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Dylan Grice: Witch Hunts, Inflation Fears,
and Why Im Bearish in 2013
By Michael Skocpol
January 22, 2013


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Dylan Grice

For someone who started his remarks proposing to “kill all the economists,” Dylan Grice can wax surprisingly sentimental, with a fresh, human take on monetary policy that leads him to some worrisome conclusions. Making a case for gold, cash, and other safe havens, Grice said the biggest threat to investors today is a problem that has plagued societies throughout history – mistrust.

Grice, who is leaving Societe Generale’s Global Strategy Team to take a buy-side position, argued that recent bouts of quantitative easing (QE) and other “monetary experimentation” in the world’s major economies may be sowing the seeds for a worldwide breakdown of social cohesion – which, among its unsavory consequences, could translate to a big spike in interest rates. He delivered his remarks – part market commentary, part history lesson, and part philosophy seminar – last week at a strategy conference hosted by his soon-to-be-former employer in London.

The core of Grice’s thesis was his view of money: He doesn’t define it merely in technical terms, as a unit of exchange or a store of value, but rather as something deeper. “Next to language, money is the most important way that we communicate with one another as a society,” he said. “It’s how we implicitly express our values: the value of other people’s labor, the value of what other people have, and the extent of exchange that we have with each other.”

As a result, Grice said, questions of trust are “fundamentally embedded” in the marketplace. “You’re not going to exchange with someone if you don’t trust them,” Grice told his audience. “You work for your employer because you trust them to pay you. You get into a airplane because you trust the pilot not to crash. It’s trust that moves the economy.”

This feature of money, Grice warned, is why inflation can have pernicious and unseen effects, and that’s what Grice is worried about today. “You cannot have this trust if you do not have money that you can trust,” Grice said. “When you devalue money, you devalue trust.”

What’s $1 trillion among friends?

Quantitative easing, printing money, devaluing currencies, monetizing debts – the increase in these activities in recent years is what has Grice concerned. He led his audience in a thought experiment to explain why.

First Grice asked his audience what happens when a government creates, say, $1 trillion out of whole cloth. (Whether by direct printing of money or by interest rate adjustments, it’s all “basically the same mechanism,” Grice said.) The answer is simple: It spends it, one way or another. It builds a road, or a school, for instance.

“If we print a trillion dollars, we can now spend a trillion dollars,” Grice said. “We have absolutely benefited from this. We have a trillion dollars that otherwise we wouldn’t have had. But the question is: Who pays for that trillion dollars?”

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