- Source, EuroPacMetals.com:
Monday, December 30, 2013
Peter Schiff - Bitcoin vs Gold
Saturday, December 28, 2013
The FED is Artificially Boosting the Stock Market
We will go a lot lower than that if the Fed moves away the monetary props. See, the problem for the economy is what the Fed is doing to goose the stock market and the housing market is actually hurting the real economy. It's preventing it from restructuring in a positive way that would produce genuine economic growth and prosperity that would be enjoyed by everyone.
- Source, Peter Schiff via
Thursday, December 26, 2013
Janet Yellen's Mission Impossible
Most market watchers expect that Janet Yellen will grapple with two major tasks once she takes the helm at the Federal Reserve in 2014: deciding on the appropriate timing and intensity of the Fed's quantitative easing taper strategy, and unwinding the Fed's enormous $4 trillion balance sheet (without creating huge losses in the value of its portfolio). In reality both assignments are far more difficult than just about anyone understands or admits.
Unlike just about every other economist, I knew that the Fed would not taper in September because the economy is still fundamentally addicted to stimulus. The signs of recovery that have caused investors and politicians to bubble with enthusiasm are just QE in disguise. Take away the QE and the economy would likely tilt back into an even more severe recession than the one we experienced before QE1 was launched
Given the Fed's failure to initiate a tapering campaign in recent months (when it was highly expected) it is surprising that most people still believe that it will pull the trigger in the first quarter of 2014. But if the Fed could not take action in September, with Ben Bernanke at the helm and the nation as yet untraumatized by the debt ceiling drama and Obamacare, why should we expect tougher treatment from Janet Yellen? This is particularly true when you consider Yellen's reputation as an extreme dove and the uninspiring economic data that has come in recent months.
Rather than explicitly describing the possibility of a reduction of asset purchases, recent Fed statements have merely said that policy would be "adjusted" according to incoming data. It has never said what direction that adjustment may take. Yet somehow the market has concluded that an imminent reduction is the only possibility. But the opposite conclusion is more likely. Recession avoidance is really the Fed's only concern and it will always come down on the side of accommodation. Therefore an expectation for a 2014 taper is just wishful thinking.
But that does not mean that QE will go on forever. It will come to an end, but not because the Fed wants it to, but because the currency markets give it no choice. A dollar crisis would ultimately force the Fed's hand, and the longer the Fed succeeds in postponing the inevitable, the more damage its policy mistakes will inflict on our economy.
Yellen's second task will be equally impossible. Since the QE campaign began in 2010 the Fed has more than quadrupled the amount of bonds that it holds on its balance sheet,to more than $4 trillion of Treasury and mortgage-backed bonds. To accumulate this massive cache, the Fed has become by far the largest buyer in both markets. Its purchases have pushed up the prices of those bonds and have kept long term interest rates low for both consumers and businesses.
When the QE was first launched, Ben Bernanke tamped down fears of the program by saying the Fed would one day sell the bonds that it was buying. But as the Fed's balance sheet ballooned, many in the market began fearing that the unwinding of these trades would crush the market for Treasuries and mortgage-backed securities. Bernanke soon allayed these fears by saying that the Fed would not actively sell, but would simply allow bonds to mature. But this is just a convenient fiction.
If stock or real estate prices were to enter into bubble territory (which I believe has already happened), or if inflation were ever to surge past the Fed's low target range (which I believe is certain to happen), then the Fed would have to sell bonds to get in front of these trends.
Through Operation Twist, the Fed has already swapped a very large portion of its short-term bonds for long-term bonds. The slow process of waiting for bonds to mature is unlikely to slow down asset bubbles or inflation. The argument also does not account for the fact that the Treasury will have to sell new bonds in order to retire the principle on the maturing bonds. Since the Fed is the primary buyer of Treasury bonds, the Fed would have to add to its balance sheet when it's trying to shrink it. Such a cycle is just a debt rollover that leaves the size of the Fed's balance sheet unchanged.
Unless other buyers of Treasuries or MBS can be found to replace the Fed's prodigious buying, the Fed will remain the only game in town. Given these realities, how can we possibly expect Janet Yellen to actually diminish the amount of assets the Fed holds? She won't be able to do it and any expectations to the contrary are pure fantasy.
So we should not be asking when Ms. Yellen will begin withdrawing stimulus and shrinking the Fed's balance sheet. Instead we should be asking how the markets will react when she runs out of excuses for delaying the taper, or ultimately decides to expand QE rather than contract it.
Unlike just about every other economist, I knew that the Fed would not taper in September because the economy is still fundamentally addicted to stimulus. The signs of recovery that have caused investors and politicians to bubble with enthusiasm are just QE in disguise. Take away the QE and the economy would likely tilt back into an even more severe recession than the one we experienced before QE1 was launched
Given the Fed's failure to initiate a tapering campaign in recent months (when it was highly expected) it is surprising that most people still believe that it will pull the trigger in the first quarter of 2014. But if the Fed could not take action in September, with Ben Bernanke at the helm and the nation as yet untraumatized by the debt ceiling drama and Obamacare, why should we expect tougher treatment from Janet Yellen? This is particularly true when you consider Yellen's reputation as an extreme dove and the uninspiring economic data that has come in recent months.
Rather than explicitly describing the possibility of a reduction of asset purchases, recent Fed statements have merely said that policy would be "adjusted" according to incoming data. It has never said what direction that adjustment may take. Yet somehow the market has concluded that an imminent reduction is the only possibility. But the opposite conclusion is more likely. Recession avoidance is really the Fed's only concern and it will always come down on the side of accommodation. Therefore an expectation for a 2014 taper is just wishful thinking.
But that does not mean that QE will go on forever. It will come to an end, but not because the Fed wants it to, but because the currency markets give it no choice. A dollar crisis would ultimately force the Fed's hand, and the longer the Fed succeeds in postponing the inevitable, the more damage its policy mistakes will inflict on our economy.
Yellen's second task will be equally impossible. Since the QE campaign began in 2010 the Fed has more than quadrupled the amount of bonds that it holds on its balance sheet,to more than $4 trillion of Treasury and mortgage-backed bonds. To accumulate this massive cache, the Fed has become by far the largest buyer in both markets. Its purchases have pushed up the prices of those bonds and have kept long term interest rates low for both consumers and businesses.
When the QE was first launched, Ben Bernanke tamped down fears of the program by saying the Fed would one day sell the bonds that it was buying. But as the Fed's balance sheet ballooned, many in the market began fearing that the unwinding of these trades would crush the market for Treasuries and mortgage-backed securities. Bernanke soon allayed these fears by saying that the Fed would not actively sell, but would simply allow bonds to mature. But this is just a convenient fiction.
If stock or real estate prices were to enter into bubble territory (which I believe has already happened), or if inflation were ever to surge past the Fed's low target range (which I believe is certain to happen), then the Fed would have to sell bonds to get in front of these trends.
Through Operation Twist, the Fed has already swapped a very large portion of its short-term bonds for long-term bonds. The slow process of waiting for bonds to mature is unlikely to slow down asset bubbles or inflation. The argument also does not account for the fact that the Treasury will have to sell new bonds in order to retire the principle on the maturing bonds. Since the Fed is the primary buyer of Treasury bonds, the Fed would have to add to its balance sheet when it's trying to shrink it. Such a cycle is just a debt rollover that leaves the size of the Fed's balance sheet unchanged.
Unless other buyers of Treasuries or MBS can be found to replace the Fed's prodigious buying, the Fed will remain the only game in town. Given these realities, how can we possibly expect Janet Yellen to actually diminish the amount of assets the Fed holds? She won't be able to do it and any expectations to the contrary are pure fantasy.
So we should not be asking when Ms. Yellen will begin withdrawing stimulus and shrinking the Fed's balance sheet. Instead we should be asking how the markets will react when she runs out of excuses for delaying the taper, or ultimately decides to expand QE rather than contract it.
- Source:
Tuesday, December 24, 2013
A River of Gold from West to East
Asia's love affair with gold became worldwide news when the price of the yellow metal dropped last April. Asian consumers saw the price drop as a fortunate buying opportunity, and metals dealers were swamped with orders for both bullion and jewelry. Premiums skyrocketed across the continent, but this did not slow demand.
With all this demand, shouldn't gold's global spot price have continued rising? Unfortunately, many Westerners were selling into the Eastern demand. In fact, the stagnant spot price concealed a historic transfer of real wealth.
The rising price of gold over the past decade had lured many Western investors into the paper gold market through precious metals exchange-traded funds (ETFs). To ETF investors intent on fast growth rather than long-term capital preservation, the recent drop in price was viewed as a sell signal, not an opportunity.
By the end of September, gold ETFs had sold off about 700 metric tons of physical gold - more than half of it in just the second quarter. The World Gold Council reports that the majority of these outflows have been absorbed by Asian demand.
However, Western selling was enough to keep the global spot price from recovering. Instead of more capital flowing into gold, it was the gold itself which was flowing from Western financial institutions to Eastern households.
The latest data shows that consumer demand for physical gold in the first three quarters of 2013 hit a historical record of 2,896.5 metric tons. 90% of the year-over-year increase in this demand came from Asia and the Middle East.
Meanwhile, Americans have been distracted by one record high after another in the domestic stock market.
With all this demand, shouldn't gold's global spot price have continued rising? Unfortunately, many Westerners were selling into the Eastern demand. In fact, the stagnant spot price concealed a historic transfer of real wealth.
The rising price of gold over the past decade had lured many Western investors into the paper gold market through precious metals exchange-traded funds (ETFs). To ETF investors intent on fast growth rather than long-term capital preservation, the recent drop in price was viewed as a sell signal, not an opportunity.
By the end of September, gold ETFs had sold off about 700 metric tons of physical gold - more than half of it in just the second quarter. The World Gold Council reports that the majority of these outflows have been absorbed by Asian demand.
However, Western selling was enough to keep the global spot price from recovering. Instead of more capital flowing into gold, it was the gold itself which was flowing from Western financial institutions to Eastern households.
The latest data shows that consumer demand for physical gold in the first three quarters of 2013 hit a historical record of 2,896.5 metric tons. 90% of the year-over-year increase in this demand came from Asia and the Middle East.
Meanwhile, Americans have been distracted by one record high after another in the domestic stock market.
- Source, Schiff Radio:
Sunday, December 22, 2013
Peter Schiff on Gold Seek Radio
- Source, Gold Seek Radio:
Friday, December 20, 2013
Bitcoin is in a Tulip Mania Bubble
On Tuesday's "Squawk Box," Cameron Winklevoss said that "some definitely view it as gold 2.0," adding, "In terms of a store of value, it definitely has the properties of gold, and people are viewing it that way."
But on the Tuesday episode of "Futures Now." Schiff, a longtime investor in gold, literally laughed at the comparison.
"I don't see bitcoins as an alternative to gold," he said. "If anything, [the creators of bitcoin are] modern-day alchemists, but you can't make gold digitally. It's no better than a fiat currency."
