Podcast Summary: Excess Returns – "The Forever Invariable Truth | Jim Grant on War, Inflation, and What Comes Next"

Date: April 13, 2026
Host(s): Jack Forehand, Justin Carbonneau, Matt Zeigler
Guest: Jim Grant (Founder, Grant’s Interest Rate Observer)

Overview

In this episode, the Excess Returns team is joined by renowned financial historian and commentator Jim Grant. The discussion focuses on the interplay between war, inflation, trust in financial systems, and what history can teach us about today’s investing environment. Grant offers rich, historical context and critical insights into macroeconomics, monetary policy, and market psychology—plus his distinct take on gold, the US dollar, and technological “bubbles.” The episode is replete with anecdotes, memorable quotes, and practical wisdom for investors navigating uncertain times.

Key Discussion Points & Insights

The Nature of Inflation, War, and Monetary Regimes

• War as an Invariable Cause of Inflation

  • Grant emphasizes: “One thing that is forever invariably true is that war is inflationary… War overstrains the productive apparatus. Its purpose is to destruct and kill and to print money to finance those activities. That’s the essence of inflation, right?” (00:26 & 04:34)
  • He notes that while many causes of inflation are debated (corporate oligopoly, labor unions, greed, fiscal policy), war consistently results in inflation, both historically and currently.

• Historical Perspective on Inflation

  • Before the mid-1960s, Americans saw inflation as a wartime phenomenon. Grant explains that the post-war shift to a fiat (paper) dollar and improvisational “PhD standard” monetary policy made inflation a secular concern, not just one tied to war. (07:55)

• Central Banking & “Steady-State” Inflation

  • Grant criticizes the Federal Reserve’s approach: “In Orwellian fashion, the Federal Reserve has defined price stability as a 2% debasement of the currency… like a tax that the Fed has unilaterally imposed.” (04:34)
  • He contends that the Fed’s measured inflation target erodes purchasing power each year—a change from earlier central bank priorities. (15:06)

Oil Shocks and the Limits of Single-Cause Explanations

• Oil Price Increases

  • Grant warns against seeing oil shocks as the root of all inflation: “You don’t need oil shocks for inflation… oil alone is not necessarily dispositive.” (10:45, 13:26)
  • Cites Paul Volcker’s misjudged optimism in 1971 and how subsequent oil shocks and policy mistakes contributed to the decade's inflation.

• Inflation Is Not a Smooth Series

  • “It’s a mistake to look at inflation as anything that’s continuous,” says the host (14:29), to which Grant responds, “Well, but it is continuous… The whole point of the Fed now is to perpetuate, is to make it continuous at the measured rate of 2% a year.” (15:06)

The Loss of Purchasing Power and Social Impact

• Irretrievability of Lost Purchasing Power
  • Grant uses Fed Chair William McChesney Martin’s 1955 quote: “We can never recapture the purchasing power we have lost.” (15:06)
  • He links perpetual inflation to “a lot of the social unrest” and notes that average Americans are more concerned with lost purchasing power than technical inflation measures.

Trust, the Credit Cycle, and Market Function

• Trust as Financial System Bedrock

  • “Trust is everything in the world of lending and borrowing… I would not lend money to a man I didn’t trust against all the bonds in Christendom.” – Citing J.P. Morgan (22:22)
  • Grant points out that in past eras—without deposit insurance or too-big-to-fail guarantees—trust was paramount, and now, questionable practices and shell games erode that trust, especially in credit markets.

• The Ever-Returning Credit Cycle

  • He narrates the phases of the credit cycle—from chastened post-crisis lenders, to increasing confidence, to excess and inevitable correction. “That’s the technical definition of the credit cycle.” (22:22)

Sovereign Credit, Fiscal Risks, and the US Dollar

• US Sovereign Credit: Denial & Reality

  • Drawing on Adam Smith, Grant reflects that “there’s a great deal of ruin in a nation,” warning that fiscal crises often come slowly and unpredictably. (29:38)
  • He notes that persistent deficits and rising yields on Treasuries reflect a gradual recognition that America’s public credit isn’t infallible: “We are therefore entering a period in which the public credit is no longer an empty phrase but rather an actionable tradable concept.” (29:38)

• The Dollar’s Unique Status

  • Despite being a “faith-based” currency, the US dollar remains “America's greatest export. Costs nothing to produce. The world still wants it.” (51:31)
  • Grant attributes the dollar’s resilience as much to American institutions and ideals as to economics.

