I have been a fan of Jim Grant (of Interest Rate Observer fame) for more years than I care to remember. He is smart, data-driven, logical, sensitive to history, and contrarian, all the traits I like in financial analysts & writers. He called the current financial debacle early, pointing to the spectacle of debt piling on worthless debt for years, tipping his subscribers to the inevitability of collapse.
Grant must be in the W camp now though, right? Or maybe the Japan camp — a palsied U.S. economy for a decade?
Not so much, according to a new WSJ column he has authored. The usually dour Mr. G. is …well, upbeat. He argues that the current recovery could be more impressive, longer-lasting and generally a surprise to his bearish compatriots.
Here is a key sample:
I promised to be bullish , and I am (for once)–bullish on the
prospects for unscripted strength in business activity. So, too, is the
Economic Cycle Research Institute, New York, which was founded by the
late Geoffrey Moore and can trace its intellectual heritage back to the
great business-cycle theorist Wesley C. Mitchell. The institute’s long
leading index of the U.S. economy, along with supporting sub-indices,
are making 26-year highs and point to the strongest bounce-back since
1983. A second nonconformist, the previously cited Mr. Darda, notes
that the last time a recession ravaged the labor market as badly as
this one has, the years were 1957-58 –after which, payrolls climbed by
a hefty 4.5% in the first year of an ensuing 24-month expansion. Which
is not to say, he cautions, that growth this time will match that pace,
only that growth is likely to surprise by its strength, not weakness.
And that is my case, too. The world is positioned for
disappointment. But, in economic and financial matters, the world
rarely gets what it expects. Pigou had humanity’s number. The “error of
pessimism” is born the size of a full-grown man–the size of the average
adult economist, for example.
And just to preserve some spirit of fair play, here is my amigo Michael Panzner telling Grant that he’s dead wrong.