Submitted by Taps Coogan on the 27th of February 2020 to The Sounding Line.

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Grant’s Interest Rate Observer founder and editor, Jim Grant, recently spoke with Barron’s about the cumulative effects of years of interest rate manipulation by central banks as well as why he believes gold keeps rising, namely a dawning sense that the monetary system is fundamentally unsound.

Some excerpts from Jim Grant:

“Monetary heresy is the biggest threat to not only this country but to the world. I think the suppression, the manipulation of interest rates, seemingly a recondite and technical thing, is a clear and present danger to human life and commerce as we know it. Interest rates are these critical prices that determine investment hurdle rates… and you discount future cash flows with them. And if interest rates are nonsense, if they mean nothing, what does that say about how people allocate investment dollars? …I think that central banks are making a nonsense of the traffic signals of a market economy.”

“I think what (Jay Powell) aught to start doing is saying ‘We have got a problem and the problem is, try as we might, we have missed our market and we can’t neutralize rates.’ Which means that the accumulation of investment errors, the accumulation of bad decisions, precipitated through fake interest rates, these bad decisions accumulate and we will have a problem called a recession or a fanatical panic…”

“The case for gold is that the monetary system has been deformed and the currencies will inevitably be debased. …2% inflation a year makes a meaningful difference in your cash positions over time. Central bankers are striving for inflation. They are acting as if all the rules have been torn up… All these things point to a coming comeuppance with respect to the nature of money itself… I think that the move up in the gold market, which has been going on for a while, maybe is the dawning of the marginal moneyed person saying ‘Ah, I don’t like this anymore…’

As Mr. Grant references, gold has touched all-time highs in most major currencies in recent days. That includes a new high in Pound Sterling, Euro, Japanese Yen, Australian Dollars, and Canadian dollars. It has not yet hit all-time highs in the US Dollar or the Swiss Franc.

There is more to the interview so enjoy it above.

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