The Forever Invariable Truth | Jim Grant on War, Inflation, and What Comes Next

War is invariably inflationary

Military conflict overstrains productive capacity by destroying resources and requiring governments to print money to finance destruction, creating the essence of inflation.

Historical inflation required war

Until the 1960s, inflation was exclusively a wartime phenomenon, with wholesale prices actually declining between 1820 and 1930 during peacetime.

Current conflicts sustain high inflation

Ongoing global conflicts and war preparations create marginal bids for production, manpower, and money that will perpetuate inflation well above the Fed's 2% target.

The 2% target is permanent theft

The Fed defines price stability as a 2% annual debasement of currency, functioning as an unvoted tax that permanently strips purchasing power from workers.

The PhD Standard enabled secular inflation

Abandoning the gold standard for discretionary monetary policy allowed inflation to persist without war, breaking the historical pattern of declining prices during peace.

Inflation acts as a ratchet

Once purchasing power is lost to inflation, it is never recaptured, explaining current social unrest and low consumer confidence despite benign headline economic numbers.

Trust is the foundation of credit

Citing J.P. Morgan, Grant emphasizes that lending depends on confidence in the borrower's character rather than collateral alone.

Collateral stripping undermines trust

Liability Management Exercises allow borrowers to legally spirit collateral away from creditors through sophisticated legal maneuvers, constituting pervasive double dealing.

Suppressed rates bred complacency

Years of near-zero interest rates led to sloppy loan documentation and reduced underwriting rigor, enabling widespread abuse of creditor rights.