How can investors hedge their portfolios against the words, thoughts and deeds of the planet’s monetary mandarins? That was the question Jim Grant, editor and founder of Grant’s Interest Rate Observer, addressed when he opened the fifth annual Innovative Alternative Investment Strategies conference in Denver on July 30.

A leading critic of activist fed policy, Grant admitted to favoring a “free-range, organic interest-rate policy” over the present position of the central bank. “My complaint with the present-day Fed is that it has lost faith in [basic] pricing mechanisms” and is, in effect, substituting “price administration for price discovery,” Grant told about 700 attendees at the event sponsored by Financial Advisor and Private Wealth magazines.

The experience of the last five years is hardly the only instance when central banks have kept manipulated interest rates to keep them at absurdly low levels. Low interest rates “were the blight of the Victorians in the 1850s,” Grant remarked. He quoted a popular phrase of that era arguing that “John Bull [England’s every man] can stand many things, but he can not stand 2 percent.”

During his talk, Grant spent a few minutes speaking about his forthcoming book, The Forgotten Depression, which will appear in the fall and offers a thoroughly intriguing history of the severe post-World War I recession of 1921. Having read proofs of the book, I highly recommend it. That recession “was a calamity of huge proportions,” Grant said.

The U.S. economy boomed as a supplier to Europe during the early years of World War I and the government was forced to place price controls and consumption quotas on certain goods and services. Once the war was over, and certain controls were removed, inflation ran rampant during much of 1919.

By 1920, the post-War boomlet was over and prices for many commodities collapsed by 40 percent or more while national output fell 24 percent in nominal terms and 8.7 percent in real terms. Stock price averages fell by 46 percent. Though there was no official measure of unemployment during that era, various attempts at estimating the jobless figure come in at 15 percent to 20 percent.

No doubt, unemployed workers and bankrupt businessmen suffered enormous pain, Grant noted. And yet two successive presidents, Wilson, a Democrat, and Harding, a Republican, did as little as possible, much to the consternation of Harding’s commerce secretary, Herbert Hoover.

Grant contrasted their inaction with the numerous “Keynesian” stimulus packages served up by presidents George W. Bush and Barack Obama. By late 1921, the U.S. economy was rising to its feet. The speed with which the recovery took hold helps explain why we know so little about the depression that didn’t last.

“Opportunistic investors came in and bought real estate and stocks” selling at 4 to 5 times earnings with dividend yields of 7 or 8 percent. RCA, the stock that would become the darling of the Roaring Twenties, was selling for one-third of earnings only a few years later. Before long, workers were being rehired and the U.S. economy was booming. Ultimately, the boom of the 1920s ended badly. But the non-existent fiscal and monetary stimulus of Wilson and Harding produced a much stronger recovery than the Herculean efforts of Bush, Bernanke and Obama almost a century later.

Then as now, the question of what constituted a safe investment remains highly controversial. Grant told attendees that in the 1970s bonds yielding 10 percent were described as “certificates of confiscation” that went begging by the end of a 35-year bond bear market that was followed by a 31-year bull market for bonds.

Today, Grant believes that we find ourselves in a place where “we are here because mainstream debt securities are not priced” by market forces. Fed policy has failed to resuscitate a vibrant U.S. economy, but it has distorted other financial asset prices. Nobel laureate Robert Shiller thinks U.S. equities could be overvalued by as much as 25 percent, not an outrageous bubble, but hardly a bargain.

Among other things, the Fed lacks self-awareness, Grant said. “In a market economy, prices coordinate human effort and wages coordinate human activity.” That’s not happening.

So what investments does Grant like? Investments in such seats of liberality and honest governance as Russia and China. Gazprom, the Russian state-controlled monster, sports a 5.4 percent dividend is selling at 2.7 times earnings after all the oligarch stealing. With profits of $35 billion, it makes more than Exxon. Lukoil sells at 3 times earnings with a 6 percent yield.

He is also bullish on goldminers who find themselves sequestered in an even dingier doghouse that gold itself. “It’s a bet on an unhappy monetary outcome,” he said.