Grant: I don't think it's a matter of communications policy. I think it's a matter of substance. To me, the clear and present risk is the consequences - unintended though they may be - of ten years of suppressed and distorted interest rates with the attendant distortions in both the so-called real economy and especially in the financial economy where leverage has been piled upon leverage.
CNBC: So this is inevitable, this kind of negative reaction.
Grant: Certainly after ten years of the lowest interest rates, literally in the 3,000 years of recorded history.
CNBC: We get that you didn't agree with the policy before, but right now are they making a mistake?
Grant: It's not a question of agreeing with it. The consequences of ten years of distorted interest rates are things that we can't always see, but which are nonetheless there. For example, the distortions of the leveraged loan market with fine print that's supposed to protect investors has been eviscerated or written down. Green investments proliferate because there are no interest rates. Interest rates are meant to measure risk, discount future cash flows and set investment hurdle rates. When those things are absent or distorted, decisions in real time - real things - are not as they might be. And exactly what is wrong is revealed in time. Now, the stock market is a forward looking indicator. The economy is not a forward looking indicator, right?
~ Jim Grant, interview on CNBC, December 19, 2018
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