I'll have to say I wasn't disappointed in the talk given by Federal Reserve Chairwoman Janet Yellen, as my expectations were appropriately low, and I wasn't surprised by the lack of anything new and some of the weasel words used to provide cover in case economic conditions in the second half are such that the Fed doesn't raise interest rates as Yellen has been leaning towards and most others expect.
Here's the wording she used to cover her actions if they end up different than she has signaled to the market:
"But I want to emphasize that the course of the economy and inflation remains highly uncertain, and unanticipated developments could delay or accelerate this first step ..." she said, referring to the probability of raising interest rates.
read more ...
Showing posts with label Inflation. Show all posts
Showing posts with label Inflation. Show all posts
Monday, July 13, 2015
Thursday, June 4, 2015
Free Market Against Central Banking - And the winner is?
One of the consequences or side effects of central banking monetary inflation (creating money out of thin air) is it masks over the benefit of the free market in lowering costs. That means the average person and investor doesn't understand how the battle between the free market and central banking is going, who is winning, and what is coming our way over the long term as a result.
As the size of the money supply continues to rise - which is what allows the faulty fractional reserve banking system to operate even while it's failing - it results in inflation. That is the reason the free market can be thriving, but the economy can have the appearance of struggling, because of the hidden costs associated with the monetary policies of central banks.
read more ...
As the size of the money supply continues to rise - which is what allows the faulty fractional reserve banking system to operate even while it's failing - it results in inflation. That is the reason the free market can be thriving, but the economy can have the appearance of struggling, because of the hidden costs associated with the monetary policies of central banks.
read more ...
Friday, May 29, 2015
Why Gold is Going to Soar
Gold is now trading at close to where it had been five years ago, as investors overall remain on the sidelines because of uncertainty surrounding the usual catalysts associated with a cyclical uptrend in the yellow metal; elements such as hints of a recession, market correction, proof of inflation, and a weak U.S. dollar, among other things.
Since the Federal Reserve has been the primary impetus behind the bull stock market, and it has resulted in interfering with the price mechanism of the market, it's difficult to ascertain its condition because of artificially low interest rates, which has encouraged some companies to take risks they may not have taken in a market that had more of an honest and measurable performance metric.
read more
Since the Federal Reserve has been the primary impetus behind the bull stock market, and it has resulted in interfering with the price mechanism of the market, it's difficult to ascertain its condition because of artificially low interest rates, which has encouraged some companies to take risks they may not have taken in a market that had more of an honest and measurable performance metric.
read more
Wednesday, April 10, 2013
Gold And Silver Prices In The Midst Of A Currency War
Since almost everything is perfectly aligned to produce rising gold and silver prices, many investors are baffled and frustrated over not only the lack of upward movement in the two precious metals, but the plunge in price for both of them.
Most mainstream media outlets point to the alleged recovery in the United States as a major reason, but that's in reality not even part of the equation. The reason a recovery is cited as important for gold and silver prices is the assumption the Federal Reserve will stop its easing program sooner than expected.
While there are all sorts of assertions of recovery thrown around in the financial media, most institutional and private investors know the difference, even if the general population doesn't. A so-called recovery isn't even part of the picture, and shouldn't be seriously considered in relationship to the prices of gold or silver.
The exception to that would be the industrial demand for silver which would result in higher silver prices. But there has to be an actual strong recovery for that to be considered in the price equation. Some may ask about the recently released job figures, which appear to confirm robust economic growth in the United States.
But the data aren't even close to being significant, as evidenced by the fact the participation rate of the labor force has plummeted to 63.5 percent; the lowest level since 1981. That is a big contributor to the 7.7 percent unemployment rate released. That and the quality of jobs and suspicions many of those getting jobs were actually obtaining second jobs because of the requirements surrounding Obamacare, which make the job numbers very dubious.
Another factor is the number of people no longer being counted in the labor force have jumped by almost 300,000 in January, which is larger than the alleged number of jobs created. Consequently, we must look past the headlines to see the actual data.
For example, a significant 48,000 of the jobs created were in the construction industry, which were the result of the $40 billion in monthly acquisitions of mortgage backed securities by the Federal Reserve.
Some may think that it means stimulus is working, but on the contrary, it means the jobs are being artificially created and propped up, and when the Fed stops pumping money into the economy and/or begins to unwind it's positions, the economic house of cards will collapse around them. Rising interest rates will result in similar consequences. On the other hand, only 14,000 of the jobs added in January were in manufacturing, which would have pointed to a sustainable growth pattern if the numbers were higher. So the economic picture remains grim, and the U.S. economy continues to falter and struggle.
Fed Strategy
For those that don't understand the monetary policy of the Federal Reserve, it is probably thought the latest job-creation numbers point to wild success for the central bank. It's actually the opposite because the overall stated purpose of quantitative easing is failing at this time, which is to debase the U.S. dollar. What that means is the Fed will continue to print money indefinitely, and could even ramp up the printing presses more ... and probably will. The Federal Reserve wants a weaker, not a stronger dollar. We'll get into the why of that a little further into the article.
Fed minutes
Before we go on, there is a need to point out the latest minutes from the Federal Reserve which supposedly pointed to internal disagreement about the loose-money policies it is now engaged in. A large number of investors actually ate this up, thinking the Fed was indecisive over whether or not it was going to continue on with its stimulus program over the long haul. It was undoubtedly a ruse.
The Fed has absolutely no intention of ending quantitative easing any time soon. The comments in the Fed minutes were obviously orchestrated to create a sense of uncertainty around its practices and outlook. The question is why did they want that to be layered on the public investment psyche? This is important because it seems to contradict the goal of debasing the U.S. dollar even further.
I don't think it's anything more than creating some doubt in the minds of those who believed they had the moves of the Fed figured out. Almost no one has been uncertain as to what the Fed would do lately, and so that allows for a number of investors to position themselves for huge gains. That includes other countries as well. So to generate some confusion in the minds of people was the goal there, and it has of course worked, as the idea of an ongoing recovery has been successfully planted in the minds of investors. Now many think sometime soon the Fed could end its stimulus, even though by its own unemployment parameters it's far from its stated goal.
Why the Federal Reserve Failed to Weaken U.S. Dollar
Okay. The Fed failed to lower the value of the U.S. dollar. The reason is that we are in the midst of a currency war, even though it is asserted that isn't the case. And don't be confused by the origin of the war: it's the Federal Reserve and its lengthy loose money policy that kicked it all off. The reason the dollar isn't falling in value is because the central banks of other nations have responded with their own stimulation efforts; the most recent and important being Japan.
Nothing but a currency war, or aggressive response to the policies of the Federal Reserve could have kept the price of the U.S. dollar from falling. The fact that the dollar is perceived to be so strong confirms the fact there is a currency war going on. Nothing else can account for the strength of the dollar at this time. Since it may not be obvious to a lot of readers, I include the practice of people and institutions throwing their money into U.S. dollars when they panic, which seems to be very regular these days.
Weaker competing currencies are creating the illusion of a strong and safe dollar, which is then artificially reinforced by investors pouring their money into it. This is why I tie the currency war and illusion of safety in the U.S. dollar together. They're inseparable, and so must be tied together when talking of currency movements. The perceived flight to safety is a major reason the dollar retains some of the strength it has.
Central Banks and Currency Wars
A currency war is when central banks representing different nations participating in the printing of money out of thin air. This is of course sounds like stimulus in general. The difference between that and a currency war is the degree and response of central banks to the Fed. In this case Japan has boosted its stimulus enormously, and so the yen has moved lower against the dollar.
While we have no idea when it will change, the outcome of all of this for the U.S. dollar is it will probably continue to remain strong for a season, and so the Federal Reserve will continue to print or respond to competing stimulus efforts in order to bring the value of the dollar down. Eventually it will cause investors to lose faith in the dollar, which at that time will experience an enormous plunge in value in a relatively short time (not instantaneously).
All of this is predicated on the fact the Fed wants a weaker U.S. dollar. The only way to get it is to continue printing money. The outcome of that is obvious, and only a matter of when, not if it happens.
Currency Wars are Predictable
What's interesting about currency wars is there are recent historical data which can be used to learn how the currencies respond. While a currency war is cyclical in regard to different currencies, they are linear in nature, which means they are predictable and easily identifiable. Already noted is the predictability of the response of the Federal Reserve to competing central banks in regard to its policy of debasing the dollar.
The next stage is to see which currencies will be affected and how by that battle. Over the last couple of years we can easily see how the battle of currencies played out with the dollar, the euro, and now the yen. This is where gold now comes into the picture. To see the movement of the value of currencies, it must be measured against gold in relationship to a specific currency. In the case of the U.S. dollar, it reached a top in September 2011.
About a year later the same happened in regard to euro gold. Now we have yen gold approaching history highs. The pattern is easy to see, and as mentioned - predictable. The metric is simply the price of gold reflected in the currency in question. So currencies move in a predictable manner as they devalue in relationship to gold.
After the yen the British pound will probably be next in line to move in the same manner. When the cycle comes back to the U.S. dollar, it is at that time the projections of much higher gold and silver prices will kick in.
Understanding Gold Prices and Currencies
Many investors don't have an understanding of what is happening with gold when talking of its price, so let's look quickly at what it really means. When talking about the price of gold and whether the movement is up or down, in reality what is being talked about is the strength or weakness of a currency that is being determined.
Gold itself is inert and actually stays neutral as a store of value. The price of gold moves in direct correlation to the strength or weakness of currencies. Again, this is why major currencies in a currency war can be identified fairly accurately as to their strength in relationship to gold. Just keep in mind it's the currency that is actually being measured against gold, not the value of gold in and of itself that is going up or down on its own.
