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Graham’s “ever-normal granary”, supply management, Fed Reserve actions


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Benjamin Graham only wrote six books and one of them was: “On Storage and Stability, a Modern Ever-normal Granary”. So I bought it and even skimmed through it.


I always find it fascinating to see where finance personalities find cause for market intervention, regulation, etc.  It’s refreshing to see the rational pragmatic mind fending off and challenging what often tends towards impractical ideological or dogmatic thinking.


Anyway, are there a lot of parallels here between Graham’s thinking on commodities, the Federal Reserve’s approach to stabilization, supply management (in the news because of free trade talks with Canada) and protectionism?


Eg The US Federal Reserve massively expanded its balance sheet buy buying up a surplus commodity (crap worthless paper that no one wanted) and then either let it mature (kept it off the market) or will sell it back onto the market when prices have risen. They pumped money into the banking sector, established ZIRP, stabilized prices/interest rates, etc.



Supply management (Canada) - Wikipedia




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Perhaps the common thread between his most well known works and the currency books is the definition between investment and speculation (at the individual level and the connection of "money", in the aggregate, with its "intrinsic" value).


Fascinating to remember that, in addition to the severity of the downturn, there continued to be a vexing absence of recovery in the 30's. Many, like Mr. Graham, tried to define ways to "reflate" without currency debasement.


It seems that Mr. Graham was concerned with the decoupling between fiat money and "goods" in the sense that private actors may then produce asset inflation and public leaders may then lose fiscal discipline...


"The idea of storage…is diametrically opposed to the topsy-turvy Alice-inWonderland reasoning that has marked so much of our depression thinking and policy.  It rejects the argument that prosperity may be promoted by scarcity; that purchasing power may be showered in a gentle rain of greenbacks from heaven; that collapse due to excessive debt may be remedied by incurring new and larger debts; that our foreign trade may be strengthened by deliberately weakening our currency."


Mr. Graham proposed a self-correcting system. The international currency system is bound to come back on the agenda and it will be interesting to see the proposals on how it should be "managed".




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