Jim Grant Warns of Long-Term Inflation and a Secular Bear Market in Bonds -

On the Money Metals podcast, host Mike Maharrey interviewed James “Jim” Grant—founder of Grant’s Interest Rate Observer—for a sharp, historically grounded discussion on inflation, interest rates, and the fragile state of American fiscal credibility.
Jim Grant is one of the most respected <a href="https://g.co/kgs/ktVmViy">financial historians and market analysts</a> of our time. With over four decades of experience, he has built a reputation for rigorous, contrarian insight through his publication, Grant’s Interest Rate Observer, which has been dissecting bond markets and central bank policy since 1983. He is also the author of several widely acclaimed books on finance and economic history, and a longtime critic of monetary excess and government debt.
With this deep foundation, Grant warned that the era of ultra-low interest rates is over—and what lies ahead <a href="https://www.moneymetals.com/news/2025/05/01/gold-soars-amid-chaos-how-to-stay-grounded-in-the-precious-metals-bull-market-004028">could surprise even seasoned investors</a>.
(Interview Starts Around 6:46 Mark)
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<h2>The Fed’s Dilemma: Inflation vs. Market Pressure</h2>
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When asked what the Fed should do in today’s monetary gridlock, Grant replied bluntly: 
“They should resign.”
Markets are anticipating rate cuts—evidenced by the <a href="https://www.moneymetals.com/news/2025/04/25/red-warning-light-blinking-in-us-treasury-market-004013">2-year Treasury yield falling below 3%</a>—but the Fed is holding the federal funds rate above 4%. Grant agrees with their caution. Inflation is not, in his view, under control.
Drawing on different schools of thought, he cited:
<ul>
<li style="font-weight: 400;" aria-level="1">Milton Friedman: “Inflation is always and everywhere a monetary phenomenon.” </li>
<li style="font-weight: 400;" aria-level="1">John Cochrane: [Inflation is a fiscal phenomenon.] </li>
<li style="font-weight: 400;" aria-level="1">The Fed: [Inflation is driven by public expectations.] </li>
</ul>
But Grant adds another constant: war. 
Armed conflict, he warns, reliably fuels inflation by driving both public spending and monetary expansion. With tensions around Taiwan and rising geopolitical risks, this pressure may be just beginning.
<h2>Money Supply and Speculative Signals</h2>
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Money supply began rising again around mid-2023—a <a href="https://www.moneymetals.com/news/2025/04/25/gold-isnt-going-up-your-money-is-just-losing-value-004015">classic early sign of inflation</a>. But Grant cautioned that the effects might not show up first in consumer prices.
Instead, speculative excess—crypto, <a href="https://www.moneymetals.com/news/2025/04/22/major-breakdown-in-the-us-dollar-signals-trouble-ahead-004002">asset bubbles</a>, meme stocks—can signal inflation before CPI or PCE respond. Grant cited a mid-century German economist who described inflation as “the straining of the economy’s productive apparatus.” 
That, he said, captures the real dynamic.
He also pointed to the cultural embrace of “something for nothing”—a meme that feeds unsustainable fiscal and monetary habits.
<h2>What’s a “Normal” Interest Rate?</h2>
Asked what constitutes a “normal” rate, Grant gave a historical benchmark: 6%.
That was the post-Revolutionary figure used by Alexander Hamilton when consolidating U.S. war debt. For decades, 5–6% was standard for high-quality debt in America.
In modern times, yields rose throughout the 1960s and 1970s, culminating in 1981, when long-term Treasury yields peaked at around 15%. That marked the top of a 35-year bond bear market—a period from 1946 to 1981 when rates climbed steadily.
Then came a reversal few expected: a 40-year bond bull market from 1981 to 2020, with interest rates falling year after year.
At its peak, this bull run produced a global financial anomaly: by 2020, $18 trillion in bonds worldwide yielded less than 0%. Investors were literally paying governments to hold their money.
But to Grant, this wasn’t the new normal—it was the exception that proves the rule.
<h2>Are We in a New Bear Market for Bonds?</h2>
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Yes, Grant believes we are—and the cycle may last decades.
Historically, bond markets follow generational rhythms. From the late 1800s through the mid-1900s, interest rates followed multi-decade waves of decline and ascent.
The pattern:
<ul>
<li style="font-weight: 400;" aria-level="1">1946–1981: A long bear market in bonds, with rising rates. </li>
<li style="font-weight: 400;" aria-level="1">1981–2020: A historic bull market in bonds, with falling rates. </li>
<li style="font-weight: 400;" aria-level="1">Post-2021: The start of a new bear cycle—likely slow, but persistent. </li>
</ul>
The inflection point came between 2020 and 2021, when 30-year Treasuries dipped below 1%, even as the Fed continued targeting 2% inflation. 
