Submitted by Taps Coogan on the 29th of April 2020 to The Sounding Line.

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Grant’s Interest Rate Observer founder and editor, Jim Grant, recently spoke with Bloomberg about the historic disconnect between Wall Street and Main Street and his growing concerns that the tsunami of monetary and fiscal stimulus from the Fed and the federal governmnet will lead to inflation.

 

Some excerpts from Jim Grant:

“The benefits (of monetary stimulus) are evident. A glance at the Bloomberg terminal: risk assets are on fire and all is well on Wall Street. But, the disparity between what’s happening on Wall Street and what’s happening on Main Street has perhaps never been wider.”

“I was a part of the ‘unnecessarily concerned about inflation ten years ago’ camp. I remain a part of the inflation camp. It seems to me that what is happening to raise the inflation rate higher is happening both in financial and real terms. As far as the later, productivity growth is certainly going to be crippled by what’s happening in the economy, world trade is… brought to a stand-still, the international arbitrage of labor rates is probably yesterday’s story rather than tomorrow’s. As for the monetary side, over the past three months the broader monetary aggregate M2 was rising at a 38% annual rate. The Fed’s balance sheet over the past three months has expanded at the annual rate of 362%. These are ‘typographical error looking’ data… The monetary impulse is towards inflation and the trends in the real economy are also inflationary.”

“Money supply growth is the fastest it… has been in any peacetime moment… Inflation is, I think, finely almost as much a psychological issue as it is an arithmetic one. According to the Gallup poll, people have the highest confidence in the Fed Chairman’s ability and judgement today… since the Greenspan era. But what the Fed is doing… is to federalize the financial markets, is to override the price mechanism, is to substitute its judgment for that of disinterested people conducting the business that we call price discovery. These are very dangerous things in my opinion and they aught to give people pause about the nature of the currency that they deal with and that they hope to be re-payed with if they are bond holders.”

Over the past few weeks, we have featured a collection of interviews with Wall Street legends who share their opinions about whether this unique moment in economic history will lead to inflation, stagflation, or deflation (Ray Dalio, Dr. Lacy Hunt, Dr. Nouriel Roubini, David Rosenberg). We can safely add Jim Grant to the ‘inflation’ camp.

There is more to the interview, so enjoy it above.

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