Jim Grant: “Cycles Begin & End In Excess” | McAlvany Commentary

the McIlvain ii weekly commentary covering monetary economic and geopolitical news events people will do crazy things with credit credit is the Achilles heel of Finance people talk about money and the money supply but it's not money that gets you into trouble there's the promise to pay money and the promise to pay money which we call credit is at the heart and the root and the black soul of every panic in one form or another now here are Kevin Eric and David McElhaney welcome to the michael vanie weekly commentary i'm kevin oracle long with david McIlvain ii well we have a guest today that actually is worth tracing back his influences you know we've talked in the past about musicians often times when you'll hear especially a jazz musician playing you'll hear a little melodic quote and oftentimes that's after years and years of listening to other people jim grant our guest today has influences he seems to be a sponge that absorbs the most important influences on his subject which is economics and interest rates whether it's music or a creation on a canvas or in stone you can look at the history of philosophy and see how there are people who have made a contribution and that has been a subsequent influence on someone else's life jim grant has been an influence like that for me and as i read his books i'm drawn to his bibliographies because not only am i interested in the way he writes which is fascinating it's how you build your library actually exactly the basis of his thoughts and I want to know his influences so as he has influenced me and today our conversation relates to his book his most recent book on the life of Walter Paget Badgett the life and times of the greatest Victorian he was a man who has been an influencer and he was influenced I mean you go back to James Wilson his father-in-law he completely influenced by him and this builds to today the Economist magazine has changed quite a bit over the last hundred and fifty years including from 3,000 subscriber base to a million five today there's a few more people who've read it but Jim grant Jim Grant is a man of great curiosity as a writer he has commented on the financial markets and barons in the Financial Times and The Wall Street Journal to name just a few and of course his by monthly newsletter that interest rate observer as an author he's wandered the highways and the byways in the back alleys of economics and politics and financial market history by I think all of his books are in my library some have served as critical educational cornerstones in the last commentary interview we did with Jim on his book The Forgotten depression of 1921 published in 2014 today we're gathering to discuss his most recent contribution it is the definitive biography of a banker of an essayist the editor of The Economist magazine and I can't think of a better person to have written the life and times of the greatest Victorian Walter Paget than James grant welcome sir well thank you David and thank you for that nice introduction clad to be here I have to begin by asking what is left to observe in the world of interest rates these days there's very little to see the rates being so low it is hard to make a negative race they simply don't show up on the horizon but what interest rates lack in visibility they certainly make up for and drama and impossibilities I mean in 4,000 years our recorded interest race history we have never before seen substantially negative nominal bond yields by nominal I mean not adjusted for inflation just plain old below zero yields on securities longer than say a 90 day Treasury bill so we are living in really for better or worse very interesting times in the credit markets well as a financial market historian you have the opportunity to observe cycles and common elements from one time frame to another and you've said that in the physical science sciences progress is cumulative and we stand on the shoulders of giants in economics you've said that the most ostensibly rigorous of these social sciences progress and error too are cyclical we keep on stepping on the same rake s– why Walter Paget and why no well Badgett is an appealing figure for me because he did what I do he did it very differently and I daresay much better but he was in the financial journalism trades he ran the economists that I should help people anchor this in history he was born in 1826 and he died in 1877 like 51 years old but he edited the Economist having married the founders daughter but he would have got that job pure merit so fine a journalist and author was he he wrote something called Lombard Street which is a kind of a handbook of central banking practice and dogma that still at least cited I'm not sure how widely it is read but it is still discussed and cited to this day Ben Bernanke in his own memoir of the Great Recession cited Badgett more frequently than than any other living economist so Badgett is with us so I when I was just getting started at Barron's I'd come to New York for the Baltimore Sun I was getting started in financial journalism in a serious way and I would go to New York Public Library and sit down on Saturday and call up the men still available bound dusty volumes of The Economist in you know the physical hard copy form and read them and you can always tell badge 'it's work because of the just how has style just scintillated and it just sparkled I've been a fan for years the decades and I thought it was just high time I was getting any