Gold and Fed Minutes
Let's revisit the Fed minutes again. Why did the Fed have the comments about its policy in them? It wants to keep investors off balance. That is important because it is in order to be able to successfully debase the dollar while attempting to hold down the price of gold and silver, as well as other commodities. If investors believe the dollar remains safe, they'll continue to pour money into it even though it is under attack by the Fed itself. In other words, it's trying to keep inflation in check by making investors believe it may stop stimulating at any time.
That's not even close to the truth, but the idea has now been planted in the minds of investors, so they are paralyzed some in regard to putting money in gold as a place of safety. Some actually believe the Fed minutes point to a possible end to quantitative easing, when in fact there is no such idea in the near-term suggesting the Fed is even contemplating it. Most investors don't understand the consequences of the Fed unwinding its positions, and so take as fact the orchestrated implanting of alleged opposition to ongoing stimulus into the Fed minutes, when the stimulus will continue on for some time to come.
Gold Traded in U.S. Dollars
All of this is to say that the continuing currency wars has helped protect the U.S. dollar from being seen as enormously weak. That has brought the price of gold down against the dollar. That means the dollar against a number of currencies has strengthened, creating the illusion it has strengthened against gold. But it's not gold that moves up and down remember, but the currencies against the gold. This is what currency wars create, and we simply need to watch it unfold and play out, looking for the time when the dollar begins its inevitable decline.
A Word on Silver
Much of what has been said about currencies and gold can be applied to silver, with the obvious exception silver has far more industrial uses and so has dual demand in that regard; both in supply and demand, as well as its being regarded as an investment metal like gold is. Without getting into the specifics of the enormous number of products now needing silver, let it suffice to say the macro-economic situation in the world - including the growing population and emerging markets - guarantees an enormous industrial demand for silver for many years into the future.
Silver demand and consumption has nowhere to go but up
The price of silver will jump up when it is understood and realized it will be difficult - if not impossible - to meet the demand for the white metal. As far as the price goes, I'm not going to enter that game as far as predicting one. The reason I say that is we are without a historical road map when contemplating and researching silver shortages; there has never been a shortage. We do know when the Hunt brothers tried to corner the market years ago, the price of silver shot up exponentially.
The reason silver is having difficulty pushing up in price is because the silver shorts at this time that are depressing the price. That can't and won't last, although it's impossible to know when that will stop. One thing to consider is there are no supports in place for silver as there are with gold, so when silver shortages are recognized as the reality and the price of silver shoots up, there will be some silver shorts who won't be able to get out that will be crushed.
It will happen. For silver prices, it's more important to look at an inevitable shortage than it is to look at inflation and the fear factor as those looking at gold must do. They come into play with silver, but the real impetus for soaring silver prices will be its inability to meet growing industrial demand rather than its relationship to its investment side.
That's not to say the price of silver couldn't or won't go up based upon its being an alternative to the U.S. dollar, because it will. It simply means the big move in the price of silver will be as a result of shortages, not because of the money supply and inflation. Since silver will move up on both, a growing number of investors believe it could be the most significant asset class of the next decade. I tend to believe they're right.
Silver Investing Strategy
To me, silver shouldn't be invested in using borrowed funds, but rather should be invested in as capital becomes available. That's because there will be a time when the shorts get hammered, and we don't want to be in that position when it happens. Silver shortages ensure that it will happen. We should be positioned accordingly.
Conclusion
The reason for the downward pressure on the price of gold is the ongoing currency wars. The U.S. dollar is still very flawed, but because of the stimulus associated with major currencies it gives the impression of strength because other currencies are also being debased by the respective central banks in each country. The goal of the Federal Reserve is to debase the U.S. dollar. It won't stop until it has accomplished that goal, and there is no way there is any chance whatsoever the Fed is really considering ending stimulus any time in the near future.
Even so, the resiliency of gold is seen by the fact it is still holding its own fairly well in a very difficult environment. Gold will catch up with the money policies of nations as people increasingly grow wary concerning the viability of paper, fiat currencies. That and the pattern of cyclical, but linear currency debasement against gold as a consequence of the current wars means the price of gold will rebound once the effects of debasement comes around again to land on the U.S. dollar.
As for silver, it will be affected by the same forces, although its major move up will be in response to the shortages that are coming and the resultant spike in prices in conjunction with soaring demand. What if you believe there is a recovery? Sorry to hear that. But if you do, be aware that it is at best tenuous and very slow. It won't affect Federal Reserve policy or the currency wars, so everything mentioned in the article will still hold for some time.
The Fed will continue to stimulate, the dollar will continue to fall in value, and the price of gold and silver will rise in response to that.
Most mainstream media outlets point to the alleged recovery in the United States as a major reason, but that's in reality not even part of the equation. The reason a recovery is cited as important for gold and silver prices is the assumption the Federal Reserve will stop its easing program sooner than expected.
While there are all sorts of assertions of recovery thrown around in the financial media, most institutional and private investors know the difference, even if the general population doesn't. A so-called recovery isn't even part of the picture, and shouldn't be seriously considered in relationship to the prices of gold or silver.
The exception to that would be the industrial demand for silver which would result in higher silver prices. But there has to be an actual strong recovery for that to be considered in the price equation. Some may ask about the recently released job figures, which appear to confirm robust economic growth in the United States.
But the data aren't even close to being significant, as evidenced by the fact the participation rate of the labor force has plummeted to 63.5 percent; the lowest level since 1981. That is a big contributor to the 7.7 percent unemployment rate released. That and the quality of jobs and suspicions many of those getting jobs were actually obtaining second jobs because of the requirements surrounding Obamacare, which make the job numbers very dubious.
Another factor is the number of people no longer being counted in the labor force have jumped by almost 300,000 in January, which is larger than the alleged number of jobs created. Consequently, we must look past the headlines to see the actual data.
For example, a significant 48,000 of the jobs created were in the construction industry, which were the result of the $40 billion in monthly acquisitions of mortgage backed securities by the Federal Reserve.
Some may think that it means stimulus is working, but on the contrary, it means the jobs are being artificially created and propped up, and when the Fed stops pumping money into the economy and/or begins to unwind it's positions, the economic house of cards will collapse around them. Rising interest rates will result in similar consequences. On the other hand, only 14,000 of the jobs added in January were in manufacturing, which would have pointed to a sustainable growth pattern if the numbers were higher. So the economic picture remains grim, and the U.S. economy continues to falter and struggle.
Fed Strategy
For those that don't understand the monetary policy of the Federal Reserve, it is probably thought the latest job-creation numbers point to wild success for the central bank. It's actually the opposite because the overall stated purpose of quantitative easing is failing at this time, which is to debase the U.S. dollar. What that means is the Fed will continue to print money indefinitely, and could even ramp up the printing presses more ... and probably will. The Federal Reserve wants a weaker, not a stronger dollar. We'll get into the why of that a little further into the article.
Fed minutes
Before we go on, there is a need to point out the latest minutes from the Federal Reserve which supposedly pointed to internal disagreement about the loose-money policies it is now engaged in. A large number of investors actually ate this up, thinking the Fed was indecisive over whether or not it was going to continue on with its stimulus program over the long haul. It was undoubtedly a ruse.
The Fed has absolutely no intention of ending quantitative easing any time soon. The comments in the Fed minutes were obviously orchestrated to create a sense of uncertainty around its practices and outlook. The question is why did they want that to be layered on the public investment psyche? This is important because it seems to contradict the goal of debasing the U.S. dollar even further.
I don't think it's anything more than creating some doubt in the minds of those who believed they had the moves of the Fed figured out. Almost no one has been uncertain as to what the Fed would do lately, and so that allows for a number of investors to position themselves for huge gains. That includes other countries as well. So to generate some confusion in the minds of people was the goal there, and it has of course worked, as the idea of an ongoing recovery has been successfully planted in the minds of investors. Now many think sometime soon the Fed could end its stimulus, even though by its own unemployment parameters it's far from its stated goal.
Why the Federal Reserve Failed to Weaken U.S. Dollar
Okay. The Fed failed to lower the value of the U.S. dollar. The reason is that we are in the midst of a currency war, even though it is asserted that isn't the case. And don't be confused by the origin of the war: it's the Federal Reserve and its lengthy loose money policy that kicked it all off. The reason the dollar isn't falling in value is because the central banks of other nations have responded with their own stimulation efforts; the most recent and important being Japan.
Nothing but a currency war, or aggressive response to the policies of the Federal Reserve could have kept the price of the U.S. dollar from falling. The fact that the dollar is perceived to be so strong confirms the fact there is a currency war going on. Nothing else can account for the strength of the dollar at this time. Since it may not be obvious to a lot of readers, I include the practice of people and institutions throwing their money into U.S. dollars when they panic, which seems to be very regular these days.
Weaker competing currencies are creating the illusion of a strong and safe dollar, which is then artificially reinforced by investors pouring their money into it. This is why I tie the currency war and illusion of safety in the U.S. dollar together. They're inseparable, and so must be tied together when talking of currency movements. The perceived flight to safety is a major reason the dollar retains some of the strength it has.
Central Banks and Currency Wars
A currency war is when central banks representing different nations participating in the printing of money out of thin air. This is of course sounds like stimulus in general. The difference between that and a currency war is the degree and response of central banks to the Fed. In this case Japan has boosted its stimulus enormously, and so the yen has moved lower against the dollar.
While we have no idea when it will change, the outcome of all of this for the U.S. dollar is it will probably continue to remain strong for a season, and so the Federal Reserve will continue to print or respond to competing stimulus efforts in order to bring the value of the dollar down. Eventually it will cause investors to lose faith in the dollar, which at that time will experience an enormous plunge in value in a relatively short time (not instantaneously).
