Monday, December 29, 2014

Lower Oil prices could cause more money printing by Fed

In a normal economic times falling energy costs would be considered unadulterated good news. The facts are simple. No one buys a barrel of oil to display above the mantle. No one derives happiness from a lump of coal. Energy is simply a means to do or get the things that we want. We use it to stay warm, to move from Point A to Point B, to transport our goods, to cook our food, and to power our homes, factories, theaters, offices, and stadiums. If we could do all these things without energy, we would happily never drill a well or build a windmill. The lower the cost of energy, the cheaper and more abundant all the things we want become. This is not economics, it is basic common sense. But these are not normal economic times, and the mathematics, at least for the United States, have become more complicated.

Most economists agree that the bright spot for the U.S. over the past few years has been the surge in energy production, which some have even called the "American Energy Revolution". The stunning improvements in drilling and recovery technologies has led to a dramatic 45% increase in U.S. energy production since 2007, according to the International Energy Agency (IEA). And while some suggest that the change was motivated by our lingering frustration over foreign energy dependence, it really comes down to dollars and cents. The dramatic increase in the price of oil over the last seven or eight years, completely changed the investment dynamics of the domestic industry and made profitable many types of formerly unappealing drilling sites, thereby increasing job creation in the industry. What's more, the jobs created by the boom were generally high paying and full time, thereby bucking the broader employment trend of low paying part time work.

The big question that most investors and drillers should have been asking, but never really did, was why oil rocketed up from $20 a barrel in 2001 to more than $150 barrel in 2007, before stabilizing at around $100 a barrel for much of the past five years. Was oil five times more needed in 2012 than it was in 2002? See my commentary last week on this subject.

Despite the analysts' recent discovery of a largely mythical supply/demand imbalance, the numbers do not explain the rapid and dramatic decrease in price. Yes, supply is up, but so is demand. And these trends have been ongoing for quite some time, so why the sudden sell off now? Instead, I believe that oil prices over the last decade has been driven by the same monetary dynamics that pushed up the prices of other commodities, like gold, or of financial assets, such as stocks, bonds, and real estate. I believe that oil headed higher because the Fed was printing money, and everyone thought that the Fed would keep printing. But now we have reached a point where the majority of analysts believe that the era of easy money is coming to an end. And while I do not believe that we are about to turn that monetary page, my view is decidedly in the minority. Could it be a coincidence that oil started falling when the mass of analysts came to believe the Fed would finally tighten?

If I am wrong and the Fed actually begins a sustained increase in rates starting in 2015, oil prices may very well stay low for a long time. But apart from the fact that our broad economy can't tolerate higher interest rates, an extended drop in oil prices may create conditions that further force the Fed's hand to reverse course.

If prices stay low for very long, many of the domestic drilling projects that have been undertaken over the past few years could become unprofitable, and plans for further investment into the sector would be shelved. Evidence suggests that this is already happening. Reuters recently reported a drop of almost 40 percent in new well permits issued across the United States in November (this was before the major oil price drops seen in December). This huge negative impact on the primary growth driver of U.S. economy may be enough in the short-run to overwhelm the other long-term benefits that cheap energy offers. If prices stabilize at current levels, then the era of triple digit oil may, in retrospect, be looked back on as just another imploded bubble. And like the other burst bubbles in tech stocks and real estate, its demise will make a major impact on the broader economy. But there is a crucial difference this time around.

When the dot-com companies flamed out in 2000, most of the losses were seen in the equity markets. Dot-coms either raised money either through venture capitalists or the stock markets. They rarely issued debt. The trillions of dollars of notional shareholder value wiped out by the Nasdaq crash had been largely paper wealth that had been created by the sharp run up in the prior two years. As a result, the damage was primarily contained to the investor class and to the relatively few number of highly paid tech workers and entrepreneurs that rode the boom up and then rode it down. In any event, the Fed was able to cushion the blow of the ensuing recession by dropping rates from 6% all the way down to 1%.

