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Jacob Wolinsky
Jacob Wolinsky
Articles  | Author's Website |

Night of the Living Fed: Jeremy Grantham

Jeremy Grantham of GMO with some humor about the Fed.

Jeremy Grantham's 3Q Letter summarizes what he believes to be the effects that the policies of the Fed, under the direction of both Alan Greenspan and Ben Bernanke, have had on the U.S. and global economies.

Grantham summarizes his article in eighteen points before getting into heavy detail. I tend to agree with most of the main points Grantham makes in this letter, and do not understand how quantitative easing will help the economy. If we want to take drastic measures to stimulate the economy IMHO a stimulus with heavy infrastructure spending would be the way to go. Of course, that is in the hands of the President and Congress and not the Feds'.

Below are the first five:

1)Long-term data suggests that higher debt levels are not correlated with higher GDP growth rates.

2) Therefore, lowering rates to encourage more debt is useless at the second derivative level.

3) Lower rates, however, certainly do encourage speculation in markets and produce higher-priced

and therefore less rewarding investments, which tilt markets toward the speculative end. Sustained higher prices mislead consumers and budgets alike.

4) Our new Presidential Cycle data also shows no measurable economic benefi ts in Year 3, yet point to a striking market and speculative stock effect. This effect goes back to FDR, and is felt all around the world.

5) It seems certain that the Fed is aware that low rates and moral hazard encourage higher asset prices and increased speculation, and that higher asset prices have a beneficial short-term impact on the economy, mainly through the wealth effect. It is also probable that the Fed knows that the other direct effects of monetary policy on the economy are negligible.

Below is the full

Night of the Living Fed Jeremy Grantham

About the author:

Jacob Wolinsky
My investment ideas have been inspired by many of value investors including Benjamin Graham, Charles Royce, John Neff, Joel Greenblatt, Peter Lynch, Seth Klarman,Martin Whitman and Bruce Greenwald. .I live with my wife and daughter in Monsey, NY. I can be contacted jacobwolinsky(AT)gmail.com and my blog is www.valuewalk.com

Visit Jacob Wolinsky's Website

Rating: 4.0/5 (11 votes)


Cowboy77 - 5 years ago
Before I read it, does he go on his soap box about Global Warming again and how evil and useless we, "the unwashed", are?
AlbertaSunwapta - 5 years ago
No don't read it. Move on folks, move on - there's nothing for you to see here.
Yswolinsky - 5 years ago
You can still learn from someone even if you do not agree with all their views. I do not agree all the time with Buffett or Munger's political views but I still learn a lot from them.
Cowboy77 - 5 years ago

You can still learn from someone even if you do not agree with all their views. I do not agree all the time with Buffett or Munger's political views but I still learn a lot from them.

You're young. You'll tire of the "holier-than-thou" speeches at some point.

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