Blog readers know we keep close tabs on Jeremy Grantham of GMO, one of the most prescient investors around. Grantham will be on Charlie Rose this evening. The long form interview has already been recorded. Here’s a preview (hat tip to our colleague Joe Fitzgerald):
- The economy is extremely difficult. The debt, in the long run, is not as significant as people think. How you manage debt is an art form. Whether you do it this year or next year, whether you spread these things out, how high is too high – I have not spent my career on those areas.
- I feel – I guess – that it’s substantially too high. I guess that you shouldn’t try to make it low in a hurry, but you should have a 20-year plan to chip away. We’ve gotten ourselves into a bit of a rathole, and we should be careful getting out of it, but it is not the overwhelming thing that will dominate our future.
- What it does is it distracts us from the real world. Debt is an accounting world. It’s paper. The real world is the quantity and quality of your people and the quantity and quality of your capital spending.
- Are you building new machines? Are you being inventive? Are you training your people? Is your high school system delivering the same education that it used to relative to the South Koreans and relative to the Norwegians? No, it’s not.
- We should worry more about the real world and less about the paper world. And somehow we’re in this death grip that only paper things matter. And so there’s much too little attention spent on education, training, capital spending – finding a way to beef it up.
- And also, I’d rather stimulate the economy directly through government spending than I would like to play games with the monetary system and games with the interest rate, inflicting great wounds on retirees and so on, and transferring wealth to people who won’t spend it.
- We’re transferring wealth from the poor to the rich by keeping interest rates low. I’m not even sure the economy gains at all by a low interest rate, and furthermore, no one has established convincingly that it’s a good idea. It’s a tradition that it’s a good idea. And that’s not the same. We’ve had lots of traditions, like that the market would look after itself – that people wouldn’t be crooks because economic theory assumes that they’re not.
- But they often were crooks, and greedy, and short-term oriented, and willing to dance until the music stopped – although, as Soros said, the music had actually stopped long before.
To see the preview, click here (courtesy of Business Insider).