Schiff said that what he does see in the peer-to-peer currency—whose value has risen from $13.50 in January to $375 on Tuesday—is a bubble.
"To me, it looks like a modern-day tulip mania," Schiff said, referring to the fantastic rise and fall of the value of tulip bulbs in 17th-century Holland. "The reason people are buying bitcoins is because they think they're going to make money. They think the price is going up. And the price probably will go up. It'll keep going up until it implodes. And a lot of people are going to lose a lot of money in bitcoins."
Schiff scoffs at the idea that the bitcoin will become a common unit of online exchange.
"I don't think it's going to end up being a source of commerce for the world," he said. "I think right now it's a source of gambling."
But on the Tuesday episode of "Futures Now." Schiff, a longtime investor in gold, literally laughed at the comparison.
"I don't see bitcoins as an alternative to gold," he said. "If anything, [the creators of bitcoin are] modern-day alchemists, but you can't make gold digitally. It's no better than a fiat currency."
Schiff said that what he does see in the peer-to-peer currency—whose value has risen from $13.50 in January to $375 on Tuesday—is a bubble.
"To me, it looks like a modern-day tulip mania," Schiff said, referring to the fantastic rise and fall of the value of tulip bulbs in 17th-century Holland. "The reason people are buying bitcoins is because they think they're going to make money. They think the price is going up. And the price probably will go up. It'll keep going up until it implodes. And a lot of people are going to lose a lot of money in bitcoins."
Schiff scoffs at the idea that the bitcoin will become a common unit of online exchange.
"I don't think it's going to end up being a source of commerce for the world," he said. "I think right now it's a source of gambling."
- Source, CNBC:
Wednesday, December 18, 2013
While the Fed Talks Taper, China Prepares to Actually Do It!
- Source the Schiff Report:
Monday, December 16, 2013
Governments Intervene
When reporting on Asian gold demand, the Western media tends to focus on nations like India, which has practically declared war against gold buyers this year in a misguided attempt to curb its trade deficit.
The Indian government raised tariffs on the metal to a record 10%, and now requires importers to re-export 20% of their gold. India's central bank even went as far as asking temples around the country to divulge how much gold they were storing, though many refused.
Thailand and Vietnam have taken similar steps to subdue their populations' gold demand, even though the primary outcome has been to increase gold smuggling.
These governments' measures have received the most attention because they fit nicely into the Western narrative that gold is an old-fashioned asset that does more harm than good in modern economies. But the truth is that the only ones harmed by gold are Western governments!
The Indian government raised tariffs on the metal to a record 10%, and now requires importers to re-export 20% of their gold. India's central bank even went as far as asking temples around the country to divulge how much gold they were storing, though many refused.
Thailand and Vietnam have taken similar steps to subdue their populations' gold demand, even though the primary outcome has been to increase gold smuggling.
These governments' measures have received the most attention because they fit nicely into the Western narrative that gold is an old-fashioned asset that does more harm than good in modern economies. But the truth is that the only ones harmed by gold are Western governments!
- Source, Schiff Radio:
Saturday, December 14, 2013
Dow will crash below 13,000
- Source, CNN:
Friday, December 13, 2013
A Rude Awakening
This is the time when the West realizes that its great reservoir of wealth has run dry, as the gold has all flowed East.
When China stops buying US Treasuries, the Fed will remain the only major buyer of US debt. This will drive interest rates up, thereby sticking the US government with obligations it cannot possibly fulfill. Ultimately, this will be the death knell for the dollar, as the Fed will be forced to significantly expand its QE program to assume the role as Treasury-buyer of last resort.
Mom-and-pop gold buyers throughout the East probably do not understand all the subtleties of the foreign exchange markets, but an undying appreciation for gold is built into their culture. Make no mistake: the East is the engine of the 21st century global economy - and it is riding on rails of gold.
This holiday season, consider breaking with our recent Western tradition of giving gifts of no enduring value. Instead, take the opportunity to turn some of your paper dollars into gifts that will still have value when your kids are grown.
When China stops buying US Treasuries, the Fed will remain the only major buyer of US debt. This will drive interest rates up, thereby sticking the US government with obligations it cannot possibly fulfill. Ultimately, this will be the death knell for the dollar, as the Fed will be forced to significantly expand its QE program to assume the role as Treasury-buyer of last resort.
Mom-and-pop gold buyers throughout the East probably do not understand all the subtleties of the foreign exchange markets, but an undying appreciation for gold is built into their culture. Make no mistake: the East is the engine of the 21st century global economy - and it is riding on rails of gold.
This holiday season, consider breaking with our recent Western tradition of giving gifts of no enduring value. Instead, take the opportunity to turn some of your paper dollars into gifts that will still have value when your kids are grown.
- Source, Schiff Radio:
Thursday, December 12, 2013
Gold The Bedrock of Savings Plans
"Having replaced savings with debt on both the national and individual levels, I think it's well past time for Westerners to take a few lessons from our creditors in the East. Many Americans consider gold a "barbarous relic," but in Asia, the yellow metal remains the bedrock of individual savings plans. This means that either greater than half of the world's population are barbarians, or they've held onto an important tradition that our culture has forgotten."
- Source, Schiff Radio:
Tuesday, December 10, 2013
Peter Schiff - Bitcoin Is NOT Gold
- Source, CNBC:
Sunday, December 8, 2013
Toronto Mayor's Only Crime Is Cutting Taxes
- Source, Schiff Radio:
Friday, December 6, 2013
Dennis "The Commodities King" vs. Peter "Dr. Doom" Schiff
- Source, Schiff Radio:
How an Economy Grows and Why It Crashes Hardcover Collectors Edition by Peter Schiff
In this Collector's Edition of their celebrated How an Economy Grows and Why It Crashes, Peter Schiff, economic expert and bestselling author of Crash Proof and The Real Crash, once again teams up with his brother Andrew to spin a lively economic fable that untangles many of the fallacies preventing people from really understanding what drives an economy. The 2010 original has been described as a “Flintstones” take economics that entertainingly explains the beauty of free markets. The new edition has been greatly expanded in both quantity and quality. A new introduction and two new illustrated chapters bring the story up to date, and most importantly, the book makes the jump from black and white to full and vivid color.
With the help of colorful cartoon illustrations, lively humor, and deceptively simple storytelling, the Schiff's bring the complex subjects of inflation, monetary policy, recession, and other important topics in economics down to Earth. The story starts with three guys on an island who barely survive by fishing barehanded. Then one enterprising islander invents a net, catches more fish, and changes the island’s economy fundamentally. Using this story the Schiffs apply their signature take-no-prisoners logic to expose the glaring fallacies and gaping holes permeating the global economic conversation. The Collector’s Edition:
- Provides straight answers about how economies work, without relying on nonsensical jargon and mind-numbing doublespeak the experts use to cover up their confusion
- Includes a new introduction that sets the stage for developing a deeper, more practical understanding of inflation and the abuses of the monetary system
- Adds two new chapters that dissect the Federal Reserve’s Quantitative easing policies and the European Debt Crisis.
- Colorizes the original book's hundreds of cartoon illustrations. The improved images, executed by artist Brendan Leach from the original book, add new vigor to the presentation
- Has a larger format that has been designed to fit most coffee tables.
While the story may appear simple on the surface, as told by the Schiff brothers, it will leave you with a deep understanding of How an Economy Grows and Why It Crashes.
- Purchase this book on Amazon here:
Wednesday, December 4, 2013
Market Crash 2014
- Source, The London Real:
Monday, December 2, 2013
Peter Schiff - Another Bubble Set to Burst
Saturday, November 30, 2013
Bitcoin vs. Gold - The Future of Money
- Source, Freedomain Radio:
Monday, November 25, 2013
Peter Schiff on the Keiser Report - Inflation Fraud
- Source, Max Keiser:
Saturday, November 23, 2013
Fed Will Do The Opposite Of Tapering
- Source, BNN:
Thursday, November 21, 2013
Eugene Fama Proves Economic Incompetence Prerequisite for Nobel Prize
Peter Schiff talks about noble prize winner Eugene Fama. He explains how he is completely incompetent.
- Source, Peter Schiff Show:
Tuesday, November 19, 2013
Rand Paul - Janet Yellen Will Be a Disaster for the Economy
Rand Paul appears on the Peter Schiff Show where he discusses the audit the FED bill and the nomination of Janet Yellen as the new FED head. Rand Paul believe Janet Yellen will be a disaster for the economy.
- Source, Schiff Radio:
Sunday, November 17, 2013
Fed Wants Inflation to Sustain Asset Bubbles & Monetize Debt
- Source, The Kudlow Report:
Friday, November 15, 2013
Alan Grayson Compares the Tea Party to the KKK
Peter Schiff discusses how Alan Grayson recently compared the Tea Party to the KKK. This is of course completely ludicrous. Peter Schiff explains.
- Source, Schiff Radio:
Wednesday, November 13, 2013
Fed Taper Will Trigger Recession
Unfortunately at about minute 2.40 I completely lost my voice. I actually had a lot more to say, but couldn't get the words out of my dry mouth. I need to remember to drink a glass of water right before I do these segments. Ron Insana caught a real break.
- Sources:
http://www.SchiffRadio.com
Monday, November 11, 2013
Central Bank Monetary Cures Cannot Work
Peter Schiff appears on CNBC where he explains to the audience that Central Bank Monetary cures CANNOT work. He gives the host a history lesson on how falling prices is a good thing.
- Source, CNBC:
Saturday, November 9, 2013
Janet Yellen's Mission Impossible
Submitted by Peter Schiff of Euro Pacific Capital,
Most market watchers expect that Janet Yellen will grapple with two major tasks once she takes the helm at the Federal Reserve in 2014: deciding on the appropriate timing and intensity of the Fed's quantitative easing taper strategy, and unwinding the Fed's enormous $4 trillion balance sheet (without creating huge losses in the value of its portfolio). In reality both assignments are far more difficult than just about anyone understands or admits.
Unlike just about every other economist, I knew that the Fed would not taper in September because the economy is still fundamentally addicted to stimulus. The signs of recovery that have caused investors and politicians to bubble with enthusiasm are just QE in disguise. Take away the QE and the economy would likely tilt back into an even more severe recession than the one we experienced before QE1 was launched.
Given the Fed's failure to initiate a tapering campaign in recent months (when it was highly expected) it is surprising that most people still believe that it will pull the trigger in the first quarter of 2014. But if the Fed could not take action in September, with Ben Bernanke at the helm and the nation as yet untraumatized by the debt ceiling drama and Obamacare, why should we expect tougher treatment from Janet Yellen? This is particularly true when you consider Yellen's reputation as an extreme dove and the uninspiring economic data that has come in recent months.
