Fantastic Interview with Jim Grant, Pirate Party Gets 9% in Berlin, and Why Young College Students Like Rick Perry

Wow, I just read one of the best reviews ever, or at least one of the best in a very long time.  It basically sums up a lot of what I have been talking about and the kind of erratic monetary trends we are experiencing.  The interview is with the always impeccable Jim Grant and is conducted by Barron's.  First on if gold is in a bubble (note, what Grant says is what I tell everyone that tells me gold is in a bubble):

If a bubble connotes absurdity, what is absurd are the monetary conditions that supported this gold bull market. Gold is an expression of the world's justifiable distrust of the way our central bankers conduct their affairs. The poetry of it is that it can't be quantified. The central banks are unworthy opponents. The Fed has pledged 0% money-market rates for the next two years, so that's not much competition. And the governments of the world are taking under advisement this notion called financial repression—short-circuiting market mechanisms, capital controls, punitive taxes or intrusive taxes and the like.

I of course don't say it in quite the brilliant prose that Grant does.  And here he follows up with has got to be one of the best quotes I have read since, well, probably Gary North's last article:

Q: The gold standard, which you've championed, is now getting its due.
A: I'm talking about the classical gold standard that ended with the guns of August 1914, not the successors. Indeed, some of the variations are not much better than the present-day paper-money system. One of its essential features is that there is no reserve currency. Markets are distorted by the huge outpouring of paper currencies. With the gold standard, nobody gets a special credit card, everyone gets a debit card, and deficits and surpluses are settled promptly in cash. The essential feature of the current monetary system is procrastination. It's "Oh, we'll get to that, we'll balance accounts later." But it turns out we don't.

"With the guns of August 1914" is a powerful connotation and perfect analogy for what happened to the classical gold standard.  It reminds me of one of the greatest Mises quotes that Robert Wenzel happened to cite today:

The essential feature of government is the enforcement of its decrees by beating, killing, and imprisoning. Those who are asking for more government interference are asking ultimately for more compulsion and less freedom.

Grant goes on about Paul Krugman's and Ben Bernanke's "deflation fairy":

Both Alan Greenspan and Bernanke in 2001 to 2003 were on a campaign to anticipate a deflationary threat. They said that we had to act lest we tumble down the stairs that Japan did in the 1990s. But never once did they define this phantom that they held out to be a clear and present danger. Most Americans spend some part of the weekend hunting down everyday lower and lower prices. And in a world blessed with digital technology and with the introduction of great new swathes of territory in which something like market economics are practiced, and with the inclusion of hundreds of millions of willing new hands into the world's labor force over the past 15 years or so, wouldn't you expect a tendency toward falling prices? That is called progress.
Deflation to me is trouble with debt, a symptom of which is falling prices. In a debt crisis, companies can't finance, they have to liquidate inventory, sell stuff at a loss—that's deflation. But Bernanke and his predecessor never distinguished between everyday lower prices and deflation. Having made their error, they suppressed the funds rate for more than a year at 1%. If there had been a sensible discussion about this, much of the distress of the past 10 years could have been avoided.

As Gary North points out, Japan experienced no deflation during its "lost decade."  Just stable and rising prices (chart is Japan from 1993-2010):

Here is the chart on Japan's output for that time period:

Yup, stable and rising prices with increased output make for a real "lost decade."  It's a wonder the Japanese are still alive after that horrible deflation.

Grant goes on in the interview and mentions the kind of weird monetary trends we are seeing lately that I often speak about:

The Fed has achieved something unique in this cycle. It has given us symptoms both of inflation and deflation. The Fed has overdone it with quantitative easing and rate reductions; the symptoms of that are the dollar exchange rate, the price of gold in dollars, commodity markets generally and a lot of speculative assets. The measured rate of rise in consumer prices is not minus 3.6%, year over year, it's 3.6%. We have too much debt, and a consequence of that is a tendency for some prices to fall. We have too much money, a symptom of which is that some prices rise. What an interesting world we live in.

