WSJ Interview with Jim Grant, New Adjusted CPI Numbers Out, and Ron Paul Holds Another Record

For a great weekend read, check out Jim Grant's interview with Holman Jenkins in the Wall Street Journal.  The interview doubles as a kind of autobiography and critique of Grant's favorite institution, the Federal Reserve and Wall Street.  Here are some excerpts:

The "fiat" dollar, he adds ruefully, "is one of the world's astounding monetary creations. That a currency of no intrinsic value is accepted as money the world over is an achievement that no monetary economist up until not so many decades ago could have imagined. It'll be 40 years next month that the dollar has been purely faith-based. I don't believe for a moment it's destined to go on much longer. I think the existing monetary arrangements are so precarious, so ill-founded and so destructive of the economic activity they are supposed to support and nurture, that they will be replaced by something better." 

Earlier this year Mr. Grant put his mouth where his mouth is, testifying before Rep. Ron Paul's House monetary affairs subcommittee on the virtues of the gold standard. No Democrats and few Republicans showed up. Asked to predict exactly when the dollar will blow up, Mr. Grant jokes, "I'd say 1978."

But his point is an earnest one and brings us back to the modern character of Wall Street. The gold standard, he says, citing the "late, great" libertarian economist Murray Rothbard, was the "people's system. If you didn't like the currency, you could exchange your paper for gold and that sent a message."
In our age of "wiki everything," Mr. Grant finds it anomalous that we sacrifice freedom of monetary choice for the diktats of central planners acting out of the Fed's faux-colonnaded headquarters in D.C. The fiat dollar is an "elite" system, he says, and Wall Street is its supporting "interest group"—those nimble, market-savvy, plugged-in folks know how to shuffle assets and exploit cheap funding from the Fed to leverage up their profits and soften the downside.

"Wall Street today is a statist creation," adds the man who has known, loved and chided the Street for nearly four decades as one of its most able observers. "Greenwich, Connecticut"—where billionaire hedge-fund operators keep their homes—"is not what Fifth Avenue was in the Edwardian age. Greenwich, Connecticut will be the last to sign up for the new gold standard."

How such truth made it into the Wall Street Journal is shocking.  I am always amused by the people I argue with on the Huffington Post who actually think that Wall Street is a complete free market enterprise not given so many privileges by our great Congressional leaders.  Republicans are of course the only political party beholden to Wall Street and Democrats are forever the great fighters for the middle class, that idea will never change in their minds.

The latest CPI data is out today and while headline inflation is expectantly down, but core CPI is slightly rising.  As Robert Wenzel points out, Krugman is beside himself with this revelation and wants a new measure of core inflation that excludes those dastardly food and energy prices.  It's a good thing that consumers don't buy such things as food or energy a lot right?  Seriously though, for someone like Krugman who constantly claims to be looking out for the lower and middle class, I am always dumbfounded that he would opt for inflation in all circumstances which benefits the elite banking class first.  This even more so since Krugman seems to believe he disproves supply side economics with every blog post.

As the numbers continue to be tallied for which GOP contender for president raised the most money, Ron Paul has nabbed the #2 spot earning more than any other candidate besides Mr. Bankster's choice himself Mitt Romney.  Besides this impressive feat, another record for Ron Paul was released today:

This week, we learned that GOP Presidential Candidate Ron Paul is the only congressman to -- ever -- hit a home run over the fence during an annual "Congressional Baseball Game."

Now if he could only take that bat to the Fed we would be in way better shape.

Update- Wow, kudos to Jeffery Snider, President of Atlantic Capital Management, for his wonderful RealClearMarkets article on the Federal Reserve's attempt at creating the illusion of prosperity and wealth.  Without naming the Austrian Business Cycle Theory, Snider lays out the fundamentals of how the Fed distorts the business cycle with easy credit policies:

In a way, central banks are engaged in nothing more than a modified "pump and dump". They are attempting to create the illusion of value through price action. By maintaining high valuations due almost solely to their own purchases, they hope to "attract" additional investors into the process. Whereas the exit plan of the traditional version seeks a higher price to disgorge the schemer's original holdings, the legal, central bank version is trying to buy public faith in order to disgorge a larger acceptance of a return to normalcy. In both cases, the public gets abused - suckered investors in the first, taxpayers in the second.

It does not matter if the ECB buys a substantial portion at par; the larger system is not fooled into blindly believing in scarcity, or that price action equals true value. The marketplace will instead buy on the foolishness and irresponsibility of the central bank, buying up all Greek debt solely on the ability to pawn it off on taxpayers at an unearned profit. But even here, it only works as far as faith in the ECB and the euro is maintained, since value has not really changed. The central bank interference is nothing more than a game of musical chairs, with risk investors willing to play as long as they believe the music will keep playing. The second the music stops, that entire intervention and managed price discovery becomes irrelevant as the assets suddenly become bidless.

Snider even takes a shot at F.D.R.:

You may not be able to eat gold, but it is a constant reminder of the constraints that it places, even in our modern times, on central bankers - earning their scorn and pejorative dismissal. There is a reason that Americans' private gold holdings were confiscated by executive decree in 1933; they offered actual protection against the currency devaluation that was being planned. Gold is the foil, the opt-out, of every central bank confidence scheme.

The whole article is highly recommended and serves as a great beginner's essay for those looking to learn the ABCT.