t it show that the fed — there are a couple of ways people are positioning for what could happen. one is that the fed tomorrow does something unexpected to wake up the markets. the other is all of this will lead thomas sieve policy mistake that will be a tradeable event. where do you see the investable opportunities around this. in the nontranquility debts. we are looking at 20 or 30 lows in volatility. the oil market, s&p puts are somnolent. the gold market is snoozing, if not dead. the fed with a lack of self-awareness is deploring the complacency of the markets. the fed having administered the sleeping potion. i think we should all recall and rare cite tomorrow jamie diamond’s admonition or question to ben bernanke three years ago. he said, has anyone considered the cumulative effect of these things meaning the sum total of fed interventions? through dodd frank the banks are admonished not to make markets. we learned like ti and debt markets is at lows and the fed is out today where at least the internally ruminated scheme to throw down gates innen front of would be sellers of corporate bond mutual funds. the fed launched with a certain amount of excess a repurchase scheme by which the fed lends out securities and takes in hundreds of billions of dollars. that’s an invitation to a bank run. the interventions are like lies. you do one and you need another one. you can’t just lie once or intervene once. you must keep intervening to negate or counteract or mollify the effects of earlier interventions. it’s complicated.

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