Is the Next Fed Menace Helicopter Money?
James Grant, Wall Street expert and editor of the investment journal «Grant’s Interest Rate Observer», warns of ever more extreme central bank policies and bets on the comeback of gold.
The global financial markets are under severe stress. The postponed interest rate hike in the United States, the fast cooldown of the Chinese economy and the crash in the commodity complex are causing a great amount of unease among investors. Fear is growing that the world slips into recession. «Central bank policy is intended to paper over the cracks in the systems. Seven years after the outbreak of the financial crisis we’re paying for this with a lack of growth», says James Grant. The sharp thinking editor of the iconic Wall Street newsletter «Grant’s Interest Rate Observer» draws worrisome parallels between the command based central planning of the Chinese economy and the economic policies in the West. He also doubts that Fed Chair Janet Yellen is the right fit for the top job at the world’s most powerful central bank. Looking for protection he points to gold and shares of gold miners.
the entire economy and our style of western central banking in which they seek to impose certain outcomes through the manipulation of prices?
Is China set for a hard landing?
I think China is very worrying. The macroeconomic data are largely made up and their methods are almost predestined to fail as the methods of command and control and suppression of the price mechanism are always predestined to fail. And then, on top of that, what’s scary is the reaction of the West: Instead of questioning those principles we talk about that the Chinese are just not as proficient in these techniques.
China was a main concern for the Federal Reserve not to raise interest rates at their recent meeting. Was this the right decision?
I was hoping that they would choose to act if only as a mercy to change the subject. I mean can we talk about something more interesting like the weather? Of course, it’s not just about one quarter of one percent of scarcely discernable monetary tightening. It’s about the idea of something in the way of a normal structure of interest rates in the time to come. But here it is again: Seven years after the fall of Lehman the biggest and supposedly most dynamic, most resilient economy in the world is still not strong enough to absorb that. That is the message from the Fed. So no wonder the markets are worried.
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