younger we look back at the 19th century and you know financial market panics are not uncommon the common element between them then and now perhaps through all time has been the expansion of credit a Badgett was in a household that was keenly aware of the history of problems panics financial market panics and what it took to operate in the context of a financial market like that 1825 was a little early for Walter as you mentioned 1826 when he was born but his professional career spanned 1839 47:57 and 66 years in that 19th century where he got some experience both as a banker and as the writer editor of The Economist can you set the stage for his life by taking us back a little further 1797 Bank of England suspends gold convertibility what did that set in motion that would end up influencing his role in the British financial system 1797 was the year as you say David in which the paper Pound came to supplant the gold out you could up until then it's your pounds for gold at the 610 statutory rate I forgot now what exactly was but it was it was inviolable and all at once with a threat perhaps an overblown threat but still was a threat of French invasion the government hid the Younger suspended gold convertibility and so the pay per pound was born and with that birth came also the beginning of a monetary controversy that lasted certainly until the restoration of convertibility in the early 1820s but in a fundamental way is still with us today is what is the nature of money what's money and who says so those great questions came to the fore during this long suspension of cool convertibility so 1797 if you didn't like the paper pound you could not present yourself at the Bank of England with notes and get the equivalent in gold you had to make do with the paper and you had to depend on the management of the bank to maintain the purchasing power of those paper pounds they were intermittent demands for the restoration of convertibility throughout that twenty odd year period it was supposed to have been temporary and it lasted instead of full generation and when the time came finally to revert to a monetary system of convertibility there was a great debate as to what rate of conversion should the British authorities adapt to should they go back to the one that was in force in 1797 this before the inflation that that necessarily followed the suspension or should they set the conversion rate and a somewhat arduous and easier or a cheaper level to give a break to the people who had borrowed money and inflated paper pounds so I'm probably getting a little bit too deep in the weeds here but the controversy between lenders and borrowers between the advocates of inflation and hard money these debates have recurred at intervals over two hundred years plus there seems no end to them even today so we have a change in the monetary system something that was similar to the 68 to 71 period here in the United States in terms of suspension of convertibility let's go back to the 1820s in the modern era today we have a response to falling rates we have a bull market and everything is it a stretch to connect the declining rates of the 1820s and the speculation that followed in unusual assets leading up to the crisis in 1825 almost a similar echo 1840s and then the panic that followed later in that decade can we surmise anything from falling rates bull markets that then ensue and Corrections that almost seem to be the next Domino what of budgets many aphorisms is especially relevant today he said alluding to a national symbol of Britain he said John Bull can stand many things but he can't stand 2% he meant positive 2% but what he meant was that very low rates tempt people to reach free yield to take risks they would not ordinarily I think prudent and the accumulation of those choices of that risk-taking leads to now kind of putting into my words what I think badger would have bent by the process but the persistence of very low rates leads to greater and greater attempts to capture yields through the reaching for credit risk and no one behold one day somebody forgets to bid and somebody wants cash and that little flicker of flame is enough to light the fuse it finally ends up in a great big explosion we call a pact but very low rates have since the dawn of modern financial capitalism has been the prelude and perhaps the cause of financial difficulties that take the form of panics and bank runs and generally a sudden demand for that thing that seemed in such abundance namely cash so again cycles cycles as a financial market historian or things that keep on popping up poll Thornton and company is an establishment that you mentioned in the prologue and this is kind of an echo from the Victoria period into our own we have interest rates low rates causing a migration to longer maturities lesser credit quality the demise of a firm and so in the Victorian era we witnessed something that was absolutely amazing Telegraph the railroad systems the expansion massively transformative and they were fueled by easy money low rates accommodative policies if you will which comes first the innovation and the transformative idea or ample credit allowing for experimentation and risk-taking yes David I think that innovation and the excitement that innovation invariably induces and people comes first and now searching not immediately fruitfully for examples of innovation that occurred in times of very high interest rates we certainly have had that those times innovation didn't stop but the combination of a big idea