All of this is predicated on the fact the Fed wants a weaker U.S. dollar. The only way to get it is to continue printing money. The outcome of that is obvious, and only a matter of when, not if it happens.
Currency Wars are Predictable
What's interesting about currency wars is there are recent historical data which can be used to learn how the currencies respond. While a currency war is cyclical in regard to different currencies, they are linear in nature, which means they are predictable and easily identifiable. Already noted is the predictability of the response of the Federal Reserve to competing central banks in regard to its policy of debasing the dollar.
The next stage is to see which currencies will be affected and how by that battle. Over the last couple of years we can easily see how the battle of currencies played out with the dollar, the euro, and now the yen. This is where gold now comes into the picture. To see the movement of the value of currencies, it must be measured against gold in relationship to a specific currency. In the case of the U.S. dollar, it reached a top in September 2011.
About a year later the same happened in regard to euro gold. Now we have yen gold approaching history highs. The pattern is easy to see, and as mentioned - predictable. The metric is simply the price of gold reflected in the currency in question. So currencies move in a predictable manner as they devalue in relationship to gold.
After the yen the British pound will probably be next in line to move in the same manner. When the cycle comes back to the U.S. dollar, it is at that time the projections of much higher gold and silver prices will kick in.
Understanding Gold Prices and Currencies
Many investors don't have an understanding of what is happening with gold when talking of its price, so let's look quickly at what it really means. When talking about the price of gold and whether the movement is up or down, in reality what is being talked about is the strength or weakness of a currency that is being determined.
Gold itself is inert and actually stays neutral as a store of value. The price of gold moves in direct correlation to the strength or weakness of currencies. Again, this is why major currencies in a currency war can be identified fairly accurately as to their strength in relationship to gold. Just keep in mind it's the currency that is actually being measured against gold, not the value of gold in and of itself that is going up or down on its own.
Gold and Fed Minutes
Let's revisit the Fed minutes again. Why did the Fed have the comments about its policy in them? It wants to keep investors off balance. That is important because it is in order to be able to successfully debase the dollar while attempting to hold down the price of gold and silver, as well as other commodities. If investors believe the dollar remains safe, they'll continue to pour money into it even though it is under attack by the Fed itself. In other words, it's trying to keep inflation in check by making investors believe it may stop stimulating at any time.
That's not even close to the truth, but the idea has now been planted in the minds of investors, so they are paralyzed some in regard to putting money in gold as a place of safety. Some actually believe the Fed minutes point to a possible end to quantitative easing, when in fact there is no such idea in the near-term suggesting the Fed is even contemplating it. Most investors don't understand the consequences of the Fed unwinding its positions, and so take as fact the orchestrated implanting of alleged opposition to ongoing stimulus into the Fed minutes, when the stimulus will continue on for some time to come.
Gold Traded in U.S. Dollars
All of this is to say that the continuing currency wars has helped protect the U.S. dollar from being seen as enormously weak. That has brought the price of gold down against the dollar. That means the dollar against a number of currencies has strengthened, creating the illusion it has strengthened against gold. But it's not gold that moves up and down remember, but the currencies against the gold. This is what currency wars create, and we simply need to watch it unfold and play out, looking for the time when the dollar begins its inevitable decline.
A Word on Silver
Much of what has been said about currencies and gold can be applied to silver, with the obvious exception silver has far more industrial uses and so has dual demand in that regard; both in supply and demand, as well as its being regarded as an investment metal like gold is. Without getting into the specifics of the enormous number of products now needing silver, let it suffice to say the macro-economic situation in the world - including the growing population and emerging markets - guarantees an enormous industrial demand for silver for many years into the future.
Silver demand and consumption has nowhere to go but up
The price of silver will jump up when it is understood and realized it will be difficult - if not impossible - to meet the demand for the white metal. As far as the price goes, I'm not going to enter that game as far as predicting one. The reason I say that is we are without a historical road map when contemplating and researching silver shortages; there has never been a shortage. We do know when the Hunt brothers tried to corner the market years ago, the price of silver shot up exponentially.
The reason silver is having difficulty pushing up in price is because the silver shorts at this time that are depressing the price. That can't and won't last, although it's impossible to know when that will stop. One thing to consider is there are no supports in place for silver as there are with gold, so when silver shortages are recognized as the reality and the price of silver shoots up, there will be some silver shorts who won't be able to get out that will be crushed.
It will happen. For silver prices, it's more important to look at an inevitable shortage than it is to look at inflation and the fear factor as those looking at gold must do. They come into play with silver, but the real impetus for soaring silver prices will be its inability to meet growing industrial demand rather than its relationship to its investment side.
That's not to say the price of silver couldn't or won't go up based upon its being an alternative to the U.S. dollar, because it will. It simply means the big move in the price of silver will be as a result of shortages, not because of the money supply and inflation. Since silver will move up on both, a growing number of investors believe it could be the most significant asset class of the next decade. I tend to believe they're right.
Silver Investing Strategy
To me, silver shouldn't be invested in using borrowed funds, but rather should be invested in as capital becomes available. That's because there will be a time when the shorts get hammered, and we don't want to be in that position when it happens. Silver shortages ensure that it will happen. We should be positioned accordingly.
Conclusion
The reason for the downward pressure on the price of gold is the ongoing currency wars. The U.S. dollar is still very flawed, but because of the stimulus associated with major currencies it gives the impression of strength because other currencies are also being debased by the respective central banks in each country. The goal of the Federal Reserve is to debase the U.S. dollar. It won't stop until it has accomplished that goal, and there is no way there is any chance whatsoever the Fed is really considering ending stimulus any time in the near future.
Even so, the resiliency of gold is seen by the fact it is still holding its own fairly well in a very difficult environment. Gold will catch up with the money policies of nations as people increasingly grow wary concerning the viability of paper, fiat currencies. That and the pattern of cyclical, but linear currency debasement against gold as a consequence of the current wars means the price of gold will rebound once the effects of debasement comes around again to land on the U.S. dollar.
As for silver, it will be affected by the same forces, although its major move up will be in response to the shortages that are coming and the resultant spike in prices in conjunction with soaring demand. What if you believe there is a recovery? Sorry to hear that. But if you do, be aware that it is at best tenuous and very slow. It won't affect Federal Reserve policy or the currency wars, so everything mentioned in the article will still hold for some time.
The Fed will continue to stimulate, the dollar will continue to fall in value, and the price of gold and silver will rise in response to that.
Wednesday, February 27, 2013
ECB's Praet Says Stimulus Losing Effectiveness
It has never been a question of whether or not the stimulus from the ECB has ever been effective, because it hasn't been.
ECB Executive Board member Peter Praet confirms this over the long term, as he said the longer the European Central Bank attempts to stimulate by throwing money at banks, and keeps interest rates at below-market levels, the less effective the measures become.
Praet added the low interest rates also removes the incentive of governments to lower their deficits.
It's interesting to see Praet take on the role of the minutes read from the latest Federal Reserve meeting, where the markets were rocked after it was revealed that some of those in attendance questioned the stimulus policy of the Federal Reserve, just as Praet appears to be in Europe.
That was undoubtedly orchestrated, as are these statements by Praet. What appears to be happening is the central banks of the U.S. and Europe are using the media to manage the movement of various markets in response to the unrestricted quantitative easing.
More than likely it's an attempt to keep commodity prices in line, and inflation down. This is why the illusion of economic recovery and reporting continues to be asserted, even though there is almost nothing to reinforce the wishful thinking of those trying to blur the terrible global economy we still face.
ECB Executive Board member Peter Praet confirms this over the long term, as he said the longer the European Central Bank attempts to stimulate by throwing money at banks, and keeps interest rates at below-market levels, the less effective the measures become.
The longer we carry on with a highly accommodative monetary policy, characterized by extremely low interest rates and excess liquidity in the banking system, the more we will see a phenomenon manifesting itself with greater and greater evidence.
I am referring to what used to be known as 'instrument instability' in policymaking: the need to apply larger and larger doses of the same policy interventions only to see their macroeconomic influence becoming more and more tenuous.
Praet added the low interest rates also removes the incentive of governments to lower their deficits.
It's interesting to see Praet take on the role of the minutes read from the latest Federal Reserve meeting, where the markets were rocked after it was revealed that some of those in attendance questioned the stimulus policy of the Federal Reserve, just as Praet appears to be in Europe.
That was undoubtedly orchestrated, as are these statements by Praet. What appears to be happening is the central banks of the U.S. and Europe are using the media to manage the movement of various markets in response to the unrestricted quantitative easing.
More than likely it's an attempt to keep commodity prices in line, and inflation down. This is why the illusion of economic recovery and reporting continues to be asserted, even though there is almost nothing to reinforce the wishful thinking of those trying to blur the terrible global economy we still face.
Thursday, January 10, 2013
Peter Schiff on CPI Illusion
Peter Schiff blasted the idea that inflation is under control during the unprecedented money expansion we're going through. Government court economist Paul Krugman has used the meaningless Consumer Price Index (CPI) and its alleged sub 2.5% increases as proof inflation hasn't been a factor during this period of time.
Most people following the CPI know it's a joke, but most in the financial media continue to use the statistics proffered by the Index as based on reality.
Schiff points out two sectors to confirm this is so.
"However, there is plenty of evidence to suggest that the CPI is essentially meaningless as it woefully under reports rising prices.