Rather than explicitly describing the possibility of a reduction of asset purchases, recent Fed statements have merely said that policy would be "adjusted" according to incoming data. It has never said what direction that adjustment may take. Yet somehow the market has concluded that an imminent reduction is the only possibility. But the opposite conclusion is more likely. Recession avoidance is really the Fed's only concern and it will always come down on the side of accommodation. Therefore an expectation for a 2014 taper is just wishful thinking.
But that does not mean that QE will go on forever. It will come to an end, but not because the Fed wants it to, but because the currency markets give it no choice. A dollar crisis would ultimately force the Fed's hand, and the longer the Fed succeeds in postponing the inevitable, the more damage its policy mistakes will inflict on our economy.
Yellen's second task will be equally impossible. Since the QE campaign began in 2010 the Fed has more than quadrupled the amount of bonds that it holds on its balance sheet,to more than $4 trillion of Treasury and mortgage-backed bonds. To accumulate this massive cache, the Fed has become by far the largest buyer in both markets. Its purchases have pushed up the prices of those bonds and have kept long term interest rates low for both consumers and businesses.
When the QE was first launched, Ben Bernanke tamped down fears of the program by saying the Fed would one day sell the bonds that it was buying. But as the Fed's balance sheet ballooned, many in the market began fearing that the unwinding of these trades would crush the market for Treasuries and mortgage-backed securities. Bernanke soon allayed these fears by saying that the Fed would not actively sell, but would simply allow bonds to mature. But this is just a convenient fiction.
If stock or real estate prices were to enter into bubble territory (which I believe has already happened), or if inflation were ever to surge past the Fed's low target range (which I believe is certain to happen), then the Fed would have to sell bonds to get in front of these trends.
Through Operation Twist, the Fed has already swapped a very large portion of its short-term bonds for long-term bonds. The slow process of waiting for bonds to mature is unlikely to slow down asset bubbles or inflation. The argument also does not account for the fact that the Treasury will have to sell new bonds in order to retire the principle on the maturing bonds. Since the Fed is the primary buyer of Treasury bonds, the Fed would have to add to its balance sheet when it's trying to shrink it. Such a cycle is just a debt rollover that leaves the size of the Fed's balance sheet unchanged.
Unless other buyers of Treasuries or MBS can be found to replace the Fed's prodigious buying, the Fed will remain the only game in town. Given these realities, how can we possibly expect Janet Yellen to actually diminish the amount of assets the Fed holds? She won't be able to do it and any expectations to the contrary are pure fantasy.
So we should not be asking when Ms. Yellen will begin withdrawing stimulus and shrinking the Fed's balance sheet. Instead we should be asking how the markets will react when she runs out of excuses for delaying the taper, or ultimately decides to expand QE rather than contract it.
Most market watchers expect that Janet Yellen will grapple with two major tasks once she takes the helm at the Federal Reserve in 2014: deciding on the appropriate timing and intensity of the Fed's quantitative easing taper strategy, and unwinding the Fed's enormous $4 trillion balance sheet (without creating huge losses in the value of its portfolio). In reality both assignments are far more difficult than just about anyone understands or admits.
Unlike just about every other economist, I knew that the Fed would not taper in September because the economy is still fundamentally addicted to stimulus. The signs of recovery that have caused investors and politicians to bubble with enthusiasm are just QE in disguise. Take away the QE and the economy would likely tilt back into an even more severe recession than the one we experienced before QE1 was launched.
Given the Fed's failure to initiate a tapering campaign in recent months (when it was highly expected) it is surprising that most people still believe that it will pull the trigger in the first quarter of 2014. But if the Fed could not take action in September, with Ben Bernanke at the helm and the nation as yet untraumatized by the debt ceiling drama and Obamacare, why should we expect tougher treatment from Janet Yellen? This is particularly true when you consider Yellen's reputation as an extreme dove and the uninspiring economic data that has come in recent months.
Rather than explicitly describing the possibility of a reduction of asset purchases, recent Fed statements have merely said that policy would be "adjusted" according to incoming data. It has never said what direction that adjustment may take. Yet somehow the market has concluded that an imminent reduction is the only possibility. But the opposite conclusion is more likely. Recession avoidance is really the Fed's only concern and it will always come down on the side of accommodation. Therefore an expectation for a 2014 taper is just wishful thinking.
But that does not mean that QE will go on forever. It will come to an end, but not because the Fed wants it to, but because the currency markets give it no choice. A dollar crisis would ultimately force the Fed's hand, and the longer the Fed succeeds in postponing the inevitable, the more damage its policy mistakes will inflict on our economy.
Yellen's second task will be equally impossible. Since the QE campaign began in 2010 the Fed has more than quadrupled the amount of bonds that it holds on its balance sheet,to more than $4 trillion of Treasury and mortgage-backed bonds. To accumulate this massive cache, the Fed has become by far the largest buyer in both markets. Its purchases have pushed up the prices of those bonds and have kept long term interest rates low for both consumers and businesses.
When the QE was first launched, Ben Bernanke tamped down fears of the program by saying the Fed would one day sell the bonds that it was buying. But as the Fed's balance sheet ballooned, many in the market began fearing that the unwinding of these trades would crush the market for Treasuries and mortgage-backed securities. Bernanke soon allayed these fears by saying that the Fed would not actively sell, but would simply allow bonds to mature. But this is just a convenient fiction.
If stock or real estate prices were to enter into bubble territory (which I believe has already happened), or if inflation were ever to surge past the Fed's low target range (which I believe is certain to happen), then the Fed would have to sell bonds to get in front of these trends.
Through Operation Twist, the Fed has already swapped a very large portion of its short-term bonds for long-term bonds. The slow process of waiting for bonds to mature is unlikely to slow down asset bubbles or inflation. The argument also does not account for the fact that the Treasury will have to sell new bonds in order to retire the principle on the maturing bonds. Since the Fed is the primary buyer of Treasury bonds, the Fed would have to add to its balance sheet when it's trying to shrink it. Such a cycle is just a debt rollover that leaves the size of the Fed's balance sheet unchanged.
Unless other buyers of Treasuries or MBS can be found to replace the Fed's prodigious buying, the Fed will remain the only game in town. Given these realities, how can we possibly expect Janet Yellen to actually diminish the amount of assets the Fed holds? She won't be able to do it and any expectations to the contrary are pure fantasy.
So we should not be asking when Ms. Yellen will begin withdrawing stimulus and shrinking the Fed's balance sheet. Instead we should be asking how the markets will react when she runs out of excuses for delaying the taper, or ultimately decides to expand QE rather than contract it.
- Source, as seen on Zero Hedge:
Sunday, November 3, 2013
Peter Schiff Owning Everyone on C-Span
Peter Schiff destroys the myth of the FED and explains how the FED is destroying the economy.
Thursday, October 31, 2013
Peter Schiff Was Right - Taper Edition
When Ben Bernanke announced that the Federal Reserve's Open Market Committee was going to continue its monetary expansion program it calls Quantitative Easing, almost everyone in the financial media was taken by complete surprise. According to the mainstream media, the non-taper "surprised almost everyone out there." Well it did not surprise me, nor anyone who had been paying attention to what I had been saying. As I said repeatedly over the past several months, the Fed knows that the appearance of economic health would evaporate if its stimulus were withdrawn, or even diminished. The Fed understands, as the market seems not to, that the current "recovery" could not survive without the continuation of massive monetary stimulus. In fact, the Fed's next big move will likely be to increase, rather than taper, its monthly QE dosage! One reporter on this video said that its time for the Fed to take the training wheels off the economy. As I have been saying for years, QE is not the training wheels, its the only wheels the economy has. Take it away and the economy stalls. However, as the economy is now headed toward a cliff, taking the wheels off is much better than leaving them on and going over that cliff.
- Source:
Tuesday, October 29, 2013
One on One with Peter Schiff
Sunday, October 27, 2013
Janet Yellen - Hype VS Reality
- Source, The Schiff Report:
Friday, October 25, 2013
Out with the Debt Ceiling
- Source, The Peter Schiff Show:
Wednesday, October 23, 2013
Goldman Sachs Trying To Flush Out Gold Sellers?
- Source, CNBC:
Monday, October 21, 2013
Government Creating Phony Crisis
- Source, CNBC:
Saturday, October 19, 2013
Why is Gold Surging?
Goldman Sachs got it completely wrong, says Peter Schiff, CEO and Chief Global Strategist of Euro Pacific Capital. A budget deal doesn't make gold a "slam dunk sell", as Goldman's head of commodities trading Jeffrey Currie said it would on October 7. Instead, says Schiff, gold is a "screaming buy".
Gold may be up 3% Thursday on a debt deal between Congress and the President. But, Peter Schiff says the yellow metal has more room on the upside to go because of the deal, not in spite of it.
Deficit spending far outweighs the benefits to the overall economy, according to Schiff in his latest note. "US GDP is measured at roughly $15 trillion per year," writes Schiff. "Two percent growth means that each year the GDP is approximately $300 billion larger than the prior year. But in the less than five years since Obama took office, the federal government has added, on average, about $1.3 trillion per year in new debt, a pace that is four times higher than the growth."
So, what does that mean for gold?
Appearing in a no-holds-barred interview on Talking Numbers, Schiff makes his case for why he thinks the recent debt ceiling deal should be bullish for bullion.
"When Goldman came out with that bogus call [saying gold will head down after a deal], I criticized it immediately because the crisis for gold was not that they would raise the debt ceiling, but that they would not," says Schiff to Talking Numbers. "What is bullish for gold is raising the debt ceiling because that means we get more government, we get more debt, [and] we get more inflation. That's bullish for gold."
In other words, Schiff is saying that without leaders aggressively taking on the government's debt, gold is headed higher. "In fact, this is probably the beginning of a much bigger rally," says Schiff.
Schiff believes the Fed won't taper its $85 billion per month bond buying program (known as "quantitative easing" or "QE") which has rallied bonds, lowered yields, and added dollars into the financial system. In fact, Schiff believes that the first thing Janet Yellen will do as Fed Chair is to actually increase the amount of bond-buying...
- Source: Yahoo Finance, read the full article here:
Gold may be up 3% Thursday on a debt deal between Congress and the President. But, Peter Schiff says the yellow metal has more room on the upside to go because of the deal, not in spite of it.
Deficit spending far outweighs the benefits to the overall economy, according to Schiff in his latest note. "US GDP is measured at roughly $15 trillion per year," writes Schiff. "Two percent growth means that each year the GDP is approximately $300 billion larger than the prior year. But in the less than five years since Obama took office, the federal government has added, on average, about $1.3 trillion per year in new debt, a pace that is four times higher than the growth."
So, what does that mean for gold?
Appearing in a no-holds-barred interview on Talking Numbers, Schiff makes his case for why he thinks the recent debt ceiling deal should be bullish for bullion.
"When Goldman came out with that bogus call [saying gold will head down after a deal], I criticized it immediately because the crisis for gold was not that they would raise the debt ceiling, but that they would not," says Schiff to Talking Numbers. "What is bullish for gold is raising the debt ceiling because that means we get more government, we get more debt, [and] we get more inflation. That's bullish for gold."
