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Grantham omits how markets really work, manipulated up or down for profit by Wall Street insiders, aided and abetted by Fed governors they control. Besides reckless interest rate policy and money printing, Ronald Reagan's March 18, 1989 Executive Order 12631 created the Working Group on Financial Markets (WGFM), commonly known as the Plunge Protection Team (PPT). It operates by manipulating stock, bond, commodity, and currency markets up or down daily, small investors mindless of illegal rigging that hurts them.
Grantham in bullet points:
-- higher debt levels aren't "correlated with higher GDP growth rates;
-- lowering rates to encourage more debt is useless at the second derivative level;"
-- they do, however, cause dangerous speculation, exacerbated in the current environment;
-- Fed governors know that "low rates and moral hazard encourage higher asset prices and increased speculation, heading, when unchecked, to bad endings, small investors and ordinary people hurt most;
-- both Bernanke and Greenspan "expressed no concern with the later stages of investment bubbles," so did nothing to prevent them;
-- when they break, "intense financial and economic pain" result;
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