Short & Sweet
‘Hello, Mr. Gold Bullion, have you noticed what they’re doing?’
Grant weighs in on the fiftieth anniversary of the fiat money system
The retrospectives on the Nixon shock continue to poured in at the end of this past August – the month fifty years ago when the Nixon administration severed the link between the dollar and gold and ushered in the fiat money era in which we are still immersed. The repertoire, though, would not be complete without a few words from James Grant – one of the great critics and chief chroniclers of the era through his highly recommended newsletter, Interest Rate Observer. The following are excerpts from an interview of Grant published by Sprott, the Canadian gold firm, in mid-August. Grant ends the exchange hosted by the firm’s Ed Coyne with an admission: “I think I spilled my entire bits of wisdom here on the counter!” We want to thank Sprott for permission to quote the interview at length. The full exchange is available at the previously highlighted link.
James Grant –
“It’s immensely frustrating, right? Because where you see heterodoxy posing as the gospel truth, we see heresy wrapped up as sound policy. And you keep on saying, ‘Hello, Mr. Gold Bullion, have you noticed what they’re saying and doing? Have you noticed that the Fed’s balance sheet doubled during the pandemic? Have you noticed that the Fed is talking about nurturing a rate of inflation higher than its target in the midst of evidence accelerating inflation? Have you noticed any of this?’ We address this new thing called gold bullion and gold bullion keeps on slumbering …
“Gold has a way of disappointing its most devoted adherents. In 2008-09 it broke people’s hearts and went down. ‘This is a crisis!’ Gold is an ancient medium that appears in the periodic table. I didn’t invent it. Some people think I invented it! It appears in the periodic table, it’s an old thing and it takes its sweet time, right. It has a kind of a geological time set, that’s its clock: geological. Over the sweep of a reasonable investment horizon, it protects against the depredations of the stewards of our currencies. That’s what its purpose is. And that’s what it mainly does. Over the course of fiscal quarters and even some years, it will disappoint, but over the course of a reasonable investment, long-term horizon, it will spare you the punishment that our central bankers so willfully are meting out.
[Y]ou really have to take these things in with a great grain of salt and just say, all right, what I have here in gold, and very cheap gold equities, by the way, what I have here is an investment in monetary disorder, not a protection against it. We have it (monetary disorder) already. Monetary disorder is in fact the monetary system. It is an inherently disorderly system. In gold, you have an investment in that you do well, the more disorderly it becomes and especially well when the world recognizes the essential chaos of our monetary institutions.”
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