In other words, Schiff is saying that without leaders aggressively taking on the government's debt, gold is headed higher. "In fact, this is probably the beginning of a much bigger rally," says Schiff.
Schiff believes the Fed won't taper its $85 billion per month bond buying program (known as "quantitative easing" or "QE") which has rallied bonds, lowered yields, and added dollars into the financial system. In fact, Schiff believes that the first thing Janet Yellen will do as Fed Chair is to actually increase the amount of bond-buying...
- Source: Yahoo Finance, read the full article here:
Thursday, October 17, 2013
Janet Yellen Exposed - The Truth Behind the Myth
However, a brief review of the speeches in question reveals that she issued no such warnings at that time.
In a new video, Peter Schiff, the CEO of Euro Pacific Capital and a well-known author and economist, goes over the speeches in question and comes to the easy conclusion that the new leader at the Federal Reserve is just as incapable as her predecessors of recognizing a dangerous asset bubble. Worse yet, as a diehard believer in the power of expansive monetary policy, Ms. Yellen would be much less likely to attack an asset bubble even if she were ever to recognize one before it burst.
- Source:
Saturday, October 12, 2013
Yellen Will be the Worst FED Chairman Ever
Janet Yellen, who will likely serve as the next Federal Reserve chairman, would probably be the worst Fed chief in history,
It will be the “same old policies,” under Yellen, now Fed vice chairman, but she’ll be even more dovish than current Fed Chairman Ben Bernanke,“I used to think that Alan Greenspan was the worst Fed chairman we ever had until Bernanke was appointed. He kind of let Greenspan off the hook,” Schiff told Yahoo Finance Yesterday “My guess is that Janet Yellen will return the favor, and Ben Bernanke won’t go down in history as the worst Fed chairman. It’s going to be Janet Yellen.”
She will bow to pressure from liberal Democrats to “keep stimulating the economy through cheap money, even though it doesn’t work,” He added.
“I think she’s going to be leading the Fed in a dangerous direction.”
It will be the “same old policies,” under Yellen, now Fed vice chairman, but she’ll be even more dovish than current Fed Chairman Ben Bernanke,“I used to think that Alan Greenspan was the worst Fed chairman we ever had until Bernanke was appointed. He kind of let Greenspan off the hook,” Schiff told Yahoo Finance Yesterday “My guess is that Janet Yellen will return the favor, and Ben Bernanke won’t go down in history as the worst Fed chairman. It’s going to be Janet Yellen.”
She will bow to pressure from liberal Democrats to “keep stimulating the economy through cheap money, even though it doesn’t work,” He added.
“I think she’s going to be leading the Fed in a dangerous direction.”
- Peter Schiff
Wednesday, October 9, 2013
Yellen's Nomination Means Any QE Taper Expectations Are Delusional
Submitted by Peter Schiff via Euro Pacific Capital,
Now that Janet Yellen has been named to lead the Federal Reserve the global financial markets should factor out any possibility that the Fed will diminish their Quantitative easing program anytime during her tenure. In fact, financial forecasts should assume that not only is a taper off the table, but that the QE program is now more likely to be perpetuated and expanded.
Unlike her predecessors, Janet Yellen has never had a youthful dalliance with hawkish monetary ideas. Before taking charge of the Fed both Alan Greenspan, and to a lesser extent Ben Bernanke, had advocated for the benefits of a strong currency and low inflation and had warned of the dangers of overly accommodative policy and unnecessary stimulus. (Both largely abandoned these ideals once they took the reins of power, but their urge to stimulate may have been restrained by a vestigial bias against the excesses of Keynesianism). Janet Yellen, who has been on the liberal/dovish end of the monetary spectrum for her entire professional career, has no such baggage. As a result, we can expect her to never waver in her belief that stimulus is the answer to every economic question.
The Federal Reserve was originally charged with the single mandate of maintaining price stability. In recent decades that mission evolved into a dual mandate of seeking price stability and full employment. I believe that a Yellen led Fed will return once again to a single mandate, but now it will focus only on employment. Based on her clear beliefs in the ability of dovish monetary policy to relive human suffering she will be inclined to dig in her heels into the ongoing QE program more than anyone else President Obama may have appointed. This is terrible news for the U.S. dollar and the U.S. economy.
For now at least the crisis in Washington has squelched any immediate discussion of a taper in the remaining months of 2013. Any predictions that a Yellen-led Fed will somehow show more resolve towards responsibility in 2014 or 2015 should be looked at as delusional.
Now that Janet Yellen has been named to lead the Federal Reserve the global financial markets should factor out any possibility that the Fed will diminish their Quantitative easing program anytime during her tenure. In fact, financial forecasts should assume that not only is a taper off the table, but that the QE program is now more likely to be perpetuated and expanded.
Unlike her predecessors, Janet Yellen has never had a youthful dalliance with hawkish monetary ideas. Before taking charge of the Fed both Alan Greenspan, and to a lesser extent Ben Bernanke, had advocated for the benefits of a strong currency and low inflation and had warned of the dangers of overly accommodative policy and unnecessary stimulus. (Both largely abandoned these ideals once they took the reins of power, but their urge to stimulate may have been restrained by a vestigial bias against the excesses of Keynesianism). Janet Yellen, who has been on the liberal/dovish end of the monetary spectrum for her entire professional career, has no such baggage. As a result, we can expect her to never waver in her belief that stimulus is the answer to every economic question.
The Federal Reserve was originally charged with the single mandate of maintaining price stability. In recent decades that mission evolved into a dual mandate of seeking price stability and full employment. I believe that a Yellen led Fed will return once again to a single mandate, but now it will focus only on employment. Based on her clear beliefs in the ability of dovish monetary policy to relive human suffering she will be inclined to dig in her heels into the ongoing QE program more than anyone else President Obama may have appointed. This is terrible news for the U.S. dollar and the U.S. economy.
For now at least the crisis in Washington has squelched any immediate discussion of a taper in the remaining months of 2013. Any predictions that a Yellen-led Fed will somehow show more resolve towards responsibility in 2014 or 2015 should be looked at as delusional.
- Source, Zero Hedge:
Saturday, October 5, 2013
Economic Collapse and Martial Law
- Source, InfoWars:
Thursday, October 3, 2013
Comparing Obamacare to the iPhone is not Apples to Apples
- Source, Peter Schiff Show:
Wednesday, September 25, 2013
FED's Non-Taper Damage Control
- Source, The Schiff report:
Monday, September 23, 2013
The Taper That Wasn't
By: Peter Schiff of Euro Pacific Capital
The Fed's failure today to announce some sort of tapering of its QE program, despite the consensus of an overwhelming percentage of economists who expected action, once again reveals the degree to which mainstream analysts have overestimated the strength of our current economy. The Fed understands, as the market seems not to, that the current "recovery" could not survive without continuation of massive monetary stimulus. Mainstream economists have mistaken the symptoms of the Fed's monetary expansion, most notably rising stock and real estate prices, as signs of real and sustainable growth. But the current asset price bubbles have nothing to do with the real economy. To the contrary, they are setting up for a painful correction that will likely be worse than the one we experienced five years ago.
Given the strong anticipation for a taper announcement, today's relief rally should come as no surprise. However, the Fed's inaction should be perceived by many as an admission that the economy is fundamentally weak. Once that possibility takes hold, today's euphoria is likely to dissipate. Perhaps the Fed's inaction may cause many to wonder if the economy is not as strong as they believed. This could ultimately lead to an even bigger sell off than what we would have seen today if the Fed had come through with a taper announcement.
A major factor in the current "recovery" is the confidence that has been created by rising stock and real estate prices. On Wall Street confidence can become a self-fulfilling prophecy. If the Fed were to make its fears more explicit that confidence could drift away. As a result, I believe that they chose a path of continuous obfuscation. But in so doing they lost control of the message.
The Fed knows that the appearance of economic health would evaporate if stimulus were withdrawn. But like Jack Nicholson in A Few Good Men, it also knows that the markets can't handle the truth. Over the past year Ben Bernanke and other top Fed officials have tried mightily to communicate to the markets that no decisions had been made on the future and timing of QE reductions and that its moves would depend on the data. On many occasions they even hedged the automatic nature of their data triggers and moved the goal posts that supposedly guided their policy. But as a result of this continuous obfuscation, the Fed lost control of its message.
Despite its efforts toward vagueness, the markets nevertheless made definite conclusions. In addition to the overwhelming consensus of economists who had predicted a taper announcement for today, many even offered precise measures of how big the taper would be (median forecasts were that bond purchases would be trimmed by between $10 and $15 billion per month). As the Fed had not dashed these expectations strongly enough, today's non-event comes as a surprise to most. However, as I have mentioned many times in the past, the Fed has checked into a monetary Roach Motel. Getting out will be infinitely harder than getting in. In fact it will be likely impossible to get out without tipping the country back into recession.
If stock and home prices continue to rise, and if the unemployment picture appears to brighten as a result of a shrinking workforce, the Fed may have an increasingly difficult time explaining why they are failing to cut back on a policy that many mistakenly assume is no longer needed. Look for the rhetorical pretzels to get ever more complex and the goalposts that would trigger an action to become completely mobile.
But the reality is that the economy will never regain true health as long as the stimulus is being delivered. Despite trillions already administered, the workforce is shrinking, energy usage is down, the trade balance is weakening, savings are down, inflation is showing up in inconvenient places, debt is up, and wages are flat. So while QE has succeeded in hiding the truth, it hasn't accomplished anything of substance. Unfortunately, the Fed is only interested in the headlines.
We also must understand that even if the Fed were to deliver a small reduction in bond purchases, such a move would change nothing. The Fed would still be adding continuously to its enormous balance sheet while presenting no credible plans to actually withdraw the liquidity. As I have pointed out many times, it simply can't do so without pushing the economy back into recession. Although this would be the right thing to do, you can rest assured that it won't happen.
We should also recall where this all began. When QE1 was first launched Bernanke talked about an exit strategy. At the time I maintained the Fed had no exit strategy. But now questions about an exit strategy have been replaced by much more delicate taper talk. But easing up on the accelerator without ever hitting the brakes will not stop the car or turn it around.
Bernanke has maintained that his purchases of government bonds should not be considered "debt monetization" because the Fed intends to only hold the bonds temporarily. In recent years however talk of actively selling bonds in the portfolio have given way to more passive plans to simply hold the bonds to maturity. But this is a convenient fiction. When the bonds mature, the Fed will have little choice but to roll the principal back into Treasury debt, as private bond buyers could not easily absorb the added selling that would be required to repay the Fed in cash. Judged by his own criteria then, Bernanke is now an admitted debt monetizer.