"Magazines and newspapers provide a good case in point. The truth has not been exposed through the economic reporting that these outlets provide, but in the prices that are permanently fixed to their covers. For instance, from 1999 to 2002 the Bureau of Labor Statistic's (BLS) "Newspaper and Magazine Index" (a component of the CPI) increased by 37.1%. But a perusal of the cover prices of the 10 most popular newspapers and magazines (WSJ, Washington Post, Time, Sports Illustrated, U.S. News & World Report, Newsweek, People, NY Times, USA Today, and the LA Times) over the same time frame showed an average cover price increase of 131.5% (3.5 times faster than the BLS' stats). This is not even in the same ballpark.
"Another stunning example is found in health insurance costs, which is a major line item for most families. According to the BLS we can all breathe easy on that front because their "Health Insurance Index" increased a mere 4.3% (total) in the four years between 2008 and 2012. Interestingly, over the same time, the Kaiser Survey of Employer Sponsored Health Insurance showed that the cost of family health insurance rose 24.2% (5.5 times faster). But even if the BLS had reported higher costs, it wouldn't have made much of a difference in the CPI itself. Believe it or not, health insurance costs are assigned a weighting of less than one percent of the overall CPI. In contrast, the Kaiser Survey revealed that in 2012 the average total cost for family health insurance coverage was $15,745, or almost one third of the median family income.
"If the inaccuracy of these two components were consistent with the rest of the CPI's components, inflation could now be reported in double-digits!
Not only is this true, but the CPI, over the years, has changed its methodology in order to ensure the majority of prices that would more accurately reflect higher prices are taken out of the equation.
"The newer CPI methodologies are designed to report not just on price movements, but on spending patterns, consumer choices, substitution bias, and product changes. In other words, the metrics have been altered to track not so much the cost of things, but the cost of living (or more accurately, the cost of surviving). But if you simply focus on price, especially on those staple commodity goods and services that haven't radically changed in quality over the years, the under reporting of inflation becomes more apparent."
To highlight how this impacts the reporting of inflation, Schiff did some research on 20 common financial transactions over two different ten-year periods. The focus was on the decades when the monetary policy of the Federal Reserve was loose.
"As reported in our Global Investor Newsletter, we selected BLS price changes for twenty everyday goods and services over two separate ten-year periods, and then compared those changes to the reported changes in the Consumer Price Index (CPI) over the same period. (The twenty items we selected are: eggs, new cars, milk, gasoline, bread, rent of primary residence, coffee, dental services, potatoes, electricity, sugar, airline tickets, butter, store bought beer, apples, public transportation, cereal, tires, beef, and prescription drugs.)
"We know that people do not spend equal amounts on the above items, and we know their share of income devoted to them has changed over the decades. But as we are only interested in how these prices have changed relative to the CPI, those issues don't really matter. We chose to look at the period between 1970 and 1980 and then again between 2002 and 2012, because these time frames both had big deficits and loose monetary policy, and they straddle the time in which the most significant changes to the CPI methodology took effect. And while the CPI rose much faster in the 1970's, the degree to which the prices of our 20 items outpaced the CPI was much higher more recently.
"Between 1970 and 1980 the officially reported CPI rose a whopping 112%, and prices of our basket of goods and services rose by 117%, just 5% faster. In contrast between 2002 and 2012 the CPI rose just 27.5%, but our basket increased by 44.3%, a rate that was 61% faster. And remember, this is using the BLS' own price data, which we have already shown can grossly under-estimate the true rate of increase. The difference can be explained by how CPI is weighted and mixed. The formula used in the 1970's effectively captured the price movements of our twenty everyday products. But in the last ten years it has been quite a different story."
The conclusion is the CPI can no longer be trusted or considered a valid measure of real inflation. Many people I talk to on the street know we're in a high inflationary period, as they point to the much higher costs of engaging in transactions and buying needed products and services. They don't know how to describe it in the terms readers here would know and use, but they are very much aware we're living in a significant inflationary economy.
Skewing data using smoke and mirrors can't hide what we pay in real prices.
Source
Most people following the CPI know it's a joke, but most in the financial media continue to use the statistics proffered by the Index as based on reality.
Schiff points out two sectors to confirm this is so.
"However, there is plenty of evidence to suggest that the CPI is essentially meaningless as it woefully under reports rising prices.
"Magazines and newspapers provide a good case in point. The truth has not been exposed through the economic reporting that these outlets provide, but in the prices that are permanently fixed to their covers. For instance, from 1999 to 2002 the Bureau of Labor Statistic's (BLS) "Newspaper and Magazine Index" (a component of the CPI) increased by 37.1%. But a perusal of the cover prices of the 10 most popular newspapers and magazines (WSJ, Washington Post, Time, Sports Illustrated, U.S. News & World Report, Newsweek, People, NY Times, USA Today, and the LA Times) over the same time frame showed an average cover price increase of 131.5% (3.5 times faster than the BLS' stats). This is not even in the same ballpark.
"Another stunning example is found in health insurance costs, which is a major line item for most families. According to the BLS we can all breathe easy on that front because their "Health Insurance Index" increased a mere 4.3% (total) in the four years between 2008 and 2012. Interestingly, over the same time, the Kaiser Survey of Employer Sponsored Health Insurance showed that the cost of family health insurance rose 24.2% (5.5 times faster). But even if the BLS had reported higher costs, it wouldn't have made much of a difference in the CPI itself. Believe it or not, health insurance costs are assigned a weighting of less than one percent of the overall CPI. In contrast, the Kaiser Survey revealed that in 2012 the average total cost for family health insurance coverage was $15,745, or almost one third of the median family income.
"If the inaccuracy of these two components were consistent with the rest of the CPI's components, inflation could now be reported in double-digits!
Not only is this true, but the CPI, over the years, has changed its methodology in order to ensure the majority of prices that would more accurately reflect higher prices are taken out of the equation.
"The newer CPI methodologies are designed to report not just on price movements, but on spending patterns, consumer choices, substitution bias, and product changes. In other words, the metrics have been altered to track not so much the cost of things, but the cost of living (or more accurately, the cost of surviving). But if you simply focus on price, especially on those staple commodity goods and services that haven't radically changed in quality over the years, the under reporting of inflation becomes more apparent."
To highlight how this impacts the reporting of inflation, Schiff did some research on 20 common financial transactions over two different ten-year periods. The focus was on the decades when the monetary policy of the Federal Reserve was loose.
"As reported in our Global Investor Newsletter, we selected BLS price changes for twenty everyday goods and services over two separate ten-year periods, and then compared those changes to the reported changes in the Consumer Price Index (CPI) over the same period. (The twenty items we selected are: eggs, new cars, milk, gasoline, bread, rent of primary residence, coffee, dental services, potatoes, electricity, sugar, airline tickets, butter, store bought beer, apples, public transportation, cereal, tires, beef, and prescription drugs.)
"We know that people do not spend equal amounts on the above items, and we know their share of income devoted to them has changed over the decades. But as we are only interested in how these prices have changed relative to the CPI, those issues don't really matter. We chose to look at the period between 1970 and 1980 and then again between 2002 and 2012, because these time frames both had big deficits and loose monetary policy, and they straddle the time in which the most significant changes to the CPI methodology took effect. And while the CPI rose much faster in the 1970's, the degree to which the prices of our 20 items outpaced the CPI was much higher more recently.
"Between 1970 and 1980 the officially reported CPI rose a whopping 112%, and prices of our basket of goods and services rose by 117%, just 5% faster. In contrast between 2002 and 2012 the CPI rose just 27.5%, but our basket increased by 44.3%, a rate that was 61% faster. And remember, this is using the BLS' own price data, which we have already shown can grossly under-estimate the true rate of increase. The difference can be explained by how CPI is weighted and mixed. The formula used in the 1970's effectively captured the price movements of our twenty everyday products. But in the last ten years it has been quite a different story."
The conclusion is the CPI can no longer be trusted or considered a valid measure of real inflation. Many people I talk to on the street know we're in a high inflationary period, as they point to the much higher costs of engaging in transactions and buying needed products and services. They don't know how to describe it in the terms readers here would know and use, but they are very much aware we're living in a significant inflationary economy.
Skewing data using smoke and mirrors can't hide what we pay in real prices.
Source
Friday, October 26, 2012
Silver, Gold Await Printing Presses
While there is no doubt the Federal Reserve and other central banks around the world will continue to ramp up the money printing presses, we remain somewhat in a holding pattern, at least in the United States, after Ben Bernanke announced the Fed will buy $40 billion in mortgage-backed securities on a monthly basis indefinitely, with indefinitely measured by the health of the job market, with hints the Fed and Bernanke want to see it at about 5.5 percent.
Even though some business and economic writers and investors have attempted to paint gold and silver has having reached a plateau at this time, with the probability they will fall in price, there is not doubt nothing will stop central banks from feeding the out of control spending habits of governments around the world, and the price of gold and silver will continue to rise over the next 10 years, with gold and silver miners, which currently, for the most part, are enjoying low valuations, will bring investors solid returns, especially for silver investors, where the gold-silver ratio continues to be far higher than historical levels, standing far beyond the usual 16 times ounces of silver it takes to buy an ounce of gold, to weigh in at a hefty 54 times the usual amount it takes to buy an ounce of gold with silver.
That alone will dramatically push up the price of silver, as its historical ratio to gold should have it stand at over $100 an ounce as of this writing.
So in the short term, in spite of the announcements by the Federal Reserve and the ECB to stimulate the respective economies of the United States and the euro zone, they still haven't launched their buying programs, which has temporarily kept the price of silver and gold in holding patterns.
It's apparent in the case of Bernanke that he's waiting to implement QE3 when it is seen as not an attempt to influence the upcoming presidential election. With that soon to end, it won't be much long afterwards when it'll begin, and then silver and gold will jump, and it could even before that as investors begin to price in the effect of the stimulus on precious metals, and the resultant fall in value of the U.S. dollar.
