Jim Grant, the founder of Grant's Interest Rate Observer, thinks that monetary policy is about to undergo a major change. In the past few years "we've seen low rates beget lower rates, and radical policy making beget more radical policy making". The problem is that this approach "doesn't work", with the only effect being that "asset prices have become distorted and the standard signposts of valuation have been twisted and turned". This has led to a growing belief "that central bankers don't have the answers and are in fact in the process of discrediting the very money they are meant to protect".
The overall result of this "road to confetti" will be that "gold will reclaim some position as an active monetary asset, not a crank's asset". Indeed, with negative interest rates starting to appear, "it is now a relatively high-yielding asset, yielding, as it does, nothing". So Grant is "very bullish on the metal, very bullish on miners". Even though gold mining stocks "have come a long way", there is still a lot of value left, since "many were priced for bankruptcy". Grant is also positive about silver, which is "as volatile as Donald Trump". Silver's industrial uses will also "come to the fore as the gold bull market progresses".
Grant also doubts that bond yields will remain low forever. Between 1946 and 1981, long-term bond yields shot up from 2% to 15%. But while he is "very bearish on bonds", he is reluctant to make a specific call on when the market will turn. "Since the 19th century, the cycles in interest rates are very long lived. They have ranged from 20-odd years in this country [the US] to 85 years in 19th-century Britain. So you can't dogmatise on the timing."
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