So Far, the Stock Market is Having the Worst Year Ever

Fed's turned stock market into a "hall of mirrors," Jim Grant says.

These first few days of 2016 have brought with it troubling drops in the Dow Jones Industrial Average. In fact, 2016 so far is the official worst year in stock market history. 

But is this just a consequence of individuals acting spontaneously in the marketplace? Or did the Federal Reserve QE policies cause this downturn? Jim Grant, editor of Grant's Interest Rate Observer and the author of The Forgotten Depression: The Crash That Cured Itself, says the Fed has turned the stock market into a "hall of mirrors."

Grant sat down with Reason magazine editor-in-chief Matt Welch in August to discuss the underlying causes of the recent market turbulence, why we don't really "have interest rates anymore," and how the classic jazz song "It's Only a Paper Moon" provides a fitting metaphor for the equities market.

Comments

[commodious spittoon]

First he's hailed as the expert of all things sciency, and now we trust him for investment advice?

[Heroic Mulatto]

T-BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL BILL

[Pl?ya Manhattan.]

Why do people make those? Fraternity hazing, or torture?

[Heroic Mulatto]

People do a lot of weird shit.

[GILMORE?]

I find nothing weird about that video.

[SIV]

Actually it's quite good.

[Pl?ya Manhattan.]

It's not just the Fed. The entire world economy is falling apart, and it actually makes the US look good by comparison.

[SIV]

American Exceptionalism FTW!

[Pl?ya Manhattan.]

THE UNITED STATES!!!
AT LEAST WE'RE NOT VENEZUELA.

Yet.

[See Double You]

That's one of the Almanian for President campaign's slogans. BTW, where has Al been?

[Pl?ya Manhattan.]

I'll check on him

[Pl?ya Manhattan.]

Messages aren't being delivered. He's not on the internet today.

[Rich]

it actually makes the US look good by comparison.

Oh boy, another excuse to post this!

[Bill Dalasio]

Cripes. Rodney Dangerfield's act is still funny after all those years.

[Rich]

Rodney was great. RIP. YouTube has more of his stuff.

[Cytotoxic]

I think India and Vietnam are doing well, and Argentina is getting better.

I choose to see today's suffering as required for the world to change and improve.

[Cytotoxic]

Ivory Coast and Ireland are getting good too. Maybe Morocco and Mexico as well.

[See Double You]

Be careful with that hyperbole, Amanda.

*wags finger*

[Rich]

"I've told you a million times -- Don't exaggerate!"

[C. Anacreon]

Today we were in the Hall of Mirrors in the palace at Versailles. And now this article quoting a "hall of mirrors."

It's like you're thinking about a plate of shrimp, and someone says "shrimp " or "plate of shrimp, "

[See Double You]

You're in Paris, eh?

[C. Anacreon]

Oui. Till Tuesday. Business came first, now just fun for a few days.

[Bill Dalasio]

Wish my predictions hadn't panned out. But, who didn't see this coming? The "boom", like the last boom was nothing but an orgy of malinvestment brought on by the monetary authorities flooding the system with liquidity.

I remember the last go around, a senior asset management executive telling his portfolio managers "Your job is to put money out the door.". This time it's different. No one is actually dumb enough to directly say it. But the game's still the same. And they have to. If you have fixed liabilities, you're pretty much being forced to take additional risk. The entire scheme was to push investors further out on the risk spectrum. The problem is, once you start playing that game, it's a dangerous drug. If you stop flooding the system all the marginal credits fall. And so you don't. And so you get more and more marginal credits.

There'll be a crisis. And I'm sure they won't let it go to waste.

[Rich]

Calm down, Bill. Bernie's going to tax Wall Street speculation.

[See Double You]

Thank Zod. A new tax will put us back on the road to progtopia.

[Rich]

The tax will enable everyone to get a college degree for free, and the resulting productivity will be astounding.

[Bill Dalasio]

Yeah! Because what we need on top of this is to dry up market liquidity and force everyone to be stuck with their losers, rather than repricing on sales. Because those evil bastards did what the government wanted them to do.

[Cytotoxic]

This stock market collapse is good though. A necessary detox after so much cheap money infusion.

[Rt. Hon. Judge Woodrow Chipper]

The frightening part is the majority of Americans want price discovery to be illegal. The proof is the support of minimum wage.

[GILMORE?]

never trust a man in a bow tie

*unless he's black

[Cytotoxic]

Or James Bond.

[Crusty Juggler]

My advice: panic.

[MJGreen - Docile Citizen]

Would you say it's time to crack each others' heads open and feast on the goo inside?

[GILMORE?]

+97% of scientists agree

[mashed potatoes]

Sometimes I feel we should just make Jim Grant and David Stockman dictators.

[Frankjasper1]

So the flint article yesterday got me reading more of this ryan cooper guy who i think reason has covered a few times one being rand paul and during the raisin story.

Anyway he claims like krugnuts that stimulus didnt work cause it wasnt big enough and the reason the economy is sluggish is due to austerity 400+ deficits are austerity? My jaw about dropped. Of course his flint article blamed the gov for being a cheap skate and poisoning them...leaving out the fine details of course.

[Sevo]

"Grant sat down with..."

Ah, yes, the ritual 'down-stting'.

[AlmightyJB]

So there is a sale on stocks. Great.