For the European Union, what is causing the holdup there is the temporary decision by Spain to attempt to make it appear they have a chance of not needing the money to bailout its economy. That's a fallacy, and largely based upon the need to make it look like they're fighting to keep their people from having to face forced austerity in order to secure the loans.
But like Germany, it will cave on the borrowing end, just like the German leaders do on the lending end. Spain will accept the loans, and when they do, that will also cause silver and gold to rise in price.
One uncertainty in regard to currencies is the major competitors are all debasing their currencies through stimulus programs of one type or another, so it's unclear whether there will be much in the way of the impact of the fall in the U.S. dollar on gold and silver. In that regard inflation and safety will be the impetus behind the rise in the two precious metals; much more so probably than the weakening of the U.S. dollar. Again, it depends on how the market reacts to and views the impact of QE3 in the U.S., and if it deems it as more dramatically weakening the U.S. dollar against major competing currencies, we could see it push up the price of silver and gold even quicker and further than most think.
Another short-term consideration is the selling off of assets by those making decisions based upon tax strategies. That could push down silver and gold some as investors sell off at foolishly low prices. But there is no doubt the duo will continue to rise, even in the short term, as you simply can't bet against the practices of the Federal Reserve and other central banks, which have placed a floor under the precious metals, and which will soar up from there for years to come.
It's a matter of how to invest in silver and gold, not whether you should.
Finally, it is believed that QE3 could even expand beyond the $40 billion spent monthly as Operation Twist comes to an end. The thought is Bernanke will probably start to buy treasuries again in an attempt to jump start the economy, even though that has repeatedly failed to achieve results.
Gold and silver miners, because of ridiculously low valuations will soar in price as an asset class, with some doing far better than others of course. But the rising price of silver and gold, and the relatively new focus on dividends will be a powerful attractant to investors, who will be able to cash in on both fronts if they invest in the right companies.
Another element to watch is mergers and acquisitions among miners, which will make a lot of money for those that can anticipate where those moves are likely to be.
Of course in the end, gold and silver are first a place of safety and hedge against inflation, so that is the number one priority for those putting money in the precious metals. But with little in the way of growth in equities, they will increasingly be looked at by general investors as places they can also make money over time. That will also push up the price of miners, which will benefit everyone holding positions in them.
The silly talk of a gold or silver bubble is off the table at this time, as the everyday investor has yet to really enter the market in a significant way, and until that happens en masse, there is little we need to be concerned about concerning a bubble.
We will need to watch it closely, but we have yet to see the outrageous bidding up of gold and silver prices, and even when that does happen, which shouldn't be for a while, it can sometimes take several years before the prices stop climbing.
For now, investors way for the printing presses to start up, and when they do, there is nothing in the way to keep the price of gold and silver from jumping in the short- and long-term.
Monday, October 1, 2012
Bernanke Defends QE3 in Washington
Talking to reporters in Washington, Federal Reserve Chairman Ben Bernanke attempted to defend the latest round of stimulus, dubbed QE3, which will acquire $40 billion in mortgaged-backed securities on a monthly basis, until the Fed is satisfied the economy can sustain growth on its own.
Never mind that the economy got no help for QE1 and QE2, and it is highly unlikely QE3 will do anything but boost inflation over the long term.
Strangely, Bernanke asserted the Fed isn't an enabler of the government in allowing it to continue to operate gigantic budget deficits. It does all of that and more, and is part of the problem and not the solution.
Bernanke stated this as the goal of the latest stimulus: "... we would like to see as many Americans as possible who want jobs to have jobs, and that we aim to keep the rate of increase in consumer prices low and stable."
The Fed has also stated the other goal is to provide price stability in the markets, something that can't happen when pouring money created from nothing into it.
Concerning monetizing government debt, Bernanke said, "That's not what's happening, and that will not happen. We are acquiring Treasury securities on the open market and only on a temporary basis, with the goal of supporting the economic recovery through lower interest rates."
That's a bizarre statement targeting those who are clueless as to how the monetary system works. To buy Treasury securities is to monetize the government. That's why there are growing concerns over how much U.S. debt China owns, which have been propping up the U.S. government in order to sell inexpensive products to Americans.
To say that creating money out of thin air and acquiring Treasure securities isn't monetizing government debt, isn't even true. That's exactly Bernanke and the Federal Reserve are doing.
Where is the government getting its money from if that's not the case?
Also, incredibly, Bernanke claims the implementation of QE1, QE2 and QE3 hasn't hurt savers. You mean people not being able to buy into a money market fund or other safe investment because interest rates are almost zero hasn't hurt them? Does he actually think any of us believe that?
Even in an inflationary environment of about 2 percent people are losing money and buying power in low-risk accounts. How does that not hurt savers?
Part of the reason this is done is to pressure consumers to spend rather than save. At best, they may plow their money into much riskier assets; assets they don't understand and stand to lose a lot of money in as a result. That's not hurting savers?
Monday, September 17, 2012
Will Oil Trigger Next Recession?
I was confident that the Fed had already begun printing. That seemed quite evident by the overall action in the commodity markets, the dollar, and the fact that stocks were unable to correct in the normal timing band for a daily cycle low. However, I didn’t really expect Ben would come out and publicly admit it. That one took me by surprise Thursday. I guess Bernanke wants to get full value for his attack on the dollar and make sure that markets are rising into the election.
At this point all the pieces are in place for the inflationary spike and currency crisis I’ve been predicting for 2014. We now have open ended QE that is tied to economic output and unemployment. But since debasing currencies has historically never been the cure for the bursting of a credit bubble, all the Fed is going to produce is spiraling inflation. So as this progresses we are going to see the Fed printing faster and faster as the result they are looking for never materializes. This is what will ultimately drive the currency crisis at the dollar’s next three year cycle low in 2014.
At this point, watch the price of oil if you want to know when the next recession is going to begin. As I’ve pointed out many times in the past, recessions (well, at least since World War II) have all been preceded by a sharp spike in the price of energy. Any move of 100% or more in a year or less, has historically been the straw that breaks the camel's back. Modern economies cannot survive that kind of shock. It invariably triggers the collapse of consumer discretionary spending and economic activity comes to a grinding halt.
In 2007 oil surged out of the 3 year cycle low into a parabolic advance as Bernanke trashed the dollar in the vain attempt to halt the sub-prime collapse. That 200% spike in oil is what tipped the economy over into recession, which was then magnified in the fall of `08 as the financial bubble and debt markets imploded.
I think it’s safe to say that Bernanke doesn’t understand his role in causing the recession of 08/09 as he is now making the same mistake again. I think he believes the recession was solely triggered by the financial meltdown. That was the icing on the cake, but not the initial trigger that caused the recession.
Despite the complete inability of QE to heal the economy or job market, and since he really has no other tool, Bernanke just keeps doing the same thing over and over expecting a different result, but never getting it.
Commodities are the check that prevents Keynesian economic policies from healing the global economy. Keynesian academics either don’t understand this, or refuse to acknowledge it. Until they do, or we install Austrian economic advisers in the government, we are destined to continue making the same mistakes over and over.
So we will watch the price of oil as it rises out of its three year cycle low. If it hits $160 by next summer that will probably be enough to start the economy on the next downward spiral. If politicians get involved (and I’m sure they will) and try to impose price controls, they will multiply the damage and probably guarantee that the next economic downturn escalates into a truly catastrophic depression.
Until we see the spike in oil and the corresponding damage to the economy, no one has any business try to short anything, well maybe bonds, but even that will be risky because the Fed is going to be actively trying to prop the bond market up and keep interest rates artificially low.
All in all there is going to be so much money to be made on the long side, especially in precious metals, that no one needs to fool around with puny little gains on the short side, especially in a market that is going to be hell to trade from the short side. The time to sell short will be in 2014 after the dollar’s next three year cycle low. The dollar’s rally out of that bottom will correspond with the next global economic collapse, ultimately caused by the decisions made by the ECB and the Fed this past week. I dare say if they could see the damage their decisions are going to inflict upon the world and the dire unintended consequences, maybe they would finally stop kicking the can down the road and let the economy heal naturally. Of course that would entail several years of severe pain and politicians, as we all know, are extremely allergic to that.
2014-2015 is when we are going to see the stock market drop 60-75% and the next great leg down in this secular bear market. But until then there’s probably a pretty good chance we are going to see the S&P at new all time-highs in the next 6 months – 12 months.
Source
At this point all the pieces are in place for the inflationary spike and currency crisis I’ve been predicting for 2014. We now have open ended QE that is tied to economic output and unemployment. But since debasing currencies has historically never been the cure for the bursting of a credit bubble, all the Fed is going to produce is spiraling inflation. So as this progresses we are going to see the Fed printing faster and faster as the result they are looking for never materializes. This is what will ultimately drive the currency crisis at the dollar’s next three year cycle low in 2014.
At this point, watch the price of oil if you want to know when the next recession is going to begin. As I’ve pointed out many times in the past, recessions (well, at least since World War II) have all been preceded by a sharp spike in the price of energy. Any move of 100% or more in a year or less, has historically been the straw that breaks the camel's back. Modern economies cannot survive that kind of shock. It invariably triggers the collapse of consumer discretionary spending and economic activity comes to a grinding halt.
In 2007 oil surged out of the 3 year cycle low into a parabolic advance as Bernanke trashed the dollar in the vain attempt to halt the sub-prime collapse. That 200% spike in oil is what tipped the economy over into recession, which was then magnified in the fall of `08 as the financial bubble and debt markets imploded.
