20121003_grant_0Jim Grant was back on CNBC comparing the ticking shot-clock in a March Madness game to the artificially low interest rates via manipulation by the Federal Reserve, allowing the Fed to stall the game without any real recovery.

Grant also discusses his belief that the problems in Cyprus cannot be contained, and stresses the point that Your money in the Western banking system is not really yours if it is needed by the state!
Grant goes on to state that This is the greatest and most perilous experiment in the history of paper money! and  This will end in immense destruction of wealth!

Full interview is below:

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CNBC auto Transcript

Maria – as the markets lick their wounds today, investors can take some comfort that federal reserve chairman ben bernanke isnt going to wind down his stimulus plan until he’s convinced that the jobs market is back on solid ground. right call? wrong call? when will the call be made? we’ve got jim grant with me here. good to see you, jim. nice to be here. i think i know what you’re going to say about the call that the fed has been making in terms of keeping this stimulus in place. bad call. correct.okay. you say it’s because of the fed’s policies that we’re seeing this long, drawn-out recovery. explain.

James Grant – all right, well, a very smart reader of ours named matthew clerc in chicago says, positive real interest rates above the rate of inflation are kind oflike a shot clock in basketball. so march madness themed. you can’t just stall in professional basketball and college financial.you have 24 seconds to shoot or 35 seconds. in any case, there’s a to become clicking. and matthew compares the clicking clock in a basketball game to the function of positive, real interest rates. real interest rates, when they are above the rate of inflation force people to do something with cash, with liquidity. when interest rates are negligible or below the rate of inflation, people can sit there and do nothing. notice our federal government. there’s no pressure, really, to balance the budget, no pressure to wind down these immense deficits, because they can be financed at about nothing. so to companies that might properly be considered bankruptcy candidates can sustain themselves and their precarious lives through borrowing at such rates. and that’s what we continue seeing.this so-called recovery has been painfully and in a very un-american way drawn out, undynamic, and to people who are looking for a job, downright cool. and the fed insists that for reasons of economics as well as humanity, it will continue to do what has not worked.

Maria – and i want to get your take on cyprus and europe, but let me put that aside for a moment. because, you know, chairman ben bernanke commented on this yesterday.someone said to him, what about the downside risk of all of this easy money. and he said, look, there are no issues of inflation.we don’t have any issues in terms of, you know, this free money so far. and in fact, it’s been helpful to the economy. so, what is the downside risk? how does this end?

Grant – well, this is the greatest and most perilous experiment in the history of paper money. every central bank in the world is doing approximately what the fed is doing. every central banker in the world, of any consequence, thinks what chairman bernanke thinks. they all have the same model, the same outlook, the same conceit about what they can know. the people who run the fed did not see the most obvious and disastrous excesses of credit and residential real estate when they were struck between the eyes with these excesses. now, chairman bernanke seems to sleep well. he has the most astonishing degree of serenity on his face, but insists he can see into the future and approve it before it happens with these policies. he can’t. and by his actions, he has proven he can’t.

Maria – so how does this end? what are you expecting? how does this play out

Grant – let’s say he starts moving on interest rates, i don’t know, 2014? a lot of people think he’ll start unwinding this at the end of this year.well, these revolutions, and this is truly a revolution in the thinking about money and monetary policy, they devour their children. he’s not the most radical voice, there are others coming forward and saying, let’s not start with zero percent rates, we can target nominal gdp, do all these things. this will end in immense inflation, in immense destruction of wealth.when, i certainly don’t know. but that is certainly, i think, i think the outcome. is the 6.5% unemployment rate the right thing to target? no. i mean, the fed — i mean, okay, if you have a pizza and you divide it not into 12 pieces, but into 36, is the anyone going to be happier? will there be more food on the table?what we are led to believe about money is more better. the more they print, the more wealthy we become. but it’s not that simple, maria. the pie is at least in the context of american dynamism, the context of enterprise, the pie wonderfully grows.that is the fruit of enterprise. what we are seeing is thes uppression of enterprise through the manipulation of markets. okay, you asked about my march brackets. here’s my march brackets. in the finals, mr. market beats mr. bernanke.that’s my call. i’m sticking to it. when you say bes mr. bernanke, how does it beat mr. bernanke? the market is going to have the last word. the fed is in the business of suppressing prices and manipulating prices. because it’s a price control. the fed won’t say that, but that truly is what it’s about. and i say that markets will have the last word. that prices will finally escape from this prison into which the fed has thrust them.