I was a bit hesitant to jump on the recent biography by Grant about a former Speaker of the U.S. House of Representatives, but he sure makes it sound intriguing:

Q: You just published Mr. Speaker!, a biography of the great House Speaker Thomas B. Reed. What did you learn?
A: He was that rarest of creatures, an intelligent, principled and, not least, funny politician, who transformed Congress through his parliamentary skill and wit. In Reed's day, the final quarter of the 19th century, the wingnuts, the eccentrics, were those who argued for a paper currency uncollateralized by gold. Today, the eccentrics are the gold people. The establishmentarians are teaching at Princeton and running the central bank. I learned that cycles forever change and that wingnuts and establishmentarians change places, even before you know it.

Like I said before, Grant hit it out of the park on this interview.  He sums up a lot of what I have been feeling lately in his always articulate manner.

For some more interesting news, see the results of a recent regional election in the city-state of Berlin, Germany:

Germany's centre-left Social Democrats beat Angela Merkel's conservatives in a regional election in the city-state of Berlin on Sunday, handing the chancellor her sixth defeat in seven elections this year.

The SPD won 29.5 percent of the vote in Berlin, down from 30.8 percent in 2006 in Germany's largest city with 3.4 million inhabitants, according to an exit poll on ARD television. SPD Mayor Klaus Wowereit appeared to be headed for a third five-year term, with the Greens as his most likely coalition partner.

The CDU won 23.5 percent, up slightly from 21.3 percent in 2006 but well below the 40 percent the party used to win in Berlin in the 1980s and 1990s. The Greens won 18 percent, up from 13.1 percent in 2006, and the Left party fell to 11.5 percent from 13.4 percent. The Pirate Party won a stunning 8.5 percent.

No surprise here with Merkel's "screw taxpayers, save the banks" positions, but the Pirate Party's success is unprecedented.  So what's up with the Pirate Party?

The party supports the preservation of current civil rights in telephony and on the Internet; in particular, it opposes the European data retention policies and Germany's new Internet censorship law called Zugangserschwerungsgesetz. It also opposes artificial monopolies and various measures of surveillance of citizens.
The party favors the civil right to information privacy and reforms of copyright, education, computer science and genetic patents.
It promotes in particular an enhanced transparency of government by implementing open source governance and providing for APIs to allow for electronic inspection and monitoring of government operations by the citizen.

Sound like my kind of dudes.  Looks like the Ron Paul influence is going worldwide.  Speaking of the only presidential candidate worth supporting, his Constitution Day money bomb just reached $1,000,000 and he just won the California Republican straw poll by a large margin:

This weekend, the California Republican Party had its 2011 Fall Convention at the JW Marriott Hotel in downtown Los Angeles. One presidential candidate, Minnesota Rep. Michele Bachmann, spoke at a dinner on Friday night, and Saturday morning's breakfast featured two more contenders: Michigan Rep. Thaddeus McCotter and Texas Rep. Ron Paul.
Paul's fans were out in force both outside the hotel -- awaiting his arrival -- and inside the ticketed Lincoln Clubs Breakfast. He spoke last and was late, allowing McCotter to add a question-and-answer period to his prepared remarks (more on that later, check back).

Below find the results:

Congressman Ron Paul (374, 44.9%)

Governor Rick Perry (244, 29.3%)?

Mitt Romney (74, 8.8%)

Congresswoman Michele Bachmann (64, 7.7%)

Jon Huntsman (17, 2.0%)

Herman Cain (15, 1.8%)

Newt Gingrich (14, 1.7%)

Thad McCotter (7, 0.8%)

Rick Santorum (7, 0.8%)

Gary Johnson (2, 0.2%)

Fred Karger (1, 0.1%)

Write-ins (15, 1.8%)

Another astounding victory that will surely be ignored by the media.  The circle of life continues, but here is an interesting excerpt from the article:

They mostly consisted of groups of roving college-age men and women in "Americans for Perry" T-shirts.
Asked why she liked Perry, one twentysomething said, "He's awesome!"

Those kids are morons, clearly Ron Paul is more awesome than Rick Perry any day!  But seriously, that should tell you a lot about Rick Perry's supporters.