like the railroad and very low rates is is a very very happy alignment of the Stars happy in the sense that the innovation proceeds and speculation in its train follows and invariably speculation goes too far whether it's in the internet boom of the late 1990s or whether it was the case in the railroads in the 1830s and 40s when people would be building parallel lines and the stock prices of both competing railroads would go up even though people knew in their heart of hearts or I guess in their mind of minds that only one of those lines would prove to be successful so so many of these stories so many of these features of cycles seemed timeless the the names of the firm's change of course the the nature of technological progress changes but the storyline more or less remains the same so we have legislation then is now that plays a role and I'm curious what role it is you have the peels Act which changed the landscape for entrepreneurs and it also seems to have changed how the Bank of England operated they started again consider longer maturities unsecured loans and very eclectic collateral what role does legislation play in either taming or exaggerating animal spirits well let's look at our own time you know back in the period of two thousand three four and five and six you found not only immense leverage building in residential real estate which became of course notorious and at length infamous but you also found at building up on Wall Street we ran a piece of grants in 2006 after looking at Morgan Stanley and you know just relating the fact that the period and leverage that his ratio of access to equity was in excess of thirty times and that was as I say at a statement date and who knows how much higher in mid between statement date and the headline of the piece was over the cliff with Morgan Stanley but I don't think there was any particular legislation that was responsible that people I think I've tried to identify changes of the SEC regulations that might have explained it but let's double back to badges time and one of the attempts at making capitalism a better system making Enterprise a better system was legislation to create limited liability so no longer would you have to form a partnership in which the partners were fully at risk of all the debts of the firm you could distribute risk and you could do this without an Act of Parliament that was a well intended piece of legislation and it Susilo Teta not so much what the author the eminent a great future Prime Minister William Gladstone what he intended to create but rather that seemed to incite a lot of sketchy actors creating a lot of kind of fake corporate structures so I'm not I'm not so sure about the effect of legislation in the short run one final thought on this is that in the day way back when in the 1820s and 30s in England banking institutions were just about it except for the Bank of England itself where partnerships and the partners were liable as the phrase went for the debts of the firm down to their quote last shilling and last acre and you would have thought that that a responsibility of you know the the sword of Damocles of utter financial ruin would have enforced most rigorous and conscientious attention to risk management on the part of these bankers but there were still panics you know and so the laws were relaxed and limited liability banking was introduced and you asked a very good question about 15 minutes ago David and I am dancing around it well I let me take this to a personal place and it's also a speculative place as a father of grown men you can now reflect on the lessons that are sometimes caught and other times deliberately taught can you speculate on what the family conversations the dinner table discussions might have been that influenced Badgett you've got to Vincent Stuckey perhaps an influencer Walters own father who's a partner at Stuckey's Bank and what did he know just by osmosis that set him in motion a lot of the lure of banking in the risk management as we now call it I'm sure was Walter and vibed in family council or at the dinner table you know his father was a very dutiful kind of second or third in command at the family bank which was called a Stuckey's banking company so they certainly talked about banking problems and young Walter was a little bit too young to have felt the family attention that must have occurred around the time of the panic of 1825 the only being just newborn but subsequent booms and busts were work to him living things and he came up did Walter in a family institution that was immensely successful and resourceful and profitable so his line as a young man his his view is on banking was that of being a privileged member of a family that had wrought great things and they always somewhat hazardous business of borrowing shortened lending long and managing credit risk the Stuckey's banking company earn consistent the rates of return on stockholders equity the partners capital in excess of 40% amazing and today we think that if the money center bank is doing well if it can earn in excess of 10% and 15% it's was certainly common enough before the crisis but it's much less common now so 40% and never really serious credit issue there were certainly some bumps in the road but Walter had a as I say I guess a kind of unusual experience in banking in that the institution was so successful for so long one of the ironies of the subsequent career of Stuckey so it became through a succession of mergers became a particle of the monstrosity called the Royal