Jim Grant on the Fed
In a previous series, we saw that Jim Grant has been a great critic of the Fed’s ZIRP. Grant said, “Zero rates say there is trouble. They say there is something abnormal. There is something to worry about. This is a state of high anxiety perpetuated by the central bank.”
When the Fed maintained a dovish stance at various meetings in 2016, Grant said that market participants were gradually losing confidence in central banks. He also said that the central banks are losing their credibility to spur growth in the economy (QQQ) (IVV) (VOO). However, the Fed hiked the rate by 25 basis points at the December 2016 meeting and said we could see three more rate hikes in 2017.
Grant also believes that Donald Trump is very dovish and might prefer lower interest rates. However, the economic indicators (VFINX) (IWM) are showing improving figures, which indicate that the US economic condition is improving. When the economy shows stronger moves, rate hikes may be appropriate. In regards to the upcoming Fed appointments, Grant said, “My guess is he’s going to put someone who is very dovish. I think he is a former leveraged New York City real estate speculator who loves low rates.”
You may be interested to read, Ray Dalio: The Market Has Discounted the Obvious.