Risk, according to James Grant, is our enemy. The current, seemingly endless run-up of the stock market is bound to crash around our ears at some point, sooner rather than later. The flood of cash that is lifting the current consumer economy stems from imprudent credit decisions by banks and, by extension, by the largest bank of all, the Federal Reserve. The flight of capital from bonds into mutual funds is only the most visible symbol of an America that has lost sight of fundamental economic forces. And so on. The writer and publisher of Grant's Interest Rate Observer
, Grant is a born contrarian, directing investors into commodities markets, which have been flat for 15 years, and away from the booming stock market. You can disagree with his prognosis, but it's hard to argue with his diagnosis. The boom of the 1990s can't last forever.
The publisher of the small but influential newsletter Grant's Interest Rate Observer
and author of Money of the Mind
, proclaimed by London's Financial Times
and Business Week
as one of the best business books of 1992, here expresses concern that too much risk has been eliminated from the financial system. He concludes that, though currently prosperous, the American economy is stagnant because marginal enterprises are protected from failure. Grant believes that success and failure are part of the natural, cyclical order of things and that that order has been disturbed, particularly by the Federal Reserve Board's manipulation of interest rates. His beliefs are grounded in the Austrian school of economics, the tenets of which Grant lucidly explains. David Rouse