Bank of Scotland which made the greatest failure in the history of British banking during the Troubles of 2008 so that was the Vincent Stuckey Walter's uncle the knock point the founder but certainly the founding genius in this institution that always wouldn't want to say that bankers are mortal but banks should live in perpetuity and if any bank seemed destined for that fate it was Stuckey's but his finally alas wound up in the lap of the British government which it would have been mortification beyond reckoning for the Stuckey family the badges well perhaps what Royal Bank of Scotland missed was some of those historical footnotes that did matter Stuckey's Bank was trimming the sales of its operations in 1853 and avoiding procyclical management RBS didn't exactly do anything to alter the course in fact they kind of layered on risk how do we borrow that conservatism trimming the sails and infuse it in today's banking system if we talked a little about limited liability current management structures what could we learn and put in real application your safety safety was a competitive attribute up until the institution of Deposit Insurance and too big to fail and the so called put that central bankers are meant to be offering the market they deny it but nonetheless that is an idea in the market so central bank's certainly in the developed world have without quite intending to have taken away safety as a competitive edge that you could claim there was a bank in New York City that was finally absorbed in what has now become JPMorgan Chase it was called The Chemical Bank it was around until I forgot what it was when the merger happened it was a while ago and the Chemical Bank was known in the day in badges time as old bullion because of one of the panics and he was 1857 the chemical Bank had continued to pay out gold to its clamoring depositors even as every other bank in the city of New York suspended convertibility and old bullion chemical traded on that that moniker until the at least the early 20th century could slowly see these old as if you went through papers newspapers of the 1920s for chemical bragging about its record the panic of 1857 and you so the bragging had an economic rationale that was telling people that this is an institution that thinks first and foremost about the sanctity of this depositors money and today if you go around looking for a new bank if you move your something at the bank you are likely to choose is the one that has the ATM nearest your house and you will not bother to look at the balance sheet because that Bank is insured or its some cases it's much too big to be considered a failure so that's what happened you mentioned the profitability of Stuckey's and this is fascinating because on the one hand Badgett loves the gold standard but he loathes the idea of gold as a reserve asset in the commercial banking world that he was a part of can you jab at that a little bit yes it's a great paradox Stuckey's bad guy no I have my really really invaluable researcher in this Harrison would deal when Harrison went to Edinboro and it went to the RBS records the RBS be what it might have been the either the archives are fabulous and the archivists are wonderfully welcoming but wound Harrison went to check this out of haha we are going to see a balance sheet that it shows a great big chunk of gold because the stockings people were famously conservative and successful but in the contrary where the balance sheets show was they held almost no bullion and there were complaints in the financial media the financial press during the 1830s and 40s and 50s that the gold standard in London was being run with precious little gold one of the complainants said that gold was becoming like in the mahogany veneer on furniture in London drawing-rooms who just so thin and why is this well gold is wonderful is it is to touch and as pretty as it is to behold it yields nothing now today gold yielding nothing actually out yields 13 trillion dollars or so worth of bonds so it's kind of a high yielding asset but when yields were invariably positive a yield of zero held no charm so profit-seeking bankers did what profit-seeking bankers doing this they wanted a whole earning assets and every ounce of gold of the balance sheet was foregone income but they did believe that someone oughta hold the gold or ought to be a gold standard very few people conceived if a purely paper currency certainly in the unhappy aftermath of 1797 to 1820 whatever it was people were bound to the system of we call the gold standard but who was going to hold the inert money and that someone the Badger prescribed was the Bank of England now he said badger was a fine one for paradox and for kind of tickling the reader by saying one thing and then inviting the reader to consider the alternative you know see he's very playful writer so bad you would say in the perfect world each bank would hold its own reserve but this is not a perfect world and furthermore we are used to having the Bank of England whole so therefore let the Bank of England explicitly own responsibility for holding this and it's our all week in the same but it's our own return equity would go down and ours would remain elevated as it is so some of us in 21st century America deplore the kind of socialization of financial risk by that I mean that in the boom the big shots get the dividends and in the bus the taxpayers on the downside that is a socialization of risk and so this idea didn't come from nowhere to would agree the bankers who wanted