Technological Booms (“Bubbles”) and Investment Lessons

• AI CapEx Bubble and Historic Parallels

  • “A new technology delivers initially more splash than macroeconomic results… first comes the bubble, then comes the payoff,” says Grant, comparing the AI buildout to air conditioning’s rise in the 1950s and the dot-com boom. (37:58)
  • The benefits of transformative technologies often take longer to materialize than investors expect.

• Asset Allocation and Gold

  • Grant advocates an enduring allocation to gold: “Gold occupies… your monetary base… it serves, not so much as a hedge against monetary disruption, but investment in monetary disruption.” (48:05)
  • He sees gold’s periodic spikes as symptoms of lost confidence in US fiscal and monetary policy.

Notable Quotes & Memorable Moments

• On War and Inflation:
  “War is inflationary. War overstrains the productive apparatus… printing money to finance those activities. That’s the essence of inflation, right?” — Jim Grant (00:26 & 04:34)

• On Central Bank Policy:
  “The Federal Reserve has defined price stability as a 2% debasement of the currency… like a tax that the Fed has unilaterally imposed.” — Jim Grant (04:34)

• On the Nature of Trust:
  “Trust is everything in the world of lending and borrowing… I would not lend money to a man I didn’t trust against all the bonds in Christendom.” — Jim Grant citing J.P. Morgan (22:22)

• On Loss of Purchasing Power:
  “We can never recapture the purchasing power we have lost… it’s a ratchet. It never goes back, it always goes up.” — Jim Grant (15:06)

• On Dollar’s Endurance:
  “It’s a faith-based currency purely and yet it has come to dominate the world… perhaps the idea of America is as much responsible for the dollar as anything the Fed has done.” — Jim Grant (51:31)

• On New Technologies:
  “First comes the bubble, then comes the payoff… the benefits of the invention [air conditioning, internet, AI] were widely distributed… but it actually wasn’t perfect.” — Jim Grant (37:58, 48:05)

• On Writing Financial Newsletters:
  “Don’t. I don’t need any more competition from you, kid.” — Jim Grant’s tongue-in-cheek advice to aspiring newsletter writers (62:16)

Timestamps for Key Segments

• War and Inflation: 00:26, 04:34, 07:55
• Historical Framing of Inflation: 07:55–10:16
• Oil Shocks and Volcker Era: 10:22–13:26
• Purchasing Power & Social Impact: 15:06–19:53
• Trust & Credit Cycles: 22:22–28:38
• Sovereign Credit & the US Dollar: 29:38–36:37, 51:31–54:30
• Technological Bubbles (AI, Dot-Com, Air Conditioning): 37:38–42:01
• Fed and Treasury Relationship: 42:01–46:48
• Asset Allocation & Gold: 46:48–51:17
• Reflections on Market Complexity & Historical Analogies: 56:16–61:31
• Advice for Newsletter Writers: 62:16–65:06

Tone & Style

The conversation is intellectual but approachable, blending historical anecdotes, sharp critiques, humor, and self-deprecation. Grant’s language is vivid (“rancid whipped cream on an unappetizing sundae”; “supplicant” Fed), and the hosts ask probing but accessible questions for long-term investors.

For Listeners: Key Takeaways

• War is a reliably inflationary force—watch for how conflicts alter macro conditions.
• Most conventional wisdom on inflation is shaped by recent experience; history provides crucial context.
• Trust underpins financial systems; current practices erode that trust, increasing systemic risk.
• The US dollar’s dominance is anchored as much by institutions and the “idea of America” as economics, but complacency is risky.
• Gold remains a sensible part of a diversified portfolio, particularly during periods of monetary disruption.
• Every market era feels complicated to its participants—humility and historical awareness are essential.

This summary distills the episode’s substance and spirit, capturing Jim Grant’s perspective for both market practitioners and curious investors, while skipping non-content sections.