The real estate and credit crash of 2008 was a much different animal. Despite the benefits that lower home prices may have brought to many would be home-buyers who had been priced out of an overheated market, the losses generated by defaulting mortgages quickly pushed lending institutions into insolvency and threatened a complete collapse of the U.S. financial system. Unlike the dot-com crash, the bursting of the housing bubble posed an existential threat to the country. The construction workers, mortgage brokers, landscapers, real estate agents, and loan officers who were displaced by the bust represented a significant portion of the economy. To prevent the bubble from fully deflating, the Fed bought hundreds of billions of toxic sub-prime debt (that no one else would touch) and dropped interest rates from 5% all the way down to zero.

I believe, a bust in the oil industry will likely play out somewhere between these two prior episodes. As was the case with falling house prices, while low prices offer benefits to consumers, the credit and job losses related to unwinding the malinvestments, made by those who believed prices would not drop, can impose severe short-term problems that the Fed will be unwilling to tolerate. Of course, long-term it's always good when a bubble pops, it's just that politicians and bankers are never prepare to endure the short-term pain necessary for long-term gain when they do.

A good portion of the money used to finance the fracking boom was raised by relatively small drillers in the debt market from banks, institutional investors, pension funds, hedge funds, and high net worth wildcatters. Public involvement has been involved primarily in the high yield debt market where energy companies have issued hundreds of billions of "junk" bonds in recent years. In 2010, energy and materials companies made up just 18% of the US high-yield index but today they account for 29%.

But many of the financing projections that these bond investors assumed will fall apart if oil stays below $60. Although the junk bond market is nowhere near as large as the home mortgage market, widespread defaults from energy-related debt could cause a crisis, which could make wider ripples throughout the financial edifice. Bernstein estimates that sustained $50 oil could result in investment in the sector to fall by as much as 75%. According to the Department of Labor, oil and gas workers as a percentage of the total labor force has doubled over the past decade, and have accounted for a very large portion of the high-paying jobs created during the current "recovery." As a result a bust in the oil patch will result in a very big hit to American labor, causing ripple effects throughout the economy.

But we are far less able to deal with the fallout now of another burst bubble than we were in 1999 or 2007 (the years before the two prior crashes). I believe it will take much less of a shock to tip us into recession. But I don't even believe that a burst energy bubble is even our biggest worry. Much greater and more fragile bubbles likely exist in the stock, bond and real estate markets, which have also been inflated by the easiest monetary policy in history. More importantly at present the Fed lacks the firepower to fight a new recession that a bursting of any of these bubbles could create. Since interest rates are already at zero, it has no ability to aggressively cut rates now in the face of a weakening economy. All it can do is go back to the well of quantitative easing, which is exactly what I think they will do.

Despite the widely held belief that 2015 will be the year in which a patient Fed finally begins to normalize rate policy, I believe the Fed has no possibility of withdrawing the stimulus to which it has addicted us. QE4 was always much more probable than anyone in government or on Wall Street cares to admit. A recession and a financial panic caused by sub $60 oil will significantly quicken the timetable by which the Fed cranks up the presses. When it does, oil could once again increase in price, along with all the other things we need on a daily basis. That should finally dispel any remaining illusions that the Fed could successfully land the metaphorical plane. More QE may minimize the damage in the short-term, but I believe it will keep us trapped in our current cocoon of endless stimulus, where we will slowly suffocate to death. 

Monday, December 22, 2014

Russian Ruble worries are not the real worry

Right now people are worried about the Russian Ruble. That’s just the warm-up. The main event is going to be the dollar crisis, and when our currency starts to collapse it’s going to be much more problematic.

What’s going to be an even bigger negative is when the Federal Reserve comes back with their monetary guns blazing and they launch QE4. 

Then the oil price is going to rise to an even higher level than it fell from and that’s going to be very bad for consumers who have to pay a lot more for oil and everything else.”


Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Thursday, December 18, 2014

Oil and Energy stocks are value buy says Peter Schiff

The stunning 40% drop in the price of oil over the past few months has scrambled global economic forecasts, changed the geo-political landscape, and has severely pressured many energy sector investments. Economists are scratching their heads to determine if the drop is good or bad for the economy or whether cheap oil will add to or decrease unemployment, or complicate the global effort to "defeat" deflation. While all of these issues merit detailed discussions, the first question to address is if the steep drop is here to stay and whether energy prices will stay low enough, for long enough, to seriously reshuffle the economic deck. Based on a variety of factors, this is not likely to happen. I believe a series of technical, industrial, and monetary factors will combine to push oil back up to, and potentially beyond, the levels that it has seen over the last few years.

The dominant narrative explaining the current situation is that oil has collapsed largely because the growing mismatch between surging supply and diminishing demand. But there is little evidence to suggest that such conditions exist on the global stage.

According to the data available this month from the International Energy Agency (IEA), global demand for crude oil has increased by .74%. from 2013 to 2014, and is 3.6% higher than the average demand seen over the past five years (2009-2013). The same trend holds true for the United States, where 2014 demand is expected to come in 1.3% higher than 2013 and essentially the same as the average demand over the previous five years. (As an aside, the relative stagnation of U.S. oil demand provides a strong counterpoint to the current belief that the U.S. economy is stronger in 2014 than it has been in recent years).

So if the low prices are a function of supply and demand, but demand has not collapsed, then the difference has to be supply. The theory here is that the fracking and shale boom in North America has flooded the world market with unexpected supply, thereby pushing down the price. While it is true that the new drilling techniques have revolutionized energy production in the U.S. and Canada, the increase in production has been mostly negligible on the global stage.

Oil production in North America increased a hefty 8.8% from 2013 to 2014, and 17.7% over two years from 2012 to 2014. But outside of North America the story has been quite different. In fact, total global production increased by just .55% between 2012 and 2013 (2014 global data is not yet available). In 2012, North America accounted for just 17.4% of global production, but over the following year contributed 59% to the total increase of global production. So the fracking miracle is, at present, primarily a local phenomenon that has made limited impact on the global stage. In fact, in its most recent data, the IEA estimated that in 3rd Quarter 2014 total world demand exceeded total world supply by only .6%, hardly a figure that suggests an historic glut.

So if it's not supply and demand, what could it be? First, there are technical factors. There was a widespread concern going into 2014 that the recovery would bring with it higher oil prices. This may explain the surge in speculative "long" contracts in crude oil futures seen in 2014. These positions, in which investors sought to make a levered bet on rising oil prices, peaked around July at 4 million contracts, nearly four times as high as 2010. With so much money anticipating an increase, a small pullback in crude could have caused a wave of selling to close out losing positions. If that is the case, in an over-levered market, this could lead to a domino effect that pushes prices far lower than market levels. But as these positions get unwound, markets eventually return to normal. If that happens, we could see a significant rally in oil.

The surging dollar is another factor that has pushed down prices. Oil is globally priced in dollars so any increase in the dollar translates directly into a decrease in the price of crude. Over the past few months the dollar has seen a major rally that I suspect has been caused by the widespread, but unfounded, belief that the Federal Reserve will begin to tighten policy in 2015 just as the other major central banks shift into prolonged easing campaigns. When traders realize that this is unlikely to occur, the dollar should sell off and oil should rise.

Industrial forces will also come to bear soon. Much of the new North American shale production has been characterized by relatively high extraction costs, large production volumes, and fast depletions. A high amount of capital expenditure is needed to maintain production volumes. If the price of crude stays low, we can expect to see a decrease in capex expenditures from the companies most closely aligned with horizontal drilling and fracking. In fact, such evidence has already come to light. This means that volume decreases will start to bite far sooner than they would in the case of traditional oil extraction.