I think it’s safe to say that Bernanke doesn’t understand his role in causing the recession of 08/09 as he is now making the same mistake again. I think he believes the recession was solely triggered by the financial meltdown. That was the icing on the cake, but not the initial trigger that caused the recession.
Despite the complete inability of QE to heal the economy or job market, and since he really has no other tool, Bernanke just keeps doing the same thing over and over expecting a different result, but never getting it.
Commodities are the check that prevents Keynesian economic policies from healing the global economy. Keynesian academics either don’t understand this, or refuse to acknowledge it. Until they do, or we install Austrian economic advisers in the government, we are destined to continue making the same mistakes over and over.
So we will watch the price of oil as it rises out of its three year cycle low. If it hits $160 by next summer that will probably be enough to start the economy on the next downward spiral. If politicians get involved (and I’m sure they will) and try to impose price controls, they will multiply the damage and probably guarantee that the next economic downturn escalates into a truly catastrophic depression.
Until we see the spike in oil and the corresponding damage to the economy, no one has any business try to short anything, well maybe bonds, but even that will be risky because the Fed is going to be actively trying to prop the bond market up and keep interest rates artificially low.
All in all there is going to be so much money to be made on the long side, especially in precious metals, that no one needs to fool around with puny little gains on the short side, especially in a market that is going to be hell to trade from the short side. The time to sell short will be in 2014 after the dollar’s next three year cycle low. The dollar’s rally out of that bottom will correspond with the next global economic collapse, ultimately caused by the decisions made by the ECB and the Fed this past week. I dare say if they could see the damage their decisions are going to inflict upon the world and the dire unintended consequences, maybe they would finally stop kicking the can down the road and let the economy heal naturally. Of course that would entail several years of severe pain and politicians, as we all know, are extremely allergic to that.
2014-2015 is when we are going to see the stock market drop 60-75% and the next great leg down in this secular bear market. But until then there’s probably a pretty good chance we are going to see the S&P at new all time-highs in the next 6 months – 12 months.
Source
Tuesday, November 9, 2010
Ron Paul Says Bernanke Delusional on Controlling Inflation
In an interview with CNBC, Ron Paul recently said the idea by Ben Bernanke that he will be able to manage inflation once it takes off is delusional.
Paul said, "When it gets to four [percent inflation], and decides to go to eight, there's no way they can stop it... They think they have control. They don't."
"They can't manage a dollar like this. People are going to desert the dollar. I think the Chinese are hinting that already. They're not wanting our dollars as much as they want raw materials and other things," added Paul.
The Chinese have quickly responded to the actions of Bernanke and the Federal Reserve, downgrading U.S. credit because of the latest round of quantitative easing, which will inject $600 billion into the economy over the next eight months, and if that doesn't work, hints from the Fed are they'll continue printing money until they get the economy moving, even though the $1.7 trillion already wasted has done nothing of the sort.
China said, "The serious defects in the U.S. economy will lead to long-term recession and fundamentally lower the national solvency. The credit crisis is far from over in the United States and the U.S. economy will be in a long-term recession. In essence, the U.S. government's move to devalue the dollar indicates its solvency is on the brink of collapse."
The Chinese rating agency Dagong Global Credit downgraded the sovereign debt rating of the U.S. from A+ to AA.
Other countries like Germany have made statements such as the US has been living on debt for far too long.
Paul said, "When it gets to four [percent inflation], and decides to go to eight, there's no way they can stop it... They think they have control. They don't."
"They can't manage a dollar like this. People are going to desert the dollar. I think the Chinese are hinting that already. They're not wanting our dollars as much as they want raw materials and other things," added Paul.
The Chinese have quickly responded to the actions of Bernanke and the Federal Reserve, downgrading U.S. credit because of the latest round of quantitative easing, which will inject $600 billion into the economy over the next eight months, and if that doesn't work, hints from the Fed are they'll continue printing money until they get the economy moving, even though the $1.7 trillion already wasted has done nothing of the sort.
China said, "The serious defects in the U.S. economy will lead to long-term recession and fundamentally lower the national solvency. The credit crisis is far from over in the United States and the U.S. economy will be in a long-term recession. In essence, the U.S. government's move to devalue the dollar indicates its solvency is on the brink of collapse."
The Chinese rating agency Dagong Global Credit downgraded the sovereign debt rating of the U.S. from A+ to AA.
Other countries like Germany have made statements such as the US has been living on debt for far too long.
Friday, November 5, 2010
Endeavour Silver, (AMEX:EXK), Fortuna Silver (TSE:FR), FIRST MAJESTIC (TSE:FR) Rise on Fed Inflation Measures
Endeavour Silver Corp., (AMEX:EXK), Fortuna Silver Mines Inc. (TSE:FR), FIRST Majestic Silver Corp(TSE:FR) all rose Thursday on the inflationary measures of QE2 by the Federal Reserve, which pushed up the overall commodity market, along with companies within each sector, including the silver miners.
Commodity prices in general increased, including silver, which increased to over $26 an ounce. Gold prices soared to all-time record highs again, reaching close to $1,400 an ounce. Aluminum moved up to its highest levels since April.
Endeavour Silver closed at $5.25 Thursday, rising $0.41, or 8.47 percent. Fortuna Silver surged to close at $4.12, gaining $0.21, or 5.37 percent. First Majectic was up $9.66 at the end of the day, increasing by $0.86, or 9.77 percent.
Commodity prices in general increased, including silver, which increased to over $26 an ounce. Gold prices soared to all-time record highs again, reaching close to $1,400 an ounce. Aluminum moved up to its highest levels since April.
Endeavour Silver closed at $5.25 Thursday, rising $0.41, or 8.47 percent. Fortuna Silver surged to close at $4.12, gaining $0.21, or 5.37 percent. First Majectic was up $9.66 at the end of the day, increasing by $0.86, or 9.77 percent.
Mag Silver (AMEX:MVG) Silver Wheaton (NYSE:SLW), Pan American(Nasdaq:PAAS) Surge on Fed QE
Mag Silver Corp. (AMEX:MVG) Silver Wheaton Corp. (NYSE:SLW), Pan American Silver Corp. (Nasdaq:PAAS) all soared Thursday on the news the Federal Reserve was going to inflate in a big way again, driving up the broader commodity market, along with individual companies within each sector.
Almost all commodity prices rose, including silver, which surpassed $26 an ounce. Gold prices rose to all-time records, while aluminum rose to its highest levels since April.
Mag Silver closed at $9.67 Thursday, rising $0.24, or 2.54 percent. Silver Wheaton surged to close at $32.20, gaining $2.59, or 8.75 percent. Pan American was up $34.51 at the end of the day, increasing by $2.06, or 6.35 percent.
Almost all commodity prices rose, including silver, which surpassed $26 an ounce. Gold prices rose to all-time records, while aluminum rose to its highest levels since April.
Mag Silver closed at $9.67 Thursday, rising $0.24, or 2.54 percent. Silver Wheaton surged to close at $32.20, gaining $2.59, or 8.75 percent. Pan American was up $34.51 at the end of the day, increasing by $2.06, or 6.35 percent.
Wednesday, October 27, 2010
Goldman (NYSE:GS) Says Federal Reserve Needs QE of $4 Trillion to Meet Inflation Goal
Every time you turn around it seems, Goldman Sachs (NYSE:GS) has added another $500 billion, or trillion, to what is needed for the Federal Reserve to meet its goal of increasing inflation via quantitative easing.
The latest figure is the Fed will need to print $4 trillion to reach their goal of 2 percent or more.
Recent research by Goldman has said a minimum of $2 trillion would be needed to move inflation, but that probably wouldn't be enough, and $4 trillion is the more likely target.
In the midst of the rebellion by American people against outrageous spending and stimulus, it's extremely doubtful that the Fed would have the courage to print another $4 trillion. Even $1 trillion would probably be considered outrageous, and it would be.
One reason this won't work is even if the money is printed, the banks aren't lending to businesses, and most businesses aren't seeking loans because of the realities of the weak economy.
Throwing more money at the problem won't change that scenario one bit.
Hints the Fed may print money at intervals to give the appearance of being more wise with their dispensing of money won't fool many people for long, as it's not too difficult to add up billions over several quarter to reach the trillion and more that will ultimately be spent.
The latest figure is the Fed will need to print $4 trillion to reach their goal of 2 percent or more.
Recent research by Goldman has said a minimum of $2 trillion would be needed to move inflation, but that probably wouldn't be enough, and $4 trillion is the more likely target.
In the midst of the rebellion by American people against outrageous spending and stimulus, it's extremely doubtful that the Fed would have the courage to print another $4 trillion. Even $1 trillion would probably be considered outrageous, and it would be.
One reason this won't work is even if the money is printed, the banks aren't lending to businesses, and most businesses aren't seeking loans because of the realities of the weak economy.
Throwing more money at the problem won't change that scenario one bit.
Hints the Fed may print money at intervals to give the appearance of being more wise with their dispensing of money won't fool many people for long, as it's not too difficult to add up billions over several quarter to reach the trillion and more that will ultimately be spent.
Thursday, September 23, 2010
How High Can Gold Prices Go During These Times of Market Uncertainty?
The year of 2010 will go down in the history books as a period of financial crisis and uncertainty as markets ponder the direction of future price movements. All eyes have been transfixed on the S&P 500 Index for some indication of what is to come, primarily since most market drivers have settled into direct correlation with the popular index. Gold and the U.S. Dollar, typically inversely correlated, have been dance partners for nearly a year, and have locked on to the S&P 500 index on occasion.
