GRANTHAM: THE FED IS BLOWING THE LAST BUBBLE
11 November 2010 by Cullen Roche
15 Comments
Jeremy Grantham was interviewed on CNBC today and he is increasingly pessimistic about monetary policy. Grantham says the Fed does little more than manipulate markets:
“The Fed has spent the majority of the last 15 years manipulating the market”
Grantham is concerned that the Fed will succeed with QE2 and that it will ultimately result in one massive bubble. The full interview is attached below:
Source: CNBC
Way too much emphasis on governments rescuing and solving problems. But at least he recognizes the follies of the Federal Reserve. Yet his solutions leave much to be desired.
Did Grentham just accuse Bernanke of printing money? Hmmmm….
“He is running the printing press to suppress the dollar”.
Yet, TPC you maintain that he is using existing reserves and not introducing any additional dollars into the system. So why would the dollar value drop, unless the inflation is via a credit expansion through the banks not matching economic output – which it is not.
Actually, I don’t see he and TPC in conflict at all. Notice, he says nothing about coming inflation. He uses the colloquial phrase printing money, when what he is really talking about the Fed’s ability to manipulate markets through low rates, liquidity, convincing investors that the Fed has its back, moral hazard, etc.
I have read everything he has ever released publicly (and some that hasn’t) and I don’t think he has any interest in monetary policy in the sense TPC does. He is interested in the Fed as an enabler of bubbles, not a source of inflation in general.
That doesn’t mean he agrees with TPC, it just doesn’t enter his way of looking at the world, and really, given what he does, it doesn’t really need to.
not to worry; QE2 won’t work. Grantham’s just a bit late.
(if that’s any consolation)
all this means is that there WON’T EVEN BE ANOTHER BUBBLE. Greenspan blew the last one.
Roger, what is he late with?
Thanks!
a bit late to recognize how far this context can run; the Fed is simply running out of bullets, it’s now up to fiscal policy
Okay, I see.
Actually, I read him a bit differently. He fears that the Fed can keep the run going for a year or two, as he says it is what worries him the most. He believes if they are successful it will just lead to a more horrible break than what we have experienced so far. Reading him over the last year, he has been pretty clear that the market and economy could easily roll over and head off that kind of catastrophe.
Jim, I won’t blow smoke you your dress here [no offense]… I don’t know what is going to happen but I am betting on the bubble inflating for a year or two just like it was surmised. I am two years into my ‘Escape America’ plan and I will be in great shape if the bubble last two years; meaning ex-patriated. If it pops before then ….well let’s just say I may have to bale my own water to make over the horizon into the sun. But rest assured my ass is going.
Of all that I have read over the last few years trying to make money in options and currencies etc. it is this one truth.
“Money goes where money is treated best.” …. I don’t see the good ole USA in that light any longer.
I have a tremendous amount of respect for this man. He usually has a very clear view of what is currently going on and what is coming. Very disciplined value investor. The real deal.
Absolutely SVG. Grantham is a hero of mine, and should be mentioned amongst the greatest investors and investment minds of all time.
Superb interview, Grantham is clear and brilliant. Thanks, TPC
excellent, saw it yest. Sure it would land here !
It is not an issue of money printing vs. asset substitution. The point is once the Treasuries have been purchased from the banks, the cash needs to be put to work. Does anyone believe 100% of the money is going to be loaned back to the FED at menial rates when there is a bull market in commodities and carry trade? The banks have been rewarded time and time again for gambling and speculation. Why would they change their behavior at this point? To say QE will have little effect is naïve; everything done at this level is done for a purpose. There is a reason they have all the money and you do not. There is a reason they never loose.
QE 2,3,4,5 will ultimately blow bubbles, but this runup pops….FED outta bullets…
i’m with cullen on that but jerry is right on all else.