James Grant, Founder of Grant’s Interest Rate Observer, deliberates the interest rate trajectory of the Fed Reserve and surveys the investing landscape for opportunities and potential pitfalls. Grant takes a closer look at gold prices and the outlook for the asset.
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Sitting down with Jim Grant. Jim thanks for joining me. You're entirely welcome. The only thing better than sitting down with grants is to sit down with Grant himself with grants so I really appreciate you joining me. Wonderful talk. Just now and as part of that talk you invited people to pick up one of these criminal and preliminary prospectus on US debt. Yeah. A phony document.
I've got to admit that we have produced this the prospectus for the United States Treasury as if the government itself were FEC. FADEL. Right. The government uses all of. It never disclosed it just like. The rest. So we thought we'd would take it upon ourselves to be the conscience of the United States Treasury and produce a prospectus that. Is satirical and. In shape and form but is filled with really interesting facts and that's how bad. The fiscal situation is.
OK. So just summarize what are the most interesting risks persist. HARRIS Well one risk is that the same government that.
The Prince of money also borrowed the money that would seem to present a clear and present conflict of interest or unity of interest. Another fun fact is that this year. The Treasury will issue. The government will issue the Fed as a seller of securities and the Treasury as a borrower of money will issue the most government securities percentage of GDP since the end of World War II. So the supply of government securities in relation to national production. Is the highest since the 1940s. Although. This country is under arms in some degree it's not waging a world war. So this is a very different fiscal picture we. Used to. So that's certainly.
In the suggest that you have a government out of control. The fact that we're not coming out of a war. That's a good thing. You could have a debt as if we had faced the world without the destruction. That's not a good thing. So. So what do you see going forward. What are they. Let's look at. The tightening. How far are they going to get on this before they have to give up on it.
Well you know there are some. There's a school of thought holds already. The Fed is having second thoughts about the temple. Its balance sheet shrinkage. And. You know. There are all sorts of reasons for the Fed to rethink this the yield curve has flattened. The savings. Give us the short and long. Interest rates narrow which have been. A good sign and always trailing behind is prelude to recession it's different.
Good thing the two speakers have already said to them that you can spread and this Congress I don't recall seeing it at all. The prior two years. So. It's wasn't watching. Yeah. Should we be taking a different attitude toward the house. Since one person said for example the Federal Reserve.
Controls the short and people control or investors control to correct these investors are central banks right. Well exactly. And I don't think they're dispositive I think is a relatively free market and longer dated issues. So we talking about why the Fed might be reconsidering. The pace of its quantitative tightening so called in the yield curve. If you want information that could just be that the Fed is taking the measure the rate of rising exchange rate and considering perhaps more than 50 percent of S&P earnings in general. So it's.