Maria – i get it, i get it. you’re talking my language now. now i get it. let me ask you about what you wrote in the newsletter this week, about the problems this month and the problems in cyprus cannot be contained, you wrote. so are you anticipating another country to suffer the same fate as cyprus? how does the cyprus news develop?

Grant – the importance of the cyprus news is an idea. and that idea is that to the authorities, your money is not necessarily yours, if it is needed for the good of the state. right? so, in a pinch, what has been demonstrated in cyprus is that there will be an event over the weekend, it seems over the weekend, there will be capital controls. there will be this orwellian and truly chilling phrase, a stability contribution. a contribution, mind you. s o i think that idea is now out, and it cannot easily be put back.= and people ought to take the measure of this.  they don’t take seriously the discussion or monetary bureaucrats about the necessity of capital controls. take seriously the fact that the bureaucrats in brussels cooked up this scheme and impose it on a saturday morning. i mean, these are very chilling facts. very scary. yeah. very scary, what’s going on there.


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    • @Strannick, It does not mean there is no pizza, is correct, just don’t plan on being satiated with 1/36 of a piece pizza. Unless it is one heck of a big pizza. No matter how much dough you pump out (pun intended) without toppings pizza is just tasteless crust.

  1. I think we have a big risk a collapse in the gold market.
    I think that Cyprus – is planned operation for a collapse in gold prices.
    Cyprus – is the main source of inflow of foreign currency into the Russian economy.
    Cyprus, the last 10 years take the first place on investment in economy of Russia.
    Last year, the inflow into the Russian economy of Cyprus banks amounted to 122 billion dollars.

    Smart people at the Fed have understood, that if deprive Russia of currency inflows, Russia will be at the brink of economic collapse.
    To prevent the collapse of the Russian economy, Putin will be forced to sell Russian gold in huge quantities.
    These huge gold sales from Russia, will push the the world price of gold in the area of ​​$ 1,200 per ounce or less.

    • Putin has Gazprom bucks out the wazoo. But where to put that wealth is the thing, your right. Thats what the 80s were all about, knocking down oil, knocking down gold (Canada was a useful idiot for that operation), knocked down the USSR.
      These days though, like we saw yesterday with the BRICS (43% world population and all gold lovers), and like Jim Willie says, we are getting bi lateral currency swaps, an attempt at an IMF/World Bank alternative, and a fateful day in the future, when China will declare its updated gold tonage and announce Yuan convertibility. China wants to put that day off as long as possible, so it can continue to avail of cheap currency to build up its FOREX. However, I believe China’s Yuan-dollar peg is now at the point of diminishing returns because QE means inflation in China, so we are quickly approaching the day when China will come out with its gold announcement, then look out above.

    • Gold price may dip from cartel paper selling, but I doubt the Russians will part with their gold.  They have abundant natural resources to sell as well as weapons systems.

    • Silvermail, your point is understood however Russia will not repeat Browns Bottom as they will never sell pyhsical assests of precious metals. No one is that ignorant of what occurs in this vacuum of real hard assets, the first one who sells losses all because their fiat is woethless, we all know it and China will be more than thrilled to take it off their hands. Both Russia and China have been net purchasers of foreign gold and have not let one domestically produced ounce out of country. The race to the bottom of fiat devaluation is full sped ahead and GOLD is the only way to survive if your a country ! SIlver if your well off along with farmland (food production bread milk eggs basics) and energy,dad to say but the masses are gonna take it deep this time around. Economic production is in an abyss, did you see the numbers from Monday and Tuesday?! WOW its getting oooogly out there. I see your point but i also see you not loooking to the forest because those darn trees are in your way.

    • “Putin has Gazprom bucks out the wazoo.”
      Indeed he does… and there is both gas and oil in Russia, not to mention gold.  The EU is not nearly as tough as they make out to be.  I strongly suggest that they do not go toe to toe with Putin.  If they do, they will get a bi+ch slapping that will be epic in European history.