Following this playbook, the Fed will likely maintain the pretense that tapering is a near term possibility and that it has a credible plan on the shelf to bring an end to QE. In reality the Fed is stalling for time and hoping that the economy will inexplicably roar back to life. Unfortunately, hope is not a strategy.
Given the strong anticipation for a taper announcement, today's relief rally should come as no surprise. However, the Fed's inaction should be perceived by many as an admission that the economy is fundamentally weak. Once that possibility takes hold, today's euphoria is likely to dissipate. Perhaps the Fed's inaction may cause many to wonder if the economy is not as strong as they believed. This could ultimately lead to an even bigger sell off than what we would have seen today if the Fed had come through with a taper announcement.
A major factor in the current "recovery" is the confidence that has been created by rising stock and real estate prices. On Wall Street confidence can become a self-fulfilling prophecy. If the Fed were to make its fears more explicit that confidence could drift away. As a result, I believe that they chose a path of continuous obfuscation. But in so doing they lost control of the message.
The Fed knows that the appearance of economic health would evaporate if stimulus were withdrawn. But like Jack Nicholson in A Few Good Men, it also knows that the markets can't handle the truth. Over the past year Ben Bernanke and other top Fed officials have tried mightily to communicate to the markets that no decisions had been made on the future and timing of QE reductions and that its moves would depend on the data. On many occasions they even hedged the automatic nature of their data triggers and moved the goal posts that supposedly guided their policy. But as a result of this continuous obfuscation, the Fed lost control of its message.
Despite its efforts toward vagueness, the markets nevertheless made definite conclusions. In addition to the overwhelming consensus of economists who had predicted a taper announcement for today, many even offered precise measures of how big the taper would be (median forecasts were that bond purchases would be trimmed by between $10 and $15 billion per month). As the Fed had not dashed these expectations strongly enough, today's non-event comes as a surprise to most. However, as I have mentioned many times in the past, the Fed has checked into a monetary Roach Motel. Getting out will be infinitely harder than getting in. In fact it will be likely impossible to get out without tipping the country back into recession.
If stock and home prices continue to rise, and if the unemployment picture appears to brighten as a result of a shrinking workforce, the Fed may have an increasingly difficult time explaining why they are failing to cut back on a policy that many mistakenly assume is no longer needed. Look for the rhetorical pretzels to get ever more complex and the goalposts that would trigger an action to become completely mobile.
But the reality is that the economy will never regain true health as long as the stimulus is being delivered. Despite trillions already administered, the workforce is shrinking, energy usage is down, the trade balance is weakening, savings are down, inflation is showing up in inconvenient places, debt is up, and wages are flat. So while QE has succeeded in hiding the truth, it hasn't accomplished anything of substance. Unfortunately, the Fed is only interested in the headlines.
We also must understand that even if the Fed were to deliver a small reduction in bond purchases, such a move would change nothing. The Fed would still be adding continuously to its enormous balance sheet while presenting no credible plans to actually withdraw the liquidity. As I have pointed out many times, it simply can't do so without pushing the economy back into recession. Although this would be the right thing to do, you can rest assured that it won't happen.
We should also recall where this all began. When QE1 was first launched Bernanke talked about an exit strategy. At the time I maintained the Fed had no exit strategy. But now questions about an exit strategy have been replaced by much more delicate taper talk. But easing up on the accelerator without ever hitting the brakes will not stop the car or turn it around.
Bernanke has maintained that his purchases of government bonds should not be considered "debt monetization" because the Fed intends to only hold the bonds temporarily. In recent years however talk of actively selling bonds in the portfolio have given way to more passive plans to simply hold the bonds to maturity. But this is a convenient fiction. When the bonds mature, the Fed will have little choice but to roll the principal back into Treasury debt, as private bond buyers could not easily absorb the added selling that would be required to repay the Fed in cash. Judged by his own criteria then, Bernanke is now an admitted debt monetizer.
Following this playbook, the Fed will likely maintain the pretense that tapering is a near term possibility and that it has a credible plan on the shelf to bring an end to QE. In reality the Fed is stalling for time and hoping that the economy will inexplicably roar back to life. Unfortunately, hope is not a strategy.
- Source, Euro Pac:
Saturday, September 21, 2013
Peter Schiff on Jobs
Peter Schiff`s comments on the economy, stock markets, politics and gold. Schiff is the renowned writer of the bestseller Crash Proof: How to Profit from the Coming Economic Collapse.
- Source:
Thursday, September 19, 2013
What Syria Means for the Price of Gold
- Source, CNBC:
Tuesday, September 17, 2013
Oil Prices Headed for $200 a Barrel
- Sources:
Thursday, September 12, 2013
The Most Bullish Environment for Gold
“They’re going to keep printing until we have a currency crisis . . . and that is the most bullish environment for gold. Don’t wait for the crisis to buy because you are not going to like the price.”
- Source, Peter Schiff via USA Watchdog:
Friday, September 6, 2013
Inflation Numbers Are Going to Get Bigger
“So, when interest rates go up because the world realizes we have too much debt relative to the size of our economy, consumers can’t spend any-more and now the economy collapses in size and the debt balloons . . . This is a huge, huge crisis. The question is: When is it going to come to a head? I think it’s a lot sooner than anybody thinks” Schiff predicts, “It’s going to be harder and harder for the U.S. government to borrow money from abroad which means the Fed is not going to be tapering. They’re going to print more and more money to buy the bonds nobody else wants. That means the inflation numbers are going to get bigger, and the government is going to have to lie even more.”
- Peter Schiff via USA Watchdog:
Wednesday, September 4, 2013
Economy Built on Bad Foundation
The Fed is trying to build skyscrapers on a bad foundation. Each subsequent structure it builds not only collapses, but also weakens the foundation that much more. The result is that subsequent structures collapse at increasingly lower heights and require more effort to build. Instead of trying to build, the Fed could concentrate on repairing the underlying foundation. That might delay construction, but in the end the buildings will be much sturdier.
- Peter Schiff via Business Insider:
Monday, September 2, 2013
Janet Yellen is Bullish for Gold
“If it’s solely based on which Fed Chairman is the most bullish for gold and silver, I would say that would be Janet Yellen. No matter who’s put in at the Fed, they are going to keep printing because that’s all they can do.”
- Source, USA Watchdog:
Tuesday, August 27, 2013
The Economy is NOT Growing
“The government keeps telling us the economy is getting bigger, but millions of Americans are leaving the workforce. We've got record numbers of people on food stamps . . . and part-time jobs are replacing full-time jobs. How is that consistent with a growing economy? It’s not.”
- Peter Schiff via a recent USA Watchdog interview:
Sunday, August 25, 2013
Shrinking U.S. Economy
- Source, USA Watchdog:
Friday, August 23, 2013
Gold is a Lot Higher
“The people who are always making fun of me every time there is a pull-back are the ones that never bought gold in the first place. Even though it’s pulled back, it’s still a lot higher than it was when they first started laughing at me for buying gold.”
- Peter Schiff via USA Watchdog:
Wednesday, August 21, 2013
Who Will Be The Next Fed Chair?
Peter Schiff appears on Yahoo Finance and talks about who the next FED chairman will be, will it be Summers or Yellen?
- Source, Yahoo Finance:
http://ca.finance.yahoo.com/
Monday, August 19, 2013
Peter Schiff Talks Oprah Winfrey
Saturday, August 17, 2013
The Peter Schiff Show - Judge Napolitano
- Source, Peter Schiff Show:
Thursday, August 15, 2013
What's the Pin that Will Collapse This New Bubble?
What's the pin that will collapse this new bubble in the US Economy?
Monday, August 12, 2013
All They Can Do is Print
For anyone who sold physical gold in the current precious metal downturn, money manager Peter Schiff says, “There’s going to be a big problem because the gold they sold on the way down isn’t going to be available on the way back up because the people who own it aren’t going to sell it at any price. . . . This is the time to load the boat, to back up the truck.” Schiff is a longtime advocate of precious metals and has taken much criticism in this downturn. Schiff answers his critics by saying,“The people who are always making fun of me every time there is a pullback are the ones that never bought gold in the first place. Even though it’s pulled back, it’s still a lot higher than it was when they first started laughing at me for buying gold.” Talk of a new Fed Chairman to replace Mr. Bernanke will only be bullish for the gold price. Schiff predicts, “If it’s solely based on which Fed Chairman is the most bullish for gold and silver, I would say that would be Janet Yellen. No matter who’s put in at the Fed, they are going to keep printing because that’s all they can do.” Schiff warns, “They’re going to keep printing until we have a currency crisis . . . and that is the most bullish environment for gold. Don’t wait for the crisis to buy because you are not going to like the price.”
- Source, USA Watchdog:
Saturday, August 10, 2013
People Who Own Gold Are Not Going to Sell
“There’s going to be a big problem because the gold they sold on the way down isn't going to be available on the way back up because the people who own it aren't going to sell it at any price. . . . This is the time to load the boat, to back up the truck.”
- Peter Schiff via USA Watchdog:
Thursday, August 8, 2013
The Market Will Overwhelm the FED
Holding rates of interest far below market levels (which is the goal of stimulus) alters patterns of consumption, savings, and investment. Fed intervention short-circuits the market driven process that resolves misallocations. The more stimulus that is provided, the harder market forces must work to try to restore equilibrium. As the misallocations grow over time, the efficacy of monetary measures diminishes. In the end, the market will overwhelm the Fed. The only question is how long it will take.
- Peter Schiff via Business Insider:
Monday, August 5, 2013
Gold Stocks and Gold $5000
- Source, Fox Business:
Saturday, August 3, 2013
Junk Silver is a Part of History
- Euro Pacific Metals:
Thursday, August 1, 2013
Buy Gold and Silver Now! Back Up the Truck!
Fed Chief Ben Bernanke is going to be replaced by the end of this year. CEO of Euro Pacific Precious Metals, Peter Schiff, speculates on his replacement by saying, "If it's solely based on which Fed Chairman is the most bullish for gold and silver, I would say that would be Janet Yellen. No matter who's put in at the Fed, they are going to keep printing because that's all they can do." Schiff warns, "They're going to keep printing until we have a currency crisis . . . and that is the most bullish environment for gold. Don't wait for the crisis to buy because you are not going to like the price."
- Source, USA Watch Dog:
Sunday, July 28, 2013
Money Causes Economic Crises
Mr. Schiff explains the fact that the interest rate is a price and that manipulation of that price results in real changes to the capital structure and structure of production within the economy, causing imbalances, booms, and eventually busts in the economy. His lecture also explores how government intervention through labor and employment policies results in diminished employment and an overall reduction in the standard of living.
- Source:
https://www.youtube.com/user/DocumentaryFull?feature=watch
Friday, July 26, 2013
Peter Schiff - Gold and The Financial Crisis
- Source:
Wednesday, July 24, 2013
Peter Schiff - The Atlantic Economy Summit
"If it was my contractual obligation, to do everything possible to wreck this economy, what I would do is go back and do everything Ben Bernanke did in the last three years."