to slough off responsibility for holding the gold reserve onto the government on to the government's bank the Bank of England those people too were interested in a little bit of financial socialism and Badgett was a spokesman for that group so speaking of socialism and really kind of the the opposite end of it because on the one hand while he sponsors a bit of financial socialism he's a free-trade advocate he is a free market guy through and through Badgett wrote as a free trade advocate as his father-in-law did as the founder of The Economist his father-in-law was a hat maker James Wilson was one of the purest exponents of the doctrine of laissez-faire he came out once in the pages The Economist against public health laws is it everyone ought to take care of his own damn sewer he was he was he was not one for compromise well there there writing at the same time that Marx and Engels are and they're in print advocating for a system that favors capital where obviously Marx and Engels were favoring labor Lombard Street is a Badgett calling card you mentioned his book earlier may I say one thing that that Wilson I think would Blanche a little bit at this word capitalism it wasn't as if Marx entangled favorite people and James Wilson favored money which is other way of saying the same thing Wilson favored enterprise and he thought that with his own eyes he could see the world improving with respect to wealth of course but also the quality of civilization he saw in the Crystal Palace exhibition and 1851 in which the world sent its inventions and its new products to be displayed and agha visitors to the Crystal Palace in London he he saw in this one of the signal triumph human ingenuity and the advance of the human race so he was a great optimist and a great believer in what we call capitalism and what we perhaps more descriptively ought to call enterprise but he believed that the system he favoured would be down to much greater benefit for the workers than anything that Marx and Engels proposed that would directly advantage those same people anyway that's the end of my speech no but let's build on that because people versus money is the way that it's contrasted if money is a measure of capital and capital is a means of wealth creation now we're to your point on enterprise how do you think Badgett might respond to the 21st century viewpoints of capital redistribution as they percolate up again in the modern political spheres I don't know your Badgett was an establishment areand and as she's just as you said that he espoused views that would today be considered rather quaint he believed the only gold and silver were money that everything else was a credit instrument he believed as you say in free trade he did not believe that railroads for example unnecessarily to be owned by the people who built them he kind of toyed with the idea of nationalizing the railroads but he was he was a man of his times that he toured a little bit of scorn on ideologues this day people in Rose Ellis for one cause another idea say he he smiled at some of his father-in-law's enthusiasms so if we imagine bagent standing around today say taking us he is the Council on Foreign Relations I imagine he would be no gold standard guy but rather a PhD stand the guy I think he would favor the experts and favor the system of central banking we have because after all he believed in what was he might in fact sit in rather well on the page of the Economist in its current edition not written by James Wilson he was adaptive and I think he won a man at his times I think he did his times a great service by living in them but he was others times and I think that is the kind of adaptive person who would not waste his precious heartbeats on tilting at windmills although I I say as a teller who actually makes his living at tilting at windmills that it's a living but badge it I think has the personality that would have him right smack dab in the middle of the establishment I think he'd be a very happy camper on the Federal Reserve Board I'm sorry to say I hope this won't put people off reading the book no I think they should read the book because here's an important element again we go back and forth between then and now August of 1857 the Ohio life and Trust Company fails in obviously Ohio the United States news of the failure was in London in early September and you've got the panic of 1857 in motion talk to us about the interconnectivity of Finance because if transatlantic problems were not contained in the nineteenth century how much more so in this age of globalized and interconnected markets of the 21st yes this always a question of which was the first truly international panic and you could make a case it was the one in 1819 6 years of what value was born in any case certainly the 1857 one was an example of a transatlantic problem and not only today when one tribe Lee observes is communication instantaneous but emotions too are instantaneously conveyed from person to person and from networks and network and you know finance is and I think deeply emotional proposition I think it's a little bit rich that we should suddenly be discovering this late in the history of economics not the concept of behavioral finance I mean I don't I don't know what other kind there is it's like a mechanistic financier robot finance I guess we have robots and we have finance but so much of what people do with money it seems to me is is it matter not so much of the head but of the heart and of the spleen and who knows what other body