James Grant's Latest Newsletter

Here is the most recent issue of Grant's Interest Rate Observer.

An excerpt:
If it's taking this much to revive today's economy (which, as of now, remains unrevived), what kind of a jolt might be necessary to succor tomorrow's? An even bigger shock, we surmise, if tomorrow's economy is no less encumbered than today's. But it is almost certain to be more encumbered, since the active ingredient of the Bush-Obama palliative is credit formation, the very hair of the dog that bit us.

To try to exorcise the Great Depression, President Herbert Hoover deployed fiscal and monetary stimulus equivalent to 8.3% of gross domestic product (i.e., GDP for 1933, the year the Depression officially ended). To banish the demons of 2008-9, successive administrations have spent, or encouraged to be printed, the equivalent to 28.9% of GDP. A macroeconomist from Mars, judging by these data alone, would never guess how much more severe was that depression than this recession. The decline in real GDP from August 1929 to March 1933 amounted to 27%; that from December 2007 to date, just 1.8% ("just 1.8%" is the phrase to use if one is still employed). So for a slump 1/15th as severe as the Depression, our 21st century economy doctors have administered a course of treatment more than three times as costly.

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Adam

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