Ordinarily, falling energy prices are a great economic development. Lowering the cost of heating, power, and transportation means consumers and businesses have more money to spend on everything else. But the U.S. economy is now far more vulnerable to energy sector weakness. A substantial portion of high paying jobs that have been created in the last few years have been in energy production. Already the capex slowdown in the Dakotas and Texas is beginning to be felt by energy workers in those areas (12/2/14, The Globe and Mail). If these trends continue, the employment reports that currently drive so much of the economic confidence, will begin to look decidedly weaker.

But falling energy will also help hold down consumer prices. And while this may sound like a good thing to anyone with a standard amount of common sense, it is not seen as a good thing by economists who believe that higher inflation is a prerequisite for economic growth. Weakening employment and slowing inflation could quickly entice the Federal Reserve to launch the next round of QE far sooner than anyone currently predicts. This could turn the table on the current dollar rally and help push oil back up.

If oil stays low, it may turn out that entire U.S. oil boom was just another Federal Reserve inflated bubble. If it pops, the job losses and debt defaults that would ensue could have a far greater impact on the economy and the credit markets than did the bursting of the Internet bubble back in 2000. For those who think that cheap oil prices will provide a strong enough shock absorber, think again. When the housing bubble burst in 2008, $35 oil did not spare the U.S. economy from recession. Nor did $20 oil keep us out of recession in 2001. Oil producers have raised hundreds of billions of "junk bond" financing that may become vulnerable if oil prices stay low for an extended period. I do not believe the Fed will allow debt defaults that would result to impact the broader economy. They will be inclined to support oil prices just as they have been willing to support other strategically important asset classes.

If oil investors overbuilt capacity based overly optimistic price assumptions, which were created by artificially low interest rates and QE, why would similar mistakes made by investors in stocks, real estate, and bonds not be similarly exposed? This could mean that the popping of the oil bubble may be just one of many bubbles that are ready to burst. But given the difficulty of dealing with such a situation, QE 4 may ultimately need to be larger than QE1, 2, and 3 combined!

As a major player in oil production, the U.S. stands to gain far less from the current price slump than many of our trading rivals. Saudi Arabia, the dominant producer, has notoriously low production costs and should likely withstand the current slump with little need for structural reform (Saudi Arabia's geopolitical strategy for cheaper oil was recently examined by John Browne in his recent Euro Pacific column).

The primary beneficiaries of the current oil dip are the Asian countries that use lots of oil but produce very little. Thailand, Taiwan, South Korea, India, China and Indonesia all import oil and, therefore, will benefit by varying degrees. Many governments (India, Indonesia, Malaysia) are removing high cost subsidies - so the immediate benefit is not to the consumer, but to government fiscal balances, which will improve greatly.

So every silver lining usually comes with a cloud or two. Although the dip in oil prices is currently the biggest thing on the street and the cause for optimism, good times come with a cost, and they are likely to be short-lived. 

Energy stocks have been unfairly beaten down and could offer long-term value at current price levels.


Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, December 8, 2014

Media ignoring the right economic policies


Low inflation, or even deflation, is not a threat to the economy but to the asset bubbles that the Fed has inflated in order to create the illusion of economic growth. 

Without the Fed creating inflation, the bubbles will burst and the government will be forced to deal with its insolvency.

Given that Wall Street economists have a vested interest in downplaying concerns about asset bubbles, it is understandable that the big financial firms have failed to point out the Fed’s historic response to low inflation. 

It is somewhat more troubling to see how the media have completely ignored the past in passing judgment on how the Fed should act today.



Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, December 1, 2014

Its going to be a bad ending for stocks

People always say [on Stocks], “Well, if you know it’s a fun ride, why not climb on board and enjoy it with everybody else?” See, the problem I have is you can only enjoy the ride if you don’t realize how disastrously it’s going to end. Since I know it’s going to end in a wreck, I can’t enjoy it. If I get on board, I’m going to be nervous the whole time.


Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Wednesday, November 26, 2014

Peter Schiff asks Swiss voters to show "courage"

For most of my career in international investing, I had always placed a great deal of faith in Switzerland's financial markets. In recent years, however, as the Swiss government has sought to hitch its wagon to the flailing euro currency and kowtow increasingly to U.S.-based financial requirements, this faith has been shaken. But this week (November 30th) a referendum in Switzerland on whether its central bank will be required to hold at least 20% of its reserves in gold, will offer ordinary Swiss citizens a rare opportunity to reclaim their country's strong economic heritage. It's a vote that few outside Switzerland are following, but the outcome could make an enormous impact on the global economy.
Peter Schiff

Traditionally, the Swiss franc had always attracted international investors looking for a long-term store of value. That's because the Swiss government had always kept sacred the idea of conservative central banking and fiscal balance. When the idea of the European common currency was first proposed, the Swiss were wise to stay out. They did not want to exchange the franc for an unknown and untried pan-national currency. The creators of the euro had suggested that it would become the heir to the strong Deutsche mark. Instead, it has become the step-child of the troubled Italian lira and the Greek drachma. In retrospect, the Swiss were wise to take no part in the experiment.

But the decision of the Swiss government in 2011 to peg the franc to the euro, in order to prevent the franc from rising, has meant that the nation has adopted the euro de facto. In order to effect this peg, the Swiss government has had to intervene massively in the currency exchange market to buy and stockpile euros, thereby weakening the franc. The raw numbers are so staggering that rank and file Swiss have taken notice. Over the last few years the Swiss economy has stagnated along with the rest of Europe, and Swiss citizens have come to understand that the current policy will require an open-ended commitment to keep doing more of the same. This frustration has given birth to the referendum movement.

In 1999, Switzerland became the last industrial nation to go off the gold standard, a system that had served the world well for centuries. At that time, the Swiss National Bank held about 2,600 tons of gold, representing about 41% of its total currency reserves. By the end of 2008 its gold holdings had dwindled to just 21% of reserves. And as of August this year, they had fallen to just 7.9%. The raw tonnage has fallen over that time to just 1,040 tons, a 60% decline from 1999.

But the real action can be seen in the Swiss National Bank's holding of foreign currencies, mostly the euro, which now sits at a whopping 453 billion francs' ($495 billion). That's about 56,000 francs ($61,000) per man, woman and child in the country, almost 90% of which have been accumulated in just the past six years. The stated aim of all these purchases is to depress the value of the franc against the euro. Currency valuation directly translates into purchasing power, which means that the Swiss are poorer for these efforts. For a family of four that means the Swiss government has diverted almost $33,000 worth of purchasing power every year for the past six years to citizens of other European countries who had mistakenly adopted the euro. That's a lot of money, even for a rich country.

Swiss politicians have said that purchases have been needed to protect the citizenry from falling prices and from the diminished exports that would result from a rising currency (In my latest newsletter, read how this central bank concern about deflation is strictly a 21st century paranoia). Putting aside the evidence to suggest that the Swiss economy has prospered under a rising currency, this idea assumes that exports are a means, rather than an end. The purpose of exports is to pay for the stuff that you import and consume. There are many things that the Swiss people want that they don't make. To get those things, they export the things that they do make (i.e. watches, chocolate, cheese, etc.). The beauty of a strong currency means that you don't need to export as much of the stuff you make to get the stuff you want. In other words, you don't have to work as hard to enjoy greater consumption. Swiss living standards could have been much higher today if Swiss bankers and politicians had not tethered the franc to the euro.

A 20% gold reserve requirement would severely limit the ability of the Swiss government to continue its pegging policy. In order to reach the new target reserve levels, the Bank would either have to sell hundreds of billions of currency reserves or buy thousands of tons of gold on the open market. Critics contend that this would be a disaster for Switzerland. But the large amount of gold reserves before 1999 did not weigh on the Swiss economy. In fact, before that time, it was the envy of the world. While other countries were undermined by the promises politicians made with a printing press, the Swiss economy prospered thanks to the discipline provided by gold. Economists and politicians who are urging the Swiss to reject the proposal make the case that inflation is a prerequisite for growth, but many Swiss know that that is a lie.