parts are so if that is the case and it is the case how much more contagious must be both extreme modes of euphoria and fear the characterized two extreme cycles the finance you know when everyone is liking the adjusted EBIT da earnings report of the latest specular favorite that is a very different thing then people reading in the dry pages The Economist that such-and-such a stock appears to be on the upswing both news reports could tickle the fancy of a special ater and the heat of a bull market but the emotional content of digital media and social media today overlaid upon the dry recitation of earnings figures or balance sheet figures is it different things so yes is there no boundaries the chamber the Federal Reserve I think rather incautiously was quoted as saying I dare say he regrets profoundly haven't used this word but he's used more than once the idea that things were contained in 2007 2008 the prospects for containment are ever-dwindling well so there is again an echo from the past you've got the 2007 2008 and how we address those issues the lifelines that were thrown out over and gurney was thrown a lifeline in the panic of 1857 and I think maybe one of the things that we learned from that is that assistance is never singular they were under they disappeared they were one of the largest financial institutions of the day and they disappeared in 1866 in spite of the help they got in 1857 or because that helped so there's a saying in Wall Street as you know well Davis is the first loss of the best loss and over and Gerti if that institution it's due was kind of the JP Morgan of its day its reputation was spotless and its prestige was unquestioned although under the surface of that prestige there was a certain amount of rock and the rot was heaven in 1857 it was evident to a few it was evident to a few more by the time that it had reached its death throes in 1866 but the Bank of England perhaps was kicking itself certainly others urged the Bank of England to take itself for helping it over the hump in 1810 years earlier so Badgett is I think most famous is a financial thinker and writer for having prescribed what a central bank ought to do in times of crisis and his advice in Lombard Street was more or less this he said the central bank bought land unstintingly at a very high rate of interest against good banking collateral and of course the solvent institutions so why at a high rate of interest that is counterintuitive and I'm sure that today central bank first of all they've lent a very low rate of interest in crisis but the idea of letting a high rate of interest would seem to be almost you know it along something from the Dark Age as well there was a good reason for it and it's still I think inadvisable of course of action certainly one to consider and by lending it a high rate of interest you ration the credit because people who don't need it and who are going to borrow just as a precaution because they were fearful with ever being able to the bank they wouldn't borrow at ten percent too costly and by lending at a high rate of interest a central bank would attract capital from overseas and that capital would reflect off I in time the financial system of the country that was stricken by a panic so that was reason for a high rate of interest but now of course there's no need to physically ration credit because central banks can materialize it with a few taps of the computer keyboard now either that is or that is not in advance in the financial doctrine and practice but Badgett espoused those ideas you know lend freely a high rate of interest against good collateral and we have reduced that to lend freely I was going to sense a modified plan today low rates collateral doesn't matter you can establish your own bad bank and put as Deutsche Bank's done recently seventy billion dollars worth of garbage into it so that collateral is never an issue so as we come to the end of our conversation Jim what kind of public discussion would Badgett propose today he liked conversation he was very at least with the pen verbose very prolific in his writing what kind of a public discussion would Badgett propose today regarding markets regarding politics trade and tariffs are we back to your observation earlier that he is solidly an establishment perhaps he would be in the CFR's publication writing that today yeah well Badgett name for his own age zone enlightened age in Victorian times he called at the age of discussion so he was all for apart from being a scintillating conversationalist he was meant to be perhaps the most interesting guy in London to talk to but he was on favor of people hashing things out of warding precipitous action boarding impulse he was fond of saying such things says if people would only do less I think how much better off we'd be if people would not over trade if they would take their money and go home rather than thank you the next leveraged opportunity we would all be better off so I think he would be in favor of he'd be in favor of doing wise things through the counsels of wise people he would indeed be at homeland console on Foreign Relations and I myself am a member of their organisation but Sebastian Mallaby who's on the staff the council a very good guy and very talented offer reviewed Badgett and he said that the author of that book and I guess you're David you're talking to him now the author of that book is the 19th century personified he meant me that I wear a bowtie and then I call our publication grants interest rate observer a