Jim Grant is a big doofus. I see him walking down Wall Street nearly every day, passing my office, looking every bit the part of Big Bird from Sesame Street, only with a scowl. And to think I used to like this guy! But that was before I met Warren Mosler and discovered MMT.
For those of you who don't know, Grant is publisher of Grant's Interest Rate Observer, which is the out-of-paradigm, hard-money-advocating, pompously-written rag sheet that he's been putting out for ages.
Like all of these Austrian clowns, Grant's in demand with the media. That's probably why he showed up on Tom Keene's radio show on Bloomberg the other day, where he droned on like some lunatic conspiracy theorist, hurling his usual ignorant attacks at the Fed and central banks in general. From Grant's mouth came such enlightened statements as "central banks were confusing the 'black art' of central planning (what isn't centrally planned these days, anyway?) with the traditional art of central banking" (Huh??) and other such nonsense.
But his best line was this:
"The Fed owns the stock market."
I kid you not. That's what he said...the Fed OWNS the stock market.
Oh really? Well, here is a screenshot of the Fed's most recent statement. Can anyone show me where you see stocks, equities, S&P futures or anything even remotely stock related on "Factors Affecting Reserve Balances?"
If you've perused the statement you'll see that there is nothing even close to stocks on the Fed's balance sheet. Just a bunch of government securities, loans, some foreign currency, and a tiny bit of gold.
Now don't get me wrong. I fully understand what Grant is alluding to. He means that the Fed's "manipulation of interest rates" (yeah, that's what the Fed does, Jimmy) could be an effort to get to get people to put money into the stock market on the hopes that higher stock prices feed through to higher confidence, more spending and investment, rising employment, etc.
That may or may not work, but one thing is crystal clear...there is no direct channel to the stock market from lower interest rates. None. Granted, some might argue lower rates make stocks more attractive from a valuation standpoint (all else being equal) and that might be enough of a reason to get some people to buy (and others to sell), but there is no direct channel from interest rates to higher stock prices. If you don't believe me, check out Japan. Interest rates there have been zero for the better part of 20 years and stocks haven't done anything. Even worse, they've gone down.
What, then, is Jim Grant talking about and why is Tom Keene according him so much reverence? (Keene seems positively smitten by Grant.)
As usual, I don't have a clue. Chalk it up to nothing more than mainstream media support for a crazy belief system that is based on fantasy over fact.