Had you been reading The Wall Street Journal in autumn '71," Frank Byrd, director of research at Fielder Research & Management, reminded the Grant's conference-goers, "there would have been almost no clue that inflation was at hand... "But suddenly, within 18 months, a tremendous inflation emerged," Byrd went on. "In response, the Fed tightened aggressively--hiking [the] fed funds [rate] from 4% to 10% within a year and a half. But it was too late. Huge imbalances had been building behind a wall of price and capital controls. When the dam finally broke, the Fed's sand castles were no match for the crushing wave of inflation. CPI tripled from 4% to 12% within two years." Not only could it happen again, it is happening at this very moment.- Jim Grant, Grant's Interest Rate Observer
BERNIE MADOFF
MADOFF
Takes money from investors with the promise that the money will be invested and made available to them later. Instead of investing the money Madoff spends it on nice homes in theHamptons and yachts.. When the time comes to pay the investors back Madoff simply uses some of the new funds from newer investors to pay back the older investors. When Madoff's scheme is discovered all hell breaks loose. New investors won't give him any more cash. Bernie Madoff is in jail.
SOCIAL SECURITY
Takes money from wage earners with the promise that the money will be invested in a "Trust Fund" and made available later. Instead of depositing money in a Trust Fund the politicians use it for general spending and vote buying. When benefits for older investors become due the politicians pay them with money taken from younger and newer wage earners to pay the geezers. When Social Security runs out of money they simply force the taxpayers to send them some more. Politicians remain in Washington.
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