For quotes related to Grant’s comments on Bernanke, see the excerpt from David Iben’s letter.
A: I've been all wrong on this. I thought that this massive monetary stuff would generate the conventional kind of inflation that would be expressed in much higher CPI readings. Not so far. But all things are cyclical and the seemingly impossible is just around the corner. On September 30, 1981, the 30-year US Treasury bond traded at 14 7/8 percent and I remember some crank, some visionary, was talking about how interest rates were going to zero, you watch. Oh, yeah right. And so it came to pass.
A: Sometimes they can't control things. We had 6 percent inflation before. Washington is full of well-intentioned people. Ben Bernanke keeps saying that what we really need is a little inflation. He says we'll get 2 percent or a little bit more. You shouldn't even think that, let alone say it out loud. That's such bad luck to tempt fate by saying that you can calibrate things like that. You can't do that.
A: The trouble with the present is that nothing is actually cheap. My big thought is that our crises are becoming ever closer in time. The recovery time from the Great Depression was 25 years. The stock market peaked in 1929. It got back there in 1954. We had a peak in 2000, crash, levitation, then the biggest debt crisis in anybody's memory. The cycles are becoming compressed. The temptation to become invested at peaks of these shorter cycles is ever greater.
Perhaps one way to proceed is to hold cash at the opportunity cost of not much in Treasury bills. You make nothing, but you want to have this money when things are absolutely, not just relatively, cheap. This time of full or overvaluation shall pass. On recent form, it'll pass in a thunderclap and there will be a panic and it'll seem as if the world's ending. And that's when somebody who is nimble can get fully invested in a comfortable way.