Mr. Market Miscalculates

Mr. Market Miscalculates

The Bubble Years and Beyond

Book - 2008
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Why is America in financial crisis today? This book, better than any to date, explains it all-how we got here and where we are going. The how we got here is brilliantly described in a collection of pieces from Grant's Interest Rate Observer, the Wall Street insider's Bible. The where we are going is treated in Jim Grant's up-to-the-minute introduction. No fan of Greenspan or Bernanke, Grant tells the unvarnished truth about America.
Publisher: Mount Jackson, VA : Axios Press, c2008
ISBN: 9781604190083
Characteristics: xxii, 430 p. : ill. ; 24 cm


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Jun 22, 2015

This is a collection of articles from Grant’s Interest Rate Observer. Like most such compilations there is a lot of repetition, but it is still an enjoyable book because of the strength of the material. Unfortunately a finance book like this really requires a lot of pictures and charts; it seems that these were present in the original articles but have mostly been edited out of Mr. Market Miscalculates. Annoyingly, the textual references to these non-existent charts and pictures haven’t also been edited out. Fortunately, the charming cartoons by a curiously underacknowledged cartoonist have been retained.
As Mr. Grant was describing events in real time, a reader must marvel at his prescience. He foresaw both the dotcom bubble and the housing boom and bust. While other business writers were ascribing God-like qualities to Chairman Greenspan, to Grant he was “just a guy in a business suit” trying to keep his job.
Mr. Grant’s May 2008 prediction at the end of the book is: “Higher interest rates and higher inflation are the coming things.” This hardly describes what has happened in North America or Europe. However, his own analysis of inflation targeting suggests why his forecast came to grief. He suggests that whatever the inflation target is, if it is adhered to by the central bank, inflation will cascade into the sectors that are out of scope of the inflation indicator. This, and the large-scale quantitative easing by the US Fed, have led to high inflation in residential real estate, farmland, equities and works of art, while the inflation rate of the target PCEPI series still shows low inflation. Mr. Grant would be doing the US a service, though, if instead of attacking inflation targeting, he called on the US Fed to target a better inflation indicator. Equities and farmland will always be out of bounds, but there is no reason that prices of houses and art works cannot be included in the target inflation indicator. This is, after all, the objective that Eurostat has set itself with its reform of the European HICPs.


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