Federal Reserve

Dire costs of easy Fed now and later: Jim Grant

Jim Grant: Allow markets to determine short-term rates
Jim Grant: Allow markets to determine short-term rates

Closely followed market watcher Jim Grant disputes the argument that there's no harm in the Federal Reserve keeping interest rates near zero percent—calling for the cost of borrowing money to be determined by the free market.

He said Tuesday the price of the central bank's persistent easy money policies is on display currently in the form of stifling American enterprise and sending millions of people from the workforce "more or less permanently."

"The prospective cost is the unmasking of the misallocations of capital that will have come about through the levitation of asset prices," including real estate, Grant said.

"If companies can't fail that means somebody else can't start. You're looking at a petrified forest rather than dynamic capitalism," the founder and editor of Grant's Interest Rate Observer told CNBC's "Squawk Box," ahead of his spring investor conference in New York City, featuring Jack Bogle, David Einhorn and Bill Gross, among other financial luminaries.

The government's much-weaker-than-expected March employment report, released on Friday, will likely keep the Fed on the sidelines for longer, Grant predicted. "The Fed is ever interested in doing something later. So I expect that this timetable will be pushed back."

After the soft job numbers, many economists see central bank policymakers waiting until September to raise rates for the first time in nearly a decade.