- Source:
Thursday, July 18, 2013
A Recession Will Overtake Us Once Again
There is an ongoing three way debate between those who believe the Fed should do more to strengthen the recovery, those who believe that the recovery is strong enough to continue on its own, and those who believe that the economy has been so fundamentally altered by the recession that no amount of stimulus can succeed in pushing unemployment down to pre-crash levels. As usual, they all have it wrong (although some are more wrong than others).
The false conclusions are being made by the likes of bond king Bill Gross, who has suggested that the economic fundamentals have changed. They argue that a "new normal" is now in place that sets an 8% unemployment rate as a floor below which we will never fall. This is absurd. America can once again prosper if we put our trust in first principles and let the free markets work. Unfortunately, that is not happening. Government is taking an ever greater role in our economy where its efforts will continue to stifle economic growth. A close second in cluelessness comes from those who believe that we are currently on the road to a real recovery. I'm not sure what economy they are looking at, but in just about every important metric, we continue to be essentially comatose.
More accurate are the opinions of those who believe that without a more serious intervention from the Fed, which can only mean another round of quantitative easing (QE III), the current quasi-recovery will soon fade and the tides of recession will overtake us once again. They are correct. And even though this time the water will be rougher and deeper than it was four years ago, it does not mean that the Fed will do the economy any good by breaking out its heavy artillery once again.
The false conclusions are being made by the likes of bond king Bill Gross, who has suggested that the economic fundamentals have changed. They argue that a "new normal" is now in place that sets an 8% unemployment rate as a floor below which we will never fall. This is absurd. America can once again prosper if we put our trust in first principles and let the free markets work. Unfortunately, that is not happening. Government is taking an ever greater role in our economy where its efforts will continue to stifle economic growth. A close second in cluelessness comes from those who believe that we are currently on the road to a real recovery. I'm not sure what economy they are looking at, but in just about every important metric, we continue to be essentially comatose.
More accurate are the opinions of those who believe that without a more serious intervention from the Fed, which can only mean another round of quantitative easing (QE III), the current quasi-recovery will soon fade and the tides of recession will overtake us once again. They are correct. And even though this time the water will be rougher and deeper than it was four years ago, it does not mean that the Fed will do the economy any good by breaking out its heavy artillery once again.
- Peter Schiff via Business Insider:
Tuesday, July 16, 2013
Our Economy Has a Disease
In his widely anticipated speech at Jackson Hole last week, Fed Chairman Ben Bernanke sounded a supremely optimistic note: "It seems clear, based on this experience, that such (easing) policies can be effective, and that, in their absence, the 2007-09 recession would have been deeper and the current recovery would have been slower than has actually occurred."
The simple truth however, is that our economy has a disease that all the quantitative easing in the world can't cure. And while the wrong medicine may make us appear healthier in the short term, we will continue to deteriorate beneath the surface. Not only should the Fed not provide additional QE, but it should remove the accommodation currently in place. Although these moves would most certainly send us back into recession, it would simultaneously provide a needed course correction that would put us finally on the road to a sustainable recovery.
The recession the Fed is trying so desperately to prevent must be allowed to run its course so that the economy that we have developed over the last decade, the one that is overly reliant on low interest rates, borrowing and consumer spending, can finally restructure itself into something healthier. By enabling this diseased economy to overstay its welcome, QE does more harm than good. To recover for the long haul, the market must be allowed to correct the misallocations of resources that resulted from prior stimulus. Additional stimulus inhibits this process, and exacerbates the size of the misallocations the markets must eventually correct.
The simple truth however, is that our economy has a disease that all the quantitative easing in the world can't cure. And while the wrong medicine may make us appear healthier in the short term, we will continue to deteriorate beneath the surface. Not only should the Fed not provide additional QE, but it should remove the accommodation currently in place. Although these moves would most certainly send us back into recession, it would simultaneously provide a needed course correction that would put us finally on the road to a sustainable recovery.
The recession the Fed is trying so desperately to prevent must be allowed to run its course so that the economy that we have developed over the last decade, the one that is overly reliant on low interest rates, borrowing and consumer spending, can finally restructure itself into something healthier. By enabling this diseased economy to overstay its welcome, QE does more harm than good. To recover for the long haul, the market must be allowed to correct the misallocations of resources that resulted from prior stimulus. Additional stimulus inhibits this process, and exacerbates the size of the misallocations the markets must eventually correct.
- Source, Peter Schiff via Business Insider:
Sunday, July 14, 2013
Ben Bernanke Has Created a Phony Economy
- Source Fox Business News:
Wednesday, July 10, 2013
Gold Seek Radio Featuring Peter Schiff
- Source, Gold Seek Radio:
Saturday, July 6, 2013
Dollar Crisis is Coming! We're in a Depression!
Peter Schiff of Euro Pacific Capital is interviewed by "Money News". Peter discusses the mistakes of government and sees a dollar crisis coming.
- Source, Money News:
Wednesday, July 3, 2013
Phony Recovery Will Evaporate
- Source, Fox Business:
Saturday, June 29, 2013
Gold Companies Will Shut Down
“We know at $1,200 an ounce, the majority of gold mines can’t even mine gold profitably. So gold is now trading for less than the cost of producing it, and of course in order to produce it you have to own a gold mine, which is very hard to do. So the price of gold can’t stay down here for a long period of time, because then the gold companies will shut down and there will be no supply.”
- Source, Euro Pac Metals:
Wednesday, June 26, 2013
Japan's "Sock Puppet Kabuki" Market
Authored by Peter Schiff of Euro Pacific Capital,
Sock Puppet Kabuki: Nikkei Today Parallels Dot-Com Bust
The Japanese stereotype of excessive courtesy is being confirmed by the actions of prime minster Shinzo Abe who is giving the world a free and timely lesson on the dangers of overly accommodative monetary policy. Whether or not we benefit from the tutorial (Japan will surely not) depends on our ability to understand what is currently happening there.
For now most economists still believe that Abe has stumbled upon the magic elixir of economic revitalization. His commitment to pull his country out of the mud by doubling the amount of yen in circulation, and raising the nation's official inflation rate to 2%, had conferred rock star status on the formerly bland career politician. But just one year after his first critical raves arrived, the audience is heading for the exits. As it turns out, the Japanese miracle may be a simple tale of confidence easily gained, and just as rapidly lost.
In many ways the 75% nine month rally in the Nikkei 225 (that began when Abe was elected prime minister in September 2012), and the subsequent crash that began on May 22, is not all that different from the turbocharged rally, and spectacular crash, that occurred in technology heavy Nasdaq more than a dozen years ago here in the United States.
At the time that Pets.com (the company behind the iconic Sock Puppet) made its IPO, other high flying tech stocks had racked up 1000% gains. While investors scratched their heads, pundits offered reasons why common sense no longer applied to the new economy. We were told that valuations, revenue and profits no longer mattered. And to an extent that now seems absurd, the investing establishment bought into the insanity. But then a funny thing happened, investors woke up and realized that they had nothing but a handful of magic beans that couldn't grow a beanstalk. When the fog lifted, stocks plummeted...Wile E. Coyote style.
This time around investors in the Japanese market were similarly deluded by fairy tales. Leading economists told them that Japan could cheapen its currency to improve trade, use inflation to create real growth, increase prices to encourage spending, and drastically increase inflation without raising interest rates. In short, monetary policy was seen as substitute for an actual economy.
Sock Puppet Kabuki: Nikkei Today Parallels Dot-Com Bust
The Japanese stereotype of excessive courtesy is being confirmed by the actions of prime minster Shinzo Abe who is giving the world a free and timely lesson on the dangers of overly accommodative monetary policy. Whether or not we benefit from the tutorial (Japan will surely not) depends on our ability to understand what is currently happening there.
For now most economists still believe that Abe has stumbled upon the magic elixir of economic revitalization. His commitment to pull his country out of the mud by doubling the amount of yen in circulation, and raising the nation's official inflation rate to 2%, had conferred rock star status on the formerly bland career politician. But just one year after his first critical raves arrived, the audience is heading for the exits. As it turns out, the Japanese miracle may be a simple tale of confidence easily gained, and just as rapidly lost.
In many ways the 75% nine month rally in the Nikkei 225 (that began when Abe was elected prime minister in September 2012), and the subsequent crash that began on May 22, is not all that different from the turbocharged rally, and spectacular crash, that occurred in technology heavy Nasdaq more than a dozen years ago here in the United States.
At the time that Pets.com (the company behind the iconic Sock Puppet) made its IPO, other high flying tech stocks had racked up 1000% gains. While investors scratched their heads, pundits offered reasons why common sense no longer applied to the new economy. We were told that valuations, revenue and profits no longer mattered. And to an extent that now seems absurd, the investing establishment bought into the insanity. But then a funny thing happened, investors woke up and realized that they had nothing but a handful of magic beans that couldn't grow a beanstalk. When the fog lifted, stocks plummeted...Wile E. Coyote style.
This time around investors in the Japanese market were similarly deluded by fairy tales. Leading economists told them that Japan could cheapen its currency to improve trade, use inflation to create real growth, increase prices to encourage spending, and drastically increase inflation without raising interest rates. In short, monetary policy was seen as substitute for an actual economy.
- Source, Zero Hedge:
Sunday, June 23, 2013
Peter Schiff And The Untapering "Waiting for Godot" Era
Submitted by Peter Schiff of Euro Pacific Capital,
Tapering the Taper Talk
As usual the Federal Reserve media reaction machine has fallen for a poorly executed head fake. It has been fooled by this move many times in the past and for its efforts it has tackled nothing but air. Yet right on cue, it took the bait once more. Somehow the takeaway from Wednesday's release of the June Fed statement and the Bernanke press conference is that the Central bank is likely to begin scaling back, or "tapering," it's $85 billion per month quantitative easing program sometime later this year, and that the program may be completely wound down by the middle of next year.
Although this scenario is about as likely as an NSA-sponsored ticker tape parade for whistle blower Edward Snowden, all of the market segments reacted as if it were a fait accompli. The stock market, convinced that it will lose the support of ultra-low, long-term interest rates, and the added consumer spending that results from a nascent housing bubble, sold off in triple digits. The bond market, sensing that its biggest and busiest customer will be exiting the market, followed a similarly negative trajectory. The sell -off in government and corporate debt pushed yields up to 21 month highs. In foreign exchange markets the dollar rallied off its four-month lows based on the belief that Fed tightening will support the currency. And lastly, the gold market, sensing that an end of quantitative easing would eliminate the inflationary fears that have partially fueled gold's spectacular rise, sold off nearly five percent to a new two and a half year low.
