The ECB needs to more aggressively pursue easy money policies like quantitative easing and even move toward negative short rates, he said, “but the euro area has not figured it out yet.”
Federal Reserve critic James Grant, founder and editor of Grant’s Interest Rate Observer, predicted that the U.S. central bank will surprise the markets and continue its bond-buying program.
“Radical monetary interventions … beget more radical monetary interventions,” Grant said.
He faulted the Fed for “fixing prices” of money in a misguided attempt to keep inflation from falling lower.
“What is wrong with stable prices?” he asked. The U.S. economy has done well in prior deflationary periods, he noted.
Grant, like other Fed bashers, thinks zero-rate policies are creating bubbles. In particular, emerging markets are at risk.
“We look at emerging markets sovereign debt [and] we think … people are doing things in this area and will regret it,” he said. “How are emerging markets going to fare in the next liquidity crisis? I think not well.”
Grant admitted he favored going back on the gold standard.
“Of course it had drawbacks, but it was a monetary institution that held prices stable for many, many decades,” he said.
“It seems to me gold is the anti-debt. It is money that cannot be conjured up on a computer screen. … It is out of favor, [so] we continue to carry a torch for gold.”