antique name and that I am in favor of such absurdities and such anachronism zazz gold as money he said I should also add in fairness to he'd like the book he seemed a little bit but I read his review of badge and I thought to myself the author of that review is in fact Walter Paget so I will see Walter at the next meeting of the Council on Foreign Relations the Bastian Mallaby or but but Walter is that establishment Arianism and he would be in favor of heightened governance by enlightened people we've explored biographical notes and some historical anecdotes today what do you think we should glean from history to honor the past and perhaps set a better trajectory you're benjin I mean Jim well I think that history will make you a less surprised reader of the newspapers and if you read enough of it you will avoid the characteristic pitfall of those who read a little and those who read a little think that you can superimpose the lessons of the past on the present day because you see a pattern and you attempt to exploit that pattern perhaps if you're really really rash with borrowed money never a good idea David but what you can do if you know enough history is to see that for example you can see certain things that are eternally true and one of those things is that people will do crazy things with credit credit is the Achilles heel of Finance people talk about money and the money supply but it's not money that gets you into trouble there's the promise to pay money and the promise to pay money which we call credit is at the heart and the root and the black soul of every panic and one form or another so you use such a thing as a credit cycle what we do try you at grants is to trace the dynamics of that cycle it begins in fear and loathing and incidentally David in value that's at the bottom and it recedes until there ain't no value and perhaps there are not 13 trained but 23 trillion security is yielding less nothing who knows but the cycles begin and end in excess and sometimes in excess so greatness to appear on its face absurd but the reader of history will know that just because it seems to you absurd doesn't mean you should short it I'm trying to adapt that lesson myself at the age of 73 you let me know when I succeed is a very kind reader of Grad stated but history is a I think it's a it's a great thing to have under your belt and to use it wisely is the idea you can get into a lot of trouble by using it too literally the reader of grants is by default a reader of history and I think those who are unfamiliar with the interest rate observer should get familiar grants pub comm and avail yourself at Amazon of James grant Badgett the life and times of the greatest Victorian we see these patterns they're very instructive we can learn from the past and apply them to the present in some way borrowing the wisdom of the ages Jim thank you for joining us in our conversation on the weekly commentary you are entirely welcome David out you are one fantastic interviewer and you're prepared and you got great questions and I thank you for that I do a certain amount of these things over the years and you are really good at what you do so thank you well I appreciate it that's where I see it David that's the way I'm calling I appreciate it thank you David you've been listening to the mcaveeney weekly commentary on Kevin oracle long with david McIlvain ii and our guest today jim grant you can find us at McIlvain e.com MC a lv a NY dot-com and you can always call us at 855 nine five five six this has been the McIlvain e weekly commentary the views expressed should not be considered to be a solicitation or a recommendation for your investment portfolio you should consult a professional financial advisor to assess your suitability for risk and investment join us again next week for a new edition of the McElhaney weekly commentary

14 thoughts on “Jim Grant: “Cycles Begin & End In Excess” | McAlvany Commentary

  1. Jim Grant: “Cycles Begin & End In Excess”. https://www.grantspub.com/ Gold now pays better interest at 0 than $13 trillion in negative paying bonds! Socialized Risk: Big boys get winnings & tax payer takes all losses. Bagehot: Central Banks should lend at very high interest rate & only with collateral. Thanks for listening to this week's McAlvany Commentary.

    James Grant founded Grant's Interest Rate Observer in 1983 following a stint at Barron's, where he originated the "Current Yield" column.

    His books include works of financial history, finance and biography. They are: “Bernard M. Baruch: The Adventures of a Wall Street Legend” (Simon & Schuster, 1983); “Money of the Mind: Borrowing and Lending from the Civil War to Michael Milken” (Farrar, Straus & Giroux, 1992); “Minding Mr. Market” (Farrar, Straus & Giroux, 1993); “The Trouble with Prosperity” (Times Books, 1996);  “John Adams: Party of One” (Farrar, Straus & Giroux, 2005); “Mr. Market Miscalculates” (Axios Press, 2008); and “Mr. Speaker! The Life and Times of Thomas B. Reed, the Man Who Broke the Filibuster” (Simon & Schuster, 2011).

  2. What happened at RBS was a shocker. Fred Goodwin ( Fred the shred) has a lot to answer for. He is responsible for the lax rules at the bank leading up to the crisis

  3. There is no such thing as a bank. Its a crew of men who skim profits through a legal entity. The will take all the capital, fail, and take all the credit

  4. If the government defaults on their credit what does that mean to the individuals credit owed?

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