Friday, November 5, 2010

Peter Schiff Is Right on Gold, QE

Peter Schiff has been mocked by the clueless pundits at CNBC and other financial media outlets for his consistent opposition to the Federal Reserve inflating and the need to acquire gold for investors to protect themselves from the Fed's disastrous policies, but he's getting the last laugh.

Although the stated reason by the Federal Reserve to is to jump-start the economy, Schiff believes the motives of the Fed aren't as altruistic as that.

Schiff states, “The true purpose of QE2 is to disguise the decreasing ability of the Treasury to finance its debts. As global demand for dollar-denominated debt falls, the Fed is looking for an excuse to pick up the slack. By announcing QE 2, it can monetize government debt without the markets perceiving a funding problem.”

If that is true, it would make sense as to why the Fed and Bernanke are introducing another round of quantitative easing when their last one failed miserably.

Of course there is absolutely nothing else the Fed can do, as printing money is pretty much their major economic weapon, along with controlling interest rats.

Schiff concludes: “If the truth were known, a real panic would ensue. So, the Fed pretends buying treasuries is simply part of its master plan to boost the economy, even though, in reality, it is simply acting as the buyer of last resort."

For years Schiff has said the Fed doesn't have the will or nerve to raise interest rates, as it would result in the collapse of the stock market, the bond market, and burst the real estate bubble, even though the latter already happened in spite of low interest rates.

He also said bankruptcies would ensure in a big way, even though, again, it happened in a low interest rate environment.

Schiff's conclusion is that easy money policies of the Fed hide the true weakness of the economy, and that has proven correct as the trillion plus in spending has resulted in little effect, and once removed, showed the economy to be in the anemic state it really is.

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