James Grant Comments on Fed’s Market Manipulation and ECB Actions

By on March 8, 2012

James Grant, founder of Grant’s Interest Rate Observer and author of Mr. Market Miscalculates: The Bubble Years and Beyond was interviewed by Maria Bartiromo regarding reports that the Federal Reserve is about to embark on a new bond buying program.

Grant said, “we should call this what it is, it is market manipulation. That is what we call it in the private sector.” Grant added, “what the Fed is doing is manhandling the structure of interest rates to the end of achieving of what it takes to be desirable macro outcomes.”

The interview continued with Grant’s observation that the Fed is punishing savers, his opinion on the resulting inflation in commodities and assets (including distressed types) from ultra-low interest rates, the Fed’s dulling of risk-sensors in the market place, his explanation of the Fed’s lending short to buy long-dated debt (a good way to go broke), his opinion on the massive explosion in the size of the European Central Bank’s (ECB) balance sheet (“the Fed is a piker compared to what the ECB has recently been doing”), and his historical perspective regarding the Depression of 1920-21 which was ended when the Treasury balanced the budget and the Fed raised interest rates.

Grant, as always, was erudite and lucid in his observations and commentary.

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