A recent print interview with credit analyst Jim Grant is worth reading, see The world-wide suppression of interest rates has been something very near a crime. Couldn’t agree more, to wit:
“…the suppression of interest rates has served to advantage one class of people: The savers have been disadvantaged whereas big banks have been very greatly advantaged, and the financial community has been advantaged. In short: the saver’s loss has been the speculators’ gain. So, the ordinary working person has been disadvantaged and that is apolitical. To speak metaphorically but, I still think truthfully, that kind of policy is bordering on criminal – and I stand by that.
Now the Fed wants to pause raising interest rates at least until 2020. And the Trump administration even demands a rate cut of 50 basis points. What does it mean when, nearly a decade after the end of the recession, the US economy can’t stand short term interest rates of more than 2,5%?”
When asked what he would advise the US Federal Reserve today, Grant is characteristically articulate:
“I fear it might be too late, but to start with, I’m in favor of interest rates which are discovered in the marketplace. And, at the very short end, interest rates ought to be pitched at a level that provides some premium to the inflation rate. So, my first order would be to give a speech saying that we are out of the business of manipulating expectations; we are out of the business of manipulating the stock market. The stock market is going where it wants to go, and if it goes down a lot, so be it. That’s not our line of work. We are in the business of securing a currency which holds its value and which provides a good medium of exchange.”
;
