Jim Grant on generational trends in interest rates and policy ideas

Analyst and author of Grant’s Interest Rate Observer offers some historical trends on interest rates, monetary policy and what is still strong in America.  Here is the direct audio link.

This chart since 1790 ties in nicely with discussion of the generational cycles in interest rates and underlines just how insanely low rates are today.  Best advice to those still in debt:  don’t use current rates to borrow more–use them to become debt free. History assures us that this-low-rate-time too shall pass. I personally look forward to the next phase where Central Banks are taken out of the driver’s seat, budgets are balanced, and markets are left to freely find fair value again. It is not a question of if–centuries of history tells us this will happen. The question is just how much mess and pain must intervene before they do.

(via the Big Picture Blog)

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4 Responses to Jim Grant on generational trends in interest rates and policy ideas

  1. John says:

    Hey, Danielle.

    This gets to the heart of the inflation/deflation debate. We seem to be having debt deflation, but price inflation. So the prediction that all this debt deflation will make dollars worth more is not panning out (at least not yet), thanks to central bank insanity to backstop the banks at any cost. The other factor, of course is global competition for resources.

    I’ve been reading how borrowing money for, say, investing in rental properties is smart during periods of high inflation because your debt burden declines in real dollars while your asset (e.g. apartment building) goes up. It’s a smart way to reverse the so-called “inflation tax” and actually use inflation to your advantage, while reducing your tax burden in real dollars. So far this has certainly been the case in Canada. And even in the US where housing is still in the doldrums, rental properties are doing fine, apparently, and rents are going up as more and more people revile home ownership.


  2. alien caffeine says:

    This Insane Clown Posse called the Fed is actually wrecking the retirements for many, many people and delaying any hope of recovery by decades, if you know what I mean. I call the Fed the criminal wing of a criminal government and the sooner the Fed Chairman gets neutered of his powers the better.

    Jim Grant is a brilliant thinker. Thank you so much, as usual, for posting such interesting and useful information from your sources.

  3. Yes borrowing to invest in a rental property or your own business can make sense. But everything has to do with the price you pay and the income stream it captures. The more you borrow the higher the risk. The higher the price you buy at the higher the risk. If you are buying a property to rent, obviously success also depends on a supply of solvent tenants. Rising taxes and utility costs can also dramatically increase risk. Case by case assessments are the only wise course.

  4. John says:

    Yes. Absolutely. All excellent points. Thanks for the reply, Danielle.

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