Presently, the stock index has finally broken through its 200-day moving average again, the third time in as many months, but resistance appears to be building as technical indicators signal another overbought condition. Stocks and other correlated market indexes seem to enjoy this sideways motion. Market traders have learned to profit from the predictable swings, but the long-term investor is confused as to where to invest his capital. Invariably, the conclusion reached by many is to invest in Gold where record highs are the norm for this year, as is a continual upward march in bullion values.
Can this trend in Gold prices continue or it just another market aberration brought on by a year of crises and risk-averse capital fleeing to safe havens? For the past decade, Gold has been ramping up in value, unabated by most conditions that have impacted other markets. The recession, whether we are out of it or not, did little to slow down the Gold parade, and its honored status as a “safe haven” has been tested several times in the recent past to no avail. Gold remains impervious to economic data that destroys value on many other fronts.
The following chart provides a longer-term perspective for evaluating present conditions:
This chart suggests that Gold has been in a “recovery” mode for the past decade, making up lost ground on the S&P 500. The price of Gold reached “parity” with the index while the recession was in full bloom and crossed above it in November of last year. Currently, the multiple is 1.12 versus the S&P 500 index, still a bit below the historical average of 1.40. From this perspective, it is easy to argue that Gold has more room to grow
Current Gold prices are due for a slight correction, as buyers and sellers consolidate their positions. Technical indicators, as with the S&P 500, are suggesting that current price levels have run out of momentum, resulting from an overbought status. However, these conditions have occurred four times in the past year, only to be followed by another resurgence in demand.
The surprise for the past year has been that Gold and our greenback have been so tightly entwined together. Traditionally, the two dance partners have been more like oil and water. When one goes down, the other goes up, and vice-versa. The advent of the Euro at the turn of the millennium coincided with Gold’s upward move. As all forex brokers will attest, the “EUR/USD” currency pair bore witness to tradition as the Euro and Gold both strengthened together. That correlation broke down at the beginning of 2010 as concern over debt issues in Europe began to materialize.
If basic correlations have broken down this year, then what are we to believe going forward? A quick review of Gold’s fundamentals may provide the desired insights.
Presently, the stock index has finally broken through its 200-day moving average again, the third time in as many months, but resistance appears to be building as technical indicators signal another overbought condition. Stocks and other correlated market indexes seem to enjoy this sideways motion. Market traders have learned to profit from the predictable swings, but the long-term investor is confused as to where to invest his capital. Invariably, the conclusion reached by many is to invest in Gold where record highs are the norm for this year, as is a continual upward march in bullion values.
Can this trend in Gold prices continue or it just another market aberration brought on by a year of crises and risk-averse capital fleeing to safe havens? For the past decade, Gold has been ramping up in value, unabated by most conditions that have impacted other markets. The recession, whether we are out of it or not, did little to slow down the Gold parade, and its honored status as a “safe haven” has been tested several times in the recent past to no avail. Gold remains impervious to economic data that destroys value on many other fronts.
The following chart provides a longer-term perspective for evaluating present conditions:
This chart suggests that Gold has been in a “recovery” mode for the past decade, making up lost ground on the S&P 500. The price of Gold reached “parity” with the index while the recession was in full bloom and crossed above it in November of last year. Currently, the multiple is 1.12 versus the S&P 500 index, still a bit below the historical average of 1.40. From this perspective, it is easy to argue that Gold has more room to grow
Current Gold prices are due for a slight correction, as buyers and sellers consolidate their positions. Technical indicators, as with the S&P 500, are suggesting that current price levels have run out of momentum, resulting from an overbought status. However, these conditions have occurred four times in the past year, only to be followed by another resurgence in demand.
The surprise for the past year has been that Gold and our greenback have been so tightly entwined together. Traditionally, the two dance partners have been more like oil and water. When one goes down, the other goes up, and vice-versa. The advent of the Euro at the turn of the millennium coincided with Gold’s upward move. As all forex brokers will attest, the “EUR/USD” currency pair bore witness to tradition as the Euro and Gold both strengthened together. That correlation broke down at the beginning of 2010 as concern over debt issues in Europe began to materialize.
If basic correlations have broken down this year, then what are we to believe going forward? A quick review of Gold’s fundamentals may provide the desired insights.
- Intrinsic Value: Investors the world over appreciate the metal’s ability to retain value and continue to view it as a primary safe haven;
- Hedge Against Inflation: As recessionary forces wane and recovery plans take hold, interest rates and inflation will surely follow, if only delayed by central bank fears of a return to negative GDP growth. Gold has always been valued as a perfect hedge against inflation;
- Mining Prospects: Mining interests have had to fight new taxes on their efforts and find new and better extraction methods, but exploration has not suffered, nor discovered any new major deposits;
- Industrial Usage: Demand is predictable in this area and can only increase as economic recovery spreads;
- Current Inventories: Despite fear mongering by Gold critics, central banks have no plan or cause to release their stored reserves. Even if they did, China would gladly exchange their U.S. Dollar CDs for Gold today.
While markets and traders alike ponder the uncertainty of economic conditions, the price of Gold continues to set new records and bolster its decade-long upward trend. While technical indicators signal that a slight pullback in price level is in the cards, the fundamental outlook for Gold remains unshaken by the market’s inability to clearly see the way forward. Gold futures on December delivery have shown slight declines, but these are part of the expected correction in price levels.
Wednesday, September 22, 2010
Should We Worry About Gold Now?
A growing number of investors, individual and institutional, have started to get worried about whether or not gold is in bubble territory.
There is nothing to justify those fears, as until the reasons for such strong support for gold are over, gold has every reason to continue on its upward climb, and it will.
That's not to say there won't be any corrections, as there is sure to be one on the horizon sometime soon, probably after a season of time which gold incrementally continues to move up to a point where profits are taken and some type of temporary, supposed positive economic news from somewhere helps the selling along.
But there is nothing in the short term, or mid-term for that matter, that suggests gold is too high, and will come plummeting down to earth.
Even if there was a gold correction stronger than expected, that does nothing to change the underlying fundamentals, and it'll again resume its climb until those things change.
Some of those fundamentals include inflation, deficits, weak U.S. dollar, weak global economy and the sovereign debt crisis in Europe. And even if there is deflation, it would be another reason to own gold.
All these solid reasons are making some investors nervous, as it sounds like too solid of a case, and too predictable.
It's hard to see anything short term which could stop the rise of gold, and that is also worrying to a growing number of people.
It seems the fundamentals supporting gold prices are strong, and there is nothing that could perceivably happen that will change that in any surprising way.
Now over the long term, whenever interest rates are increased again, along with a real economic recovery, that would be a time to seriously look at selling gold.
A secondary, but easy to identify possibility, would be if the regular man on the street starts to irrationally invest in gold without knowing why, other than his friend or neighbor is going it.
In that case, even the reason for high gold prices could be outrun by their exuberance, and bring gold to very high levels which couldn't even in our economic environment be justified.
But again, that won't matter in the long run, as until the fundamentals are no longer in place, gold prices will rise, even if there are significant peaks and valleys along the way.
There is nothing to justify those fears, as until the reasons for such strong support for gold are over, gold has every reason to continue on its upward climb, and it will.
That's not to say there won't be any corrections, as there is sure to be one on the horizon sometime soon, probably after a season of time which gold incrementally continues to move up to a point where profits are taken and some type of temporary, supposed positive economic news from somewhere helps the selling along.
But there is nothing in the short term, or mid-term for that matter, that suggests gold is too high, and will come plummeting down to earth.
Even if there was a gold correction stronger than expected, that does nothing to change the underlying fundamentals, and it'll again resume its climb until those things change.
Some of those fundamentals include inflation, deficits, weak U.S. dollar, weak global economy and the sovereign debt crisis in Europe. And even if there is deflation, it would be another reason to own gold.
All these solid reasons are making some investors nervous, as it sounds like too solid of a case, and too predictable.
It's hard to see anything short term which could stop the rise of gold, and that is also worrying to a growing number of people.
It seems the fundamentals supporting gold prices are strong, and there is nothing that could perceivably happen that will change that in any surprising way.
Now over the long term, whenever interest rates are increased again, along with a real economic recovery, that would be a time to seriously look at selling gold.
A secondary, but easy to identify possibility, would be if the regular man on the street starts to irrationally invest in gold without knowing why, other than his friend or neighbor is going it.
In that case, even the reason for high gold prices could be outrun by their exuberance, and bring gold to very high levels which couldn't even in our economic environment be justified.
But again, that won't matter in the long run, as until the fundamentals are no longer in place, gold prices will rise, even if there are significant peaks and valleys along the way.
Thursday, September 16, 2010
Citigroup (NYSE:C): $1,300 Gold within Week
If the Federal Reserve announces they're going to resume quantitative easing, Citigroup (NYSE:C) says gold prices could reach as high as $1,300 within a week.
Citigroup analyst David Thurtell said, "If the Fed says next week it is going to do more quantitative easing ... the inflation bugs will have a field day."
That's actually a real possibility, as gold prices have strong support, and the market is looking closely at inflation, government stimulus and central banks to print money again.
These are all coming together, as inflation was reported as higher today, with the core Producer Price Index in the U.S. increasing 0.4 percent in August.
Add to that the expected stimulus and resumption of quantitative easing, and it can't get any better than that as far as something that will drive the price of gold to extreme levels.
If quantitative easing is in fact announced and implemented, gold prices will immediately skyrocket on the news, and it's unknown how high it will go after that, as the perfect storm again is influencing the gold market.
Citigroup analyst David Thurtell said, "If the Fed says next week it is going to do more quantitative easing ... the inflation bugs will have a field day."
That's actually a real possibility, as gold prices have strong support, and the market is looking closely at inflation, government stimulus and central banks to print money again.
