Hall of Mirrors: Jim Grant on the "Paper Moon", No Price Discovery Economy; Psychology of Bubbles

Reason TV had an excellent interview with Jim Grant, editor of Grant's Interest Rate Observer on the recent stock market turmoil. Grant says The Fed Turned the Stock Market Into a 'Hall of Mirrors'.

“Confoundingly to me, people have come to be quite accepting of the value attached by fiat to these pieces of paper we call currency,” says Jim Grant, who’s the editor of Grant’s Interest Rate Observer and the author of The Forgotten Depression: The Crash That Cured Itself.

“Are prices meant to be imposed from on high, or discovered by individuals acting spontaneously in markets? The readers and viewers of Reason known the answer to that but they’re regrettably in the minority."

Grant sat down with Reason magazine editor-in-chief Matt Welch on Tuesday to discuss the underlying causes of the recent market turbulence, why we don’t really “have interest rates anymore,” and how the classic jazz song “It’s Only a Paper Moon” provides a fitting metaphor for the equities market.

Grant Interview



Psychology of Bubbles

Central banks have blown another massive set of bubbles by removing every aspect of price discovery for the sole benefit of banks and the already wealthy. That's the bottom line, and it's remarkably easy to see.

Yet, very few see it that way.

Why?

Wall Street, academia, and the media, all have a vested interest in denial. Bad news does not sell. And people believe what they want to hear: Stocks are cheap and the economy is getting better.

Expect another "no one could possibly have seen this coming" set of excuses.

Mike "Mish" Shedlock