All of this came as a result of Bernanke's mild commitments to begin easing back on permanent QE sometime later this year if the economy continued to improve the way he expected. The Chairman did not really elaborate of what types of improvements he had seen, or how much farther those unidentified trends would need to go before he would finally pull the trigger. He was however careful to point out that any policy shift, be it for less or more quantitative easing, would not be dependent on incoming data, but on the Fed's interpretation of that data. By stressing repeatedly that its data goalposts were "thresholds rather than triggers" the Fed gained further latitude to pursue any stance it chooses regardless of the data.
Yet the mere mention that tapering was even possible, combined with the Chairman's fairly sunny disposition (perhaps caused by the realization that the real mess will likely be his successor's problem to clean up) was enough to convince the market that the post-QE world was at hand. This conclusion is wrong.
Although many haven't yet realized it, the financial markets are stuck in a "Waiting for Godot" era in which the change in policy that all are straining to see, will never in fact arrive. Most fail to grasp the degree to which the "recovery" will stall without the $85 billion per month that the Fed is currently pumping into the economy.
What exactly has convinced the Fed that the economy is improving? From what I can tell, the evidence centered on the rise in stock and real estate prices, and the confidence and spending that follow. But inflated asset prices are completely dependent on QE and are likely to reverse course even before it is removed. And while it is painfully clear that expectations about QE continuance have made a far bigger impact on the stock, bond, and real estate markets than any other economic data points, many must be assuming that this dependency will soon end.
Those who hold this belief have naively described QE as the economy's "training wheels," (in reality the program is currently our only wheels.) They are convinced that the kindling of QE will inevitably ignite a fire in the larger economy. But the big lumber is still too dampened by debt, government spending, regulation, and high asset prices to catch fire. So all we have gotten is smoke. A few mirrors supplied by the Fed merely completed the illusion. The larger problem of course, is that even though the stimulus are the only wheels, the Fed must remove them anyway as we are cycling toward the edge of a cliff.
Although Bernanke dodged the question in his press conference, the Fed has broken the normal market for mortgage backed debt. While it's true that the Fed only owns 14% of all outstanding MBS (the "small fraction" he referred to in the press conference) it is by far the largest purchaser of newly issued mortgage debt. What would happen to the market if the Fed were to stop buying? There are no longer enough private buyers to soak up the issuance. Those who do remain would certainly expect higher yields if the option of selling to the Fed was of table. Put bluntly, the Fed is the market right now and has been for years.
A clear-eyed look at the likely consequences of a pull-back in QE should cause an abandonment of the optimistic assumptions behind the Fed's forecast. Interest rates are already rising rapidly based simply on the expectation of tapering. Image how high they would soar if the Fed actually tried to sell some of the mortgages it already owns. But the fact is, the mere anticipation of such an event has already sent mortgage rates north of 4%, and without more QE from the Fed in the could soon exceed 5%. Such an increase would deliver a devastating blow to the housing market. More foreclosure will hit just as higher home prices and mortgage rates price legitimate buyers out of the market. Housing prices will fall to new post bubble lows, sinking the phony recovery in the process. The wealth effect will work in reverse, spending and confidence will fall, unemployment will rise, and we will be back in recession even before the Fed begins to taper.
In fact, the back-up in mortgage rates seen over the last month has already produced pain in the financial world, with banks reporting a rapid collapse in refinancing applications. With personal income and wage growth essentially stagnant, individual buyers are extremely dependent on the affordability that ultra-low rates provide. A 50% increase in mortgage rates (an increase from 3.25% to 5%) would price a great many buyers out of the market. Higher rates would also cool much of the housing demand that has been coming from the private equity funds that have been a huge factor in pushing up real estate prices in recent years. Falling home prices would likely trigger a new wave of defaults and housing related bankruptcies that had plunged the economy into recession five years ago.
A similar dynamic would occur in the market for U.S. Treasury debt. Despite Bernanke's assurances that the Fed is not monetizing the government's debt, the central bank has been buying nearly 70% of the new issuance in recent years. Already rates on 10 year treasury debt have crept up by more than 50% in less than two months, to over 2.4%. Any actual decrease or cessation in buying (let alone the selling that would be needed to unwind the Fed's multi-trillion dollar balance sheet) would place the Treasury market under extreme pressure. Since low rates are the life blood of our borrow and spend economy, it is highly likely that higher rates will lead directly to lower stock prices, lower GDP growth, and higher unemployment. Since rising asset prices, and the confidence and spending they produce, are the basis for Bernanke's rosy forecast, new lows in house prices and a bear market in stocks will quickly reverse those forecasts.
Higher interest rates and a slowing economy will be a a disaster for Federal budget deficits. An increase in unemployment and a decrease in tax will hit just as rising rates make it more expensive for the Fed to finance new and maturing debt. Also the profit checks Fannie and Freddie have been paying the Treasury will turn into bills for losses, as a new wave of foreclosures comes crashing down.
It's fascinating how the goal posts have moved quickly on the Fed's playing field. Months ago the conversation focused on the "exit strategy" it would use to unwind the trillions of bonds and mortgages that it had accumulated over the last few years. Despite apparent improvements in the economy, those discussions have given way to the more modest expectations for the "tapering" of QE. I believe that we should really be expecting a "tapering" of the tapering conversations.
I expect that the Fed will continue to pantomime that an Exit Strategy is preparing for a grand entrance, even as their time line and decision criteria become ever more ambiguous. The Fed's next big announcement will likely be to increase, not diminish QE. After all, Bernanke made clear in his press conference that if the economy does not perform up to his expectations, he will simply do more of what has already failed.
Of course, when the Fed is forced to make this concession, it should be obvious to a critical mass that the recovery is a sham. Investors will realize that yeas of QE have only exacerbated the problems it was meant to solve. When the grim reality of QE infinity sets in, the dollar will tank, gold will soar, and the real crash will finally be upon us. Buckle up.
- Source, Zero Hedge:
http://www.zerohedge.com/news/2013-06-21/peter-schiff-and-untapering-waiting-godot-era
Although this scenario is about as likely as an NSA-sponsored ticker tape parade for whistle blower Edward Snowden, all of the market segments reacted as if it were a fait accompli. The stock market, convinced that it will lose the support of ultra-low, long-term interest rates, and the added consumer spending that results from a nascent housing bubble, sold off in triple digits. The bond market, sensing that its biggest and busiest customer will be exiting the market, followed a similarly negative trajectory. The sell -off in government and corporate debt pushed yields up to 21 month highs. In foreign exchange markets the dollar rallied off its four-month lows based on the belief that Fed tightening will support the currency. And lastly, the gold market, sensing that an end of quantitative easing would eliminate the inflationary fears that have partially fueled gold's spectacular rise, sold off nearly five percent to a new two and a half year low.
All of this came as a result of Bernanke's mild commitments to begin easing back on permanent QE sometime later this year if the economy continued to improve the way he expected. The Chairman did not really elaborate of what types of improvements he had seen, or how much farther those unidentified trends would need to go before he would finally pull the trigger. He was however careful to point out that any policy shift, be it for less or more quantitative easing, would not be dependent on incoming data, but on the Fed's interpretation of that data. By stressing repeatedly that its data goalposts were "thresholds rather than triggers" the Fed gained further latitude to pursue any stance it chooses regardless of the data.
Yet the mere mention that tapering was even possible, combined with the Chairman's fairly sunny disposition (perhaps caused by the realization that the real mess will likely be his successor's problem to clean up) was enough to convince the market that the post-QE world was at hand. This conclusion is wrong.
Although many haven't yet realized it, the financial markets are stuck in a "Waiting for Godot" era in which the change in policy that all are straining to see, will never in fact arrive. Most fail to grasp the degree to which the "recovery" will stall without the $85 billion per month that the Fed is currently pumping into the economy.
What exactly has convinced the Fed that the economy is improving? From what I can tell, the evidence centered on the rise in stock and real estate prices, and the confidence and spending that follow. But inflated asset prices are completely dependent on QE and are likely to reverse course even before it is removed. And while it is painfully clear that expectations about QE continuance have made a far bigger impact on the stock, bond, and real estate markets than any other economic data points, many must be assuming that this dependency will soon end.
Those who hold this belief have naively described QE as the economy's "training wheels," (in reality the program is currently our only wheels.) They are convinced that the kindling of QE will inevitably ignite a fire in the larger economy. But the big lumber is still too dampened by debt, government spending, regulation, and high asset prices to catch fire. So all we have gotten is smoke. A few mirrors supplied by the Fed merely completed the illusion. The larger problem of course, is that even though the stimulus are the only wheels, the Fed must remove them anyway as we are cycling toward the edge of a cliff.
Although Bernanke dodged the question in his press conference, the Fed has broken the normal market for mortgage backed debt. While it's true that the Fed only owns 14% of all outstanding MBS (the "small fraction" he referred to in the press conference) it is by far the largest purchaser of newly issued mortgage debt. What would happen to the market if the Fed were to stop buying? There are no longer enough private buyers to soak up the issuance. Those who do remain would certainly expect higher yields if the option of selling to the Fed was of table. Put bluntly, the Fed is the market right now and has been for years.
A clear-eyed look at the likely consequences of a pull-back in QE should cause an abandonment of the optimistic assumptions behind the Fed's forecast. Interest rates are already rising rapidly based simply on the expectation of tapering. Image how high they would soar if the Fed actually tried to sell some of the mortgages it already owns. But the fact is, the mere anticipation of such an event has already sent mortgage rates north of 4%, and without more QE from the Fed in the could soon exceed 5%. Such an increase would deliver a devastating blow to the housing market. More foreclosure will hit just as higher home prices and mortgage rates price legitimate buyers out of the market. Housing prices will fall to new post bubble lows, sinking the phony recovery in the process. The wealth effect will work in reverse, spending and confidence will fall, unemployment will rise, and we will be back in recession even before the Fed begins to taper.
In fact, the back-up in mortgage rates seen over the last month has already produced pain in the financial world, with banks reporting a rapid collapse in refinancing applications. With personal income and wage growth essentially stagnant, individual buyers are extremely dependent on the affordability that ultra-low rates provide. A 50% increase in mortgage rates (an increase from 3.25% to 5%) would price a great many buyers out of the market. Higher rates would also cool much of the housing demand that has been coming from the private equity funds that have been a huge factor in pushing up real estate prices in recent years. Falling home prices would likely trigger a new wave of defaults and housing related bankruptcies that had plunged the economy into recession five years ago.
A similar dynamic would occur in the market for U.S. Treasury debt. Despite Bernanke's assurances that the Fed is not monetizing the government's debt, the central bank has been buying nearly 70% of the new issuance in recent years. Already rates on 10 year treasury debt have crept up by more than 50% in less than two months, to over 2.4%. Any actual decrease or cessation in buying (let alone the selling that would be needed to unwind the Fed's multi-trillion dollar balance sheet) would place the Treasury market under extreme pressure. Since low rates are the life blood of our borrow and spend economy, it is highly likely that higher rates will lead directly to lower stock prices, lower GDP growth, and higher unemployment. Since rising asset prices, and the confidence and spending they produce, are the basis for Bernanke's rosy forecast, new lows in house prices and a bear market in stocks will quickly reverse those forecasts.