These are all coming together, as inflation was reported as higher today, with the core Producer Price Index in the U.S. increasing 0.4 percent in August.
Add to that the expected stimulus and resumption of quantitative easing, and it can't get any better than that as far as something that will drive the price of gold to extreme levels.
If quantitative easing is in fact announced and implemented, gold prices will immediately skyrocket on the news, and it's unknown how high it will go after that, as the perfect storm again is influencing the gold market.
Monday, August 9, 2010
Peter Schiff Says Inflationary Depression Has Already Begun
Almost four years ago to this date, in August 2006, Peter Schiff offered his take on the economy, and he painted a bleak picture very few believed, that real estate prices would crash and consumers in America would start to save again.
That and more happened, and the president of Euro Pacific Capital has once again made a dire prediction of where he sees the economy going in a recent interview.
Even though a lot of media attention has gravitated towards deflation, Schiff will have none of that, as he sees what he calls the worst type of depression beginning, and that is an inflationary one.
When asked where he saw the economy now, Schiff responded:
"We're in the early stages of a depression now. It's going to be a horrific experience for average Americans who are going to watch their standard of living plunge. The cost of living is going to escalate dramatically. We are going to see soaring prices for the basic necessities of life, like energy, clothing, and other things. Education and health-care costs are going to continue to spiral out of control. Millions of more Americans are going to lose their jobs, and all of us are going to lose our freedoms and our rights. As the government gets bigger, it tries to end the crisis; but its policies are creating, perpetuating, and making it worse."
When asked what needs to be done to fix the economy, Schiff added, "We have to stop stimulating. We have to shrink the government and cut government spending dramatically. The reason the economy is so screwed up is because government regulations and subsidies have created a slowing economy. They have prevented market forces from operating the way they need to be. They have prevented an efficient allocation of resources. We need to rebuild our manufacturing base. We need to reindustrialize. We can't do that without the resources, without the savings, without the investment.
"They've created a nation of spenders, speculators, and consumers, and they've destroyed the savers, producers, and the investing class that built this country. We're moving from a market-based economy to essentially a planned economy. We're abandoning capitalism and embracing socialism. That's a recipe for disaster."
Schiff recommends getting out of U.S. dollars altogether. He says people need to flee U.S. bonds and Treasuries, and look more toward emerging markets and commodities.
That and more happened, and the president of Euro Pacific Capital has once again made a dire prediction of where he sees the economy going in a recent interview.
Even though a lot of media attention has gravitated towards deflation, Schiff will have none of that, as he sees what he calls the worst type of depression beginning, and that is an inflationary one.
When asked where he saw the economy now, Schiff responded:
"We're in the early stages of a depression now. It's going to be a horrific experience for average Americans who are going to watch their standard of living plunge. The cost of living is going to escalate dramatically. We are going to see soaring prices for the basic necessities of life, like energy, clothing, and other things. Education and health-care costs are going to continue to spiral out of control. Millions of more Americans are going to lose their jobs, and all of us are going to lose our freedoms and our rights. As the government gets bigger, it tries to end the crisis; but its policies are creating, perpetuating, and making it worse."
When asked what needs to be done to fix the economy, Schiff added, "We have to stop stimulating. We have to shrink the government and cut government spending dramatically. The reason the economy is so screwed up is because government regulations and subsidies have created a slowing economy. They have prevented market forces from operating the way they need to be. They have prevented an efficient allocation of resources. We need to rebuild our manufacturing base. We need to reindustrialize. We can't do that without the resources, without the savings, without the investment.
"They've created a nation of spenders, speculators, and consumers, and they've destroyed the savers, producers, and the investing class that built this country. We're moving from a market-based economy to essentially a planned economy. We're abandoning capitalism and embracing socialism. That's a recipe for disaster."
Schiff recommends getting out of U.S. dollars altogether. He says people need to flee U.S. bonds and Treasuries, and look more toward emerging markets and commodities.
Wednesday, August 4, 2010
What Deflation? Wheat Leading Food Inflation
It's strange to hear the deflation advocates continue their mantra of lower prices while food prices have hit their highest levels in the United States in 26 years in March, and wheat continues to soar in price.
September futures for wheat hit $7.11 on Wednesday, a huge jump of 58 percent from June.
For now wheat is a problem, but it's doubtful that will continue, as countries around the world have increased wheat plantings for several years, and it's more the drought news coverage of Russia and Eastern Europe which is driving wheat prices, more than the actual supply available.
Even so, food inflation is a major threat, and that, probably more than any other element, can lead to social unrest and riots.
Businesses have said the rising inputs associated with their products will be passed on to consumers. And if foolish governments attempt the price control thing, it'll get worse, as enormous shortages will occur, making it even more volatile.
Major foods like meat, dairy and grain is expected to rise higher in price over the next decade, according to the Organization for Economic Cooperation and Development.
Another unknown is how the supply and demand factor will change as consumers in emerging markets increase their meat consumption, which increases demand not only for meat products, but grains used to feed the livestock.
Of larger emerging market countries, India is facing some of the larger inflation problems, with an annualized rate of 10.55 percent as of June.
People can play all the games with numbers they want, and change the definition or parameters of deflation, but inflation will be the problem going forward, and people need to make decisions based on that.
September futures for wheat hit $7.11 on Wednesday, a huge jump of 58 percent from June.
For now wheat is a problem, but it's doubtful that will continue, as countries around the world have increased wheat plantings for several years, and it's more the drought news coverage of Russia and Eastern Europe which is driving wheat prices, more than the actual supply available.
Even so, food inflation is a major threat, and that, probably more than any other element, can lead to social unrest and riots.
Businesses have said the rising inputs associated with their products will be passed on to consumers. And if foolish governments attempt the price control thing, it'll get worse, as enormous shortages will occur, making it even more volatile.
Major foods like meat, dairy and grain is expected to rise higher in price over the next decade, according to the Organization for Economic Cooperation and Development.
Another unknown is how the supply and demand factor will change as consumers in emerging markets increase their meat consumption, which increases demand not only for meat products, but grains used to feed the livestock.
Of larger emerging market countries, India is facing some of the larger inflation problems, with an annualized rate of 10.55 percent as of June.
People can play all the games with numbers they want, and change the definition or parameters of deflation, but inflation will be the problem going forward, and people need to make decisions based on that.
Monday, June 7, 2010
Falling Commodity Prices Suggest Ongoing Recession
The ongoing drop in commodity prices implies the recession continues on, as the decline in prices tell us demand has plummeted.
I say an ongoing recession because I've never believed we've left the recession, but only the government stimulus plans and unprecedented printing of money has kept it from being exposed for what it is.
But whether you want to call it a double-dip recession, , u-shaped recession, or something else, the fact is we're set to face more economic difficulty, and after spending trillions around the world, it has done nothing to stop the recession we've been in for several years, and now has been made worse because of the government spending that has hidden and masked the reality.
There is only one reason commodity prices will drop, and that's based on supply and demand. In this case it's all about demand, which has simply dried up.
That drying up comes from the emerging narrative of slowing demand in China, the European Union, and the United States.
The frantic attempts to spin the situation by the U.S. governments and other governments around the world are no longer believable, and we need to be ready as it hits the fan again.
If spending trillions has ended with nothing, we can be sure spending trillions more will do nothing as well, other than continue to decimate people and their spending power.
Consequently gold prices will continue to rise, as well as quality gold mining stocks, as it becomes the only place of safety that can be counted on going forward.
I say an ongoing recession because I've never believed we've left the recession, but only the government stimulus plans and unprecedented printing of money has kept it from being exposed for what it is.
But whether you want to call it a double-dip recession, , u-shaped recession, or something else, the fact is we're set to face more economic difficulty, and after spending trillions around the world, it has done nothing to stop the recession we've been in for several years, and now has been made worse because of the government spending that has hidden and masked the reality.
There is only one reason commodity prices will drop, and that's based on supply and demand. In this case it's all about demand, which has simply dried up.
That drying up comes from the emerging narrative of slowing demand in China, the European Union, and the United States.
The frantic attempts to spin the situation by the U.S. governments and other governments around the world are no longer believable, and we need to be ready as it hits the fan again.
If spending trillions has ended with nothing, we can be sure spending trillions more will do nothing as well, other than continue to decimate people and their spending power.
Consequently gold prices will continue to rise, as well as quality gold mining stocks, as it becomes the only place of safety that can be counted on going forward.
Saturday, May 8, 2010
Peter Schiff: Government Bubble Bursting
In a recent interview on Sound Off Connecticut, Peter Schiff said the government bubble will burst, and when it does, the bond market will collapse and hyperinflation will follow soon afterwards.
Schiff also stated that “The bigger the government gets, the weaker the real economy gets,” and of course he's correct. Just look at Greece as an example of that truth.
All the government does is rob from the productive and redistribute to the unproductive. Government can't produce anything, and the larger it gets, as Schiff says, the weaker the real economy becomes because it takes away from investment capital and becomes a part of consumption, which produces nothing.
Keeping interest rates low will "destroy the value of" the dollar, said Schiff, and that will result in hyperinflation, which could bring chaos to the country.
Schiff also stated that “The bigger the government gets, the weaker the real economy gets,” and of course he's correct. Just look at Greece as an example of that truth.
All the government does is rob from the productive and redistribute to the unproductive. Government can't produce anything, and the larger it gets, as Schiff says, the weaker the real economy becomes because it takes away from investment capital and becomes a part of consumption, which produces nothing.
Keeping interest rates low will "destroy the value of" the dollar, said Schiff, and that will result in hyperinflation, which could bring chaos to the country.
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