To Grant, that was a clear warning: yields were irrationally low, and the cycle was about to turn.
Now, he says, we’re entering a slow climb. Rates may rise gradually, but the multi-decade trend is no longer in investors’ favor.
<h2>Debt, Tariffs, and the Erosion of Public Credit</h2>
Recent market reactions reveal deeper trouble. During <a href="https://www.moneymetals.com/news/2025/04/22/dowgold-ratio-breakdown-whats-the-downside-target-for-stocks-004004">stock selloffs</a> tied to tariff uncertainty—announced, reversed, then re-announced—long-term Treasuries failed to rally. Even the dollar showed weakness.
That’s a red flag, Grant warned. Treasuries, once a dependable safe haven, are beginning to lose their traditional appeal. According to Grant, the bond market’s muted response to tariff-induced volatility shows we are no longer in the environment investors grew accustomed to over the past 40 years.
He also warned that tariffs can be inflationary—raising the cost of goods and shrinking supply chains—while simultaneously undermining market confidence. If tariffs persist or escalate amid already strained global trade dynamics, they could further destabilize both prices and investor sentiment.
But the greater threat, in Grant’s view, is America’s unrelenting debt binge. The U.S. public debt now exceeds 120% of GDP, and there’s no sign of serious fiscal restraint. Even during brief attempts at tightening, the underlying growth of debt continues largely unabated.
He cited troubling proposals from economist Zoltan Pozsar and Trump advisor Steven Moore suggesting the U.S. alter the terms of outstanding bonds—<a href="https://www.moneymetals.com/news/2025/04/22/trump-wants-interest-rate-cuts-be-careful-what-you-wish-for-004003">reducing coupon payments</a> or stretching maturities as a way to ease the government’s balance sheet burden. 
On Wall Street, this is euphemistically called a “liability management exercise.” In practice, Grant warned, it’s a breach of good faith—a subtle but profound erosion of public credit.
He tied this back to Alexander Hamilton’s Report on Public Credit (1790), where Hamilton wrote that national prosperity rests on the perceived integrity of government obligations. Proposals to forcibly rework bond terms—even if walked back—undermine the very trust on which the U.S. financial system is built.
Grant believes that a combination of reckless spending, aggressive trade policies, and a growing willingness to treat creditors as adversaries may soon shatter the illusion of American fiscal credibility.
If investors lose faith in the U.S. government’s commitment to honoring its debts, the result won’t just be rising inflation—it could mark the <a href="https://www.moneymetals.com/news/2025/04/17/fed-chair-sets-up-tariffs-as-scapegoat-as-the-economy-he-helped-create-leaks-air-003993">unraveling of the global bond market</a> as we know it.
<h2>“What Did You Expect?”</h2>
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Grant wrapped with a baseball anecdote.
After a light-hitting player smashed a water cooler in frustration, pitcher Bob Gibson pointed to the guy’s .231 batting average and deadpanned: “What did you expect?”
That, Grant said, is where we are now.
With gross federal debt over 120% of GDP, a currency backed by nothing, and a Congress addicted to spending, a financial reckoning should surprise no one.
If inflation accelerates, if bond yields soar, if public trust erodes—Grant’s message is simple:
What did you expect?!
<h2>Closing Summary</h2>
Jim Grant’s interview was a sharp warning wrapped in historical context.
He believes the bond market has entered a new secular bear phase—one that could last decades, much like previous interest rate cycles. Inflation, he argues, is not under control and may emerge in unpredictable ways, including through asset bubbles, monetary excess, and geopolitical shocks.
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You can find Jim Grant on his website, <a href="http://grantspub.com">GrantsPub.com</a>, or his X (formerly Twitter) <a href="https://x.com/GrantsPub">@GrantsPub</a>.  
Grant didn’t name specific alternatives, but the message between the lines was unmistakable: U.S. Treasuries are no longer the safe haven they once were. The traditional reliance on government debt for long-term stability has been undermined by fiscal irresponsibility and monetary distortion.
That’s why now—more than ever—is the time to own real money.
Unlike bonds, which carry inflation and counterparty risk, physical gold and silver remain time-tested stores of value. They aren’t promises—they’re assets. In times of monetary chaos and debt-driven uncertainty, gold and silver provide the security fiat currencies and paper debt simply can’t.
For those seeking a safer path forward, Money Metals Exchange offers an <a href="http://moneymetals.com">easy, affordable way to accumulate precious metals</a>. With low premiums, excellent service, and discreet delivery, Money Metals helps Americans preserve their wealth with real, tangible assets—the kind that survive <a href="https://www.moneymetals.com/news/2025/04/29/paper-money-as-a-weapon-of-war-004024">war, inflation, and political upheaval</a>.
The bond market is shifting. The debt machine is running hot. Don’t wait until it’s too late.
Buy gold. Buy silver. Protect yourself.

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