  2. Silvermail. From what I have read, Russia has gotten their money out of Cyprus and won’t be materially affected by what is going on there.  They are already setting up accounts in other country’s like Dubai or Singapore.  You underestimate Russia.  I don’t believe they intend to sell their gold but rather will continue to buy more.  Gold could go down further but this down side risk is not so great.  I believe that Jim Sinclair is correct in his opinions.  Gold may touch 1580 for a short time but will be moving higher in the next few months.  I do not underestimate the Russians.  I disagree with you completely. 

  3. the big money is in pension funds. This is where a government will go first, in most cases.  Cyprus was a political battle between Germany and Merkel against Russia and Putin, with Merkel trying to settle some scores, make points with her base and get reelected.  Cyprus was just collateral damage. It cant be contained by that’s what happens when you thrown your weight around and hurt people.  You can ignore the people but that does not mean they will ignore you.
    Pension plans have neen raided 10-12 times inthe last couple of years with the last raids in Argentina and Spain. 
    Our pension plans were ‘generously’ granted to us by the USG when they realized in 1981 or so that the social security system,being completely raided, would not provide enough funds for the average person.  So Keoughs, 401Ks and IRA were set up.  The government will see those funds as the fat cow to milk when the time comes.  The confiscation will be couched in language like  ‘its your patriotic duty to cough up your money’ or ‘the government expects you to return some funds because we were so generous in giving this opportunity to you’
    It is just a matter of time.  When?  Mayne next year. It depends on how badly our gummint needs the money and the Euro situation. 
    I dont think Russia will sell gold.  Oil, nat gas etc are very fungible items.  China loans Russia billions from their USD reserves so I dont think Russia will end up needing to sell gold.  But maybe I’m wrong. Maybe gold will tank due to the fear factor liquidation event that’s coming to Europe.  I hope I’m wrong about this since most of us dont stack gold.

    • Central banks are buying gold, not silver.  Ultimately, you’ll want to be in gold.  However, the path to financial armageddon is not a straight line and silver will see its day.  Back a few years ago collecting baseball cards was all the rage.  And if you know anything about baseball cards the value is in holding a rookie card(gold), but the larger % moves are in the lower cost 2nd year card(silver) when a player gets hot. Wise move is to collect them both.

    • AG… the birth of the 401K was actually an accident.  This was not invented by the US Gov as a plan to help people save for retirement.  It DID work out that way, though.  There was a gentleman named Ted Benna, who worked for a private company as their benefits admin.  His reading of the IRS rules was that the IRS authorized the officers in a company to set aside part of their pay before taxes as a Gov sanctioned savings plan and that the company was also allowed to contribute to it.  What the IRS never said was that non-officer employees could not do this, so Benna interpreted it as if they could.  He then set up the very first “401K plan” for his company and submitted it to the IRS for approval.  They read it over and ended up agreeing with Benna that the law did not prohibit what he suggested.  At that moment, the 401K plan that we know today was born.  Perhaps this is why it works so well for so many employees?  It was not invented by government.

    • I think the results of a gun ban/registration will decide when and how. If they can’t get a registration in they will be facing a lot of angry armed Americans who will demand change, one that will take money back from the banks

  4. Simple and smart.
    If only they taught this in schools.
    You wouldn’t even need everyone to get it, just 10% of the population, maybe not even.
    Ah well, it is what it is.
    We’re using Schiff’s idea, run a small over-draft to live. No money in the bank.
    Keep stacking.

  5. It is being reported (I heard this in a Greg Manarino vid) that many branches of Cyprus Bank remained open over the last week and were allowing the wealthiest depositors a chance to pull out their funds. Not in Cyprus propper however. All branches remained closed.

  6. Exactly! What Cyprus wanted to show us is that “if you don’t hold it, you don’t own it”! A lot of Western countries are starting to follow Cyprus’ idea, like New Zealand for example! I’m glad that it still didn’t happen in Canada! 😀

  7. Also, it seems much more logic that these banksters want to destroy us because the banksters could simply print more fiat currencies to bail out their greedy friends. So instead, they are stealing our fiat currencies by getting them from our bank accounts.

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