Jim Grant made a most interesting call on the markets back in September. He is something of a perma-contrarian residing out of the box in his thinking. According to a recent article in the Dallas Morning News, “Wall Street Stars Look For Truth In Packaging,” Jim Grant and his Interest Rate Observer have a “star quality” track record.  Of the Observer’s editor Will Danoff, the newspaper said he “manages Fidelity’s $110 billion Contrafund and has one of the best track records on Wall Street over the last 25 years.”
So what did Jim say recently that was so interesting? Clear back in September, 2015, when everyone and their dog was debating the only important topic of the day – how many times and when will the Fed hike rates because the economy is so good on its own now – Grant wrote an article titled “Jim Grant On Helicopter Money And The Comeback Of Gold”. Mind you this was back when gold was still dead, buried, and detested, and very few were buzzing about helicopters. On the free credit binge of recent years leading to malinvestment and mismanagement, resulting in mass loan troubles resulting in more stimulus needed, he said:
So it’s seemingly a never ending, circular process of so called stimulus leading to still more stimulus and unconventional ideas leading to radical ideas. I dare to say that we have not yet seen the most radical brainwaves of the mandarins running our central banks.
What do you think this will look like? They don’t keep those things as a secret. They talk quite openly about “direct monetary funding” which is what Milton Friedman had in mind when he coined the phrase “helicopter moneyâ€. So the next idea is just bypassing the banking system altogether and mailing out checks to the citizens.
Would something like that even work? All this monetary stimulus does two things in a reciprocal way: It pushes failure into the future and brings consumption into the present. Providing marginal businesses with very cheap credit is inviting companies that have passed their useful days of their commercial lives to pretending some kind of an afterlife thanks to the subsidies from the central banks.  But capitalism is inherently a dynamic system based on entrepreneurship and to new inventions. It’s a little bit like the forest for the trees: You need life but you also need death. Without death there is no room for a new generation and what you get is Japan …
