U.S. News

Tie Central Bankers' Hands, Return to Gold Standard: Grant

Diamond Sky Images | Photodisc | Getty Images

Central bankers are in the business of "currency manipulation," James Grant, editor of Grant's Interest Rate Observer, told CNBC Thursday.

He wants a "modernized, 21st century gold standard that checks the capacity of central banks to print money."

"I am for more rope in regard to the government’s hands and less rope around the hands of people in enterprise," he said. The problems in the U.S. economy come from an "accumulation of government initiatives and the sum total gets you to $14.3 trillion in the debt crisis."

The fact the U.S. can pay its bills in dollars, the reserve currency, and that it can print more as needed, creates "a world of immense distortions" and is one reason why the price of gold has skyrocketed and stocks have been volatile.

European & U.S. Bank Leverage

"There's no market check on what we borrow," he said. "What this country needs is a debit card. The gold standard represents approximately a debit card. The reserve currency privilege is a credit card with no balance due. That's the formula for trouble, whether you're an institution or a human being as a consumer—it's the wrong system."

He finds it interesting that investors are fleeing the stock market for Treasurys at a time when equity yields "are above government securities yields [at levels] which we haven’t seen in this country on a continuous basis since the late 1950s."

He called Treasurys a "return-free risk. Real interest rates don’t exist anymore. You are suffering an immediate loss in your purchasing power."