Higher interest rates and a slowing economy will be a a disaster for Federal budget deficits. An increase in unemployment and a decrease in tax will hit just as rising rates make it more expensive for the Fed to finance new and maturing debt. Also the profit checks Fannie and Freddie have been paying the Treasury will turn into bills for losses, as a new wave of foreclosures comes crashing down.
It's fascinating how the goal posts have moved quickly on the Fed's playing field. Months ago the conversation focused on the "exit strategy" it would use to unwind the trillions of bonds and mortgages that it had accumulated over the last few years. Despite apparent improvements in the economy, those discussions have given way to the more modest expectations for the "tapering" of QE. I believe that we should really be expecting a "tapering" of the tapering conversations.
I expect that the Fed will continue to pantomime that an Exit Strategy is preparing for a grand entrance, even as their time line and decision criteria become ever more ambiguous. The Fed's next big announcement will likely be to increase, not diminish QE. After all, Bernanke made clear in his press conference that if the economy does not perform up to his expectations, he will simply do more of what has already failed.
Of course, when the Fed is forced to make this concession, it should be obvious to a critical mass that the recovery is a sham. Investors will realize that yeas of QE have only exacerbated the problems it was meant to solve. When the grim reality of QE infinity sets in, the dollar will tank, gold will soar, and the real crash will finally be upon us. Buckle up.
- Source, Zero Hedge:
http://www.zerohedge.com/news/2013-06-21/peter-schiff-and-untapering-waiting-godot-era
Friday, June 21, 2013
What Are You Afraid of Bernanke?
- Source, Peter Schiff show:
Thursday, June 13, 2013
Monetary Heroin
- Source, The Blaze:
Saturday, June 8, 2013
Only Fools Are Selling Gold
THE GREAT GOLD REDEMPTION
The most puzzling part of the investment business is seeing how the vast and largely economically illiterate masses interpret any given piece of news. Take the recent gold selloff: many large players were motivated to sell by news that Cyprus will have to liquidate its gold stockpiles to pay off acute debt obligations. But just a moment's reflection shows this reaction to be knee-jerk.
The real story behind Cyprus' deal has much more profound ramifications - and they are positive for gold.
The Right Lens
The reaction to Cyprus' forced gold sale re-affirms my belief that most Western investors remain in a state of extreme anxiety. This leaves no room for the kind of nuanced analysis that leads to wise long-term investment decisions.
The important point is not that Cyprus has to sell €400 million worth of its gold reserves, but rather the circumstances of the sale and the potential buyers that will emerge.
Gold Demanded, Not Divested
After all, this isn't a strategic investment decision by the Central Bank of Cyprus to divest itself of the yellow metal. In fact, local officials have gone on record saying any gold liquidation is a last resort. Cyprus wants to keep its gold - as has every nation in the West since the fiat money system started breaking down in the mid-2000s.
The only reason a gold sale is being proposed is that Cyprus finds itself at the height of its sovereign debt collapse. It has a long line of creditors but scant capital to pay them back. Gold is among the island nation's only liquid assets available to be repossessed. This is, in fact, a ringing endorsement of the enduring value of gold when a banking system disintegrates.
Won't Hit the Market
Still, some may be concerned about the price effects of gold sales by sovereigns. After all, Cyprus is just the tip of the iceberg. Lower down, the iceberg contains many European nations that are well-stocked with gold but that have debts orders of magnitude more hefty than Cyprus, e.g. Italy, France, Portugal, and Spain.
Again, when viewed correctly, this reality is at worst neutral for gold investors.
When a sovereign is forced to sell its gold, the reason is to pay other sovereign creditors. With regard to the spot price and global marketplace for the metal, that sale is "off the books." It merely cancels some IOUs, and the gold is shifted between central banks. It is not that this transaction has no market effects, but at the end of the day, the impact on gold's trading price is minimal.
Redemption
While Cyprus' payments to its European creditors is unlikely to change the fundamental landscape for gold, it represents a coming trend that will reshape everything we take for granted.
A legacy of its former wealth, the developed world is gold-rich and capital-poor. Emerging markets are in the opposite position. As I have long explained, we are undergoing a prolonged foreclosure by the emerging markets (centered on China) on the developed world (centered on the US). Greece, Cyprus, Ireland, Iceland... these are the marginal cases that are the first movements in what will be a global realignment of the remaining Western capital to the East.
China and its cohorts have a pile of IOUs, and the Western nations have a pile of gold. As push comes to shove and the ongoing Eastern shift into hard assets translates into spiking interest rates and runaway asset prices in the West, the Western governments' reserves will quickly become illiquid; in other words, they'll be about as desirable as Greek government bonds are today. If history is any indicator, Eastern governments may continue to offer lifelines - but they will demand collateral that can't be devalued. As Western governments inevitably continue their profligacy, the loans will be called and the gold stockpiles will board ships across the Pacific.
Renaissance
This entire process of breakdown and redemption will serve as a first-hand lesson in the enduring value of the yellow metal. And, at its conclusion, the nations with the capital will also be the ones with large gold stockpiles.
This bodes well for the price of gold. As bullion moves from weak hands to strong, the odds of Cypriot gold seeing the light of day again in our lifetimes are slim. Wealthy creditor nations have the resources to protect their gold. Bankrupt debtor nations do not.
It also bodes well for the re-monetization of the precious metals. Larger gold reserves will give Eastern nations the confidence they need to finally abandon the US dollar-based reserve system and put their currencies on a sounder footing.
Cyprus, Greece, et al. might be foreign countries, but their problems are exactly the same as those facing the US. The key difference is that the US is in a unique position to prolong and exacerbate its debt situation until it faces the largest sovereign debt collapse in human history. With the US dollar at the center of the global money system, I expect that this will shake confidence in fiat currencies for generations to come.
The Long View
Fair-weather investors in gold jump at the first sign of turbulence because they do not have a clear concept of the monetary transformation that is taking place. They see other gold investors as greater fools who they must beat to the safety of US dollars when the music stops. Fortunately for those who know better, these momentary panics allow us to buy their gold at steep discounts.
Many of you are aware of this already. Our phones at Euro Pacific Precious Metals have been ringing off the hooks, especially given our new products on offer.
So the fools sell on news of Cyprus, while the rest of us see it as the kickoff of a historic Great Redemption of gold from West to East.
The most puzzling part of the investment business is seeing how the vast and largely economically illiterate masses interpret any given piece of news. Take the recent gold selloff: many large players were motivated to sell by news that Cyprus will have to liquidate its gold stockpiles to pay off acute debt obligations. But just a moment's reflection shows this reaction to be knee-jerk.
The real story behind Cyprus' deal has much more profound ramifications - and they are positive for gold.
The Right Lens
The reaction to Cyprus' forced gold sale re-affirms my belief that most Western investors remain in a state of extreme anxiety. This leaves no room for the kind of nuanced analysis that leads to wise long-term investment decisions.
The important point is not that Cyprus has to sell €400 million worth of its gold reserves, but rather the circumstances of the sale and the potential buyers that will emerge.
Gold Demanded, Not Divested
After all, this isn't a strategic investment decision by the Central Bank of Cyprus to divest itself of the yellow metal. In fact, local officials have gone on record saying any gold liquidation is a last resort. Cyprus wants to keep its gold - as has every nation in the West since the fiat money system started breaking down in the mid-2000s.
The only reason a gold sale is being proposed is that Cyprus finds itself at the height of its sovereign debt collapse. It has a long line of creditors but scant capital to pay them back. Gold is among the island nation's only liquid assets available to be repossessed. This is, in fact, a ringing endorsement of the enduring value of gold when a banking system disintegrates.
Won't Hit the Market
Still, some may be concerned about the price effects of gold sales by sovereigns. After all, Cyprus is just the tip of the iceberg. Lower down, the iceberg contains many European nations that are well-stocked with gold but that have debts orders of magnitude more hefty than Cyprus, e.g. Italy, France, Portugal, and Spain.
Again, when viewed correctly, this reality is at worst neutral for gold investors.
When a sovereign is forced to sell its gold, the reason is to pay other sovereign creditors. With regard to the spot price and global marketplace for the metal, that sale is "off the books." It merely cancels some IOUs, and the gold is shifted between central banks. It is not that this transaction has no market effects, but at the end of the day, the impact on gold's trading price is minimal.
Redemption
While Cyprus' payments to its European creditors is unlikely to change the fundamental landscape for gold, it represents a coming trend that will reshape everything we take for granted.
A legacy of its former wealth, the developed world is gold-rich and capital-poor. Emerging markets are in the opposite position. As I have long explained, we are undergoing a prolonged foreclosure by the emerging markets (centered on China) on the developed world (centered on the US). Greece, Cyprus, Ireland, Iceland... these are the marginal cases that are the first movements in what will be a global realignment of the remaining Western capital to the East.
China and its cohorts have a pile of IOUs, and the Western nations have a pile of gold. As push comes to shove and the ongoing Eastern shift into hard assets translates into spiking interest rates and runaway asset prices in the West, the Western governments' reserves will quickly become illiquid; in other words, they'll be about as desirable as Greek government bonds are today. If history is any indicator, Eastern governments may continue to offer lifelines - but they will demand collateral that can't be devalued. As Western governments inevitably continue their profligacy, the loans will be called and the gold stockpiles will board ships across the Pacific.
Renaissance
This entire process of breakdown and redemption will serve as a first-hand lesson in the enduring value of the yellow metal. And, at its conclusion, the nations with the capital will also be the ones with large gold stockpiles.
This bodes well for the price of gold. As bullion moves from weak hands to strong, the odds of Cypriot gold seeing the light of day again in our lifetimes are slim. Wealthy creditor nations have the resources to protect their gold. Bankrupt debtor nations do not.
It also bodes well for the re-monetization of the precious metals. Larger gold reserves will give Eastern nations the confidence they need to finally abandon the US dollar-based reserve system and put their currencies on a sounder footing.
Cyprus, Greece, et al. might be foreign countries, but their problems are exactly the same as those facing the US. The key difference is that the US is in a unique position to prolong and exacerbate its debt situation until it faces the largest sovereign debt collapse in human history. With the US dollar at the center of the global money system, I expect that this will shake confidence in fiat currencies for generations to come.
The Long View
Fair-weather investors in gold jump at the first sign of turbulence because they do not have a clear concept of the monetary transformation that is taking place. They see other gold investors as greater fools who they must beat to the safety of US dollars when the music stops. Fortunately for those who know better, these momentary panics allow us to buy their gold at steep discounts.
Many of you are aware of this already. Our phones at Euro Pacific Precious Metals have been ringing off the hooks, especially given our new products on offer.
So the fools sell on news of Cyprus, while the rest of us see it as the kickoff of a historic Great Redemption of gold from West to East.
-Source: Peter Schiff via The Street Insider:
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