While the pundits see little chance of success for the gold vote, I am encouraged by the recent results of another recent Swiss referendum that rejected the imposition of what would have been the highest minimum wage in the world. Swiss voters were smart enough to understand that an arbitrarily high wage costs would simply destroy employment opportunities without offering any tangible benefits in return. Perhaps they will be equally wise about the usefulness of sound and stable currency.

As an American, I envy the choice that the Swiss have given themselves. If successful, the vote could be seen as the first major counterattack against the forces of fiat currencies and unlimited global QE. A successful outcome may also mean the requirement for the Swiss government to buy gold would add significant demand in the gold market and should thereby help put the metal back on track.

All eyes should now be focused on the Swiss voters. I wish them courage. 


Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, November 24, 2014

Global currency wars favor Gold


Gold is the only true winner in a currency war because when everybody is printing money, then gold is going to rise in all currencies. While central bankers can all print their respective currencies, none of them can print gold. The supply of paper money continues to grow, and the supply of gold does not.


Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Tuesday, November 18, 2014

Correct way to evaluate performance of Gold longer term

When you’re talking about the history of gold, of course, you start correctly in 1970, because you’re going back to before we basically went off the gold standard. If you really want to compare the performance of gold to other assets, you really need to go back to when we left the gold standard. 

Of course, all of the people who want to play down the role in the returns on gold, they never start in 1970. They start in 1980 to try to show what a bad investment gold was when they take [a look at] a peak.




What they really need to compare gold to is other currencies, like the dollar or the yen or the euro or pick a currency. 

If you want to compare gold to the dollar over extended periods of time and say, “If you were going to keep liquidity, if you didn’t want to buy assets for whatever reason – you wanted liquidity – where did you preserve your purchasing power?” Were you better off holding dollars in a bank account or burying gold in your backyard? 

You want to go back a hundred years, even probably with the interest that you could have earned on a bank deposit, you still have more purchasing power today just burying gold than depositing dollars in a bank. 

Of course, if you stuff those dollars under your mattress, compared to gold, you have lost almost everything.



Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, November 17, 2014

Bitcoin holders also may own Precious metals

Chances are your average bitcoin holder is more likely to be a precious metal buyer than a person who doesn't own bitcoin.


Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, November 10, 2014

More QE's to come than Rocky movies

QE is kinda like a sedative, kinda like Novocaine, you don't feel the pain until it wears off. We've had a lot of Quantitative Easing. Once we come off the QE high, the hangover is going to spectacular. The government will try to head it off by launching QE 4 and that's something the markets are not anticipating and I think when that happens you will see a big reversal in the dollar and in the Precious Metals market. We will have more QE's than Rocky movies.



Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Wednesday, November 5, 2014

Peter Schiff defends himself against bully on CNBC

I will tell you, I am wrong less often than every other guest that comes on this program [on CNBC], bar none. I generally get things right. The structure of the economy has been weakened dramatically by the Fed. The problem is, you guys [CNBC talking heads] don't know that. You [CNBC guest] were so fooled by the phony economy before the financial crisis, and you're just as fooled now.

When you [CNBC guest] get blindsided by the next crisis, hopefully you'll apologize to me, because you didn't do it last time.


Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Sunday, November 2, 2014

Gold has been better buy than stocks last 13 years



First of all, I've been consistently telling people to buy gold since it was under $300, so people who have been following my advice for the past 13 years and have bought gold are actually doing better than the people who just bought stocks.

I think it's going to $5,000 [one day].


Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, October 27, 2014

US will not end QE [VIDEO]



Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, October 20, 2014

There will be QE unlimited

The dollar is rallying because people are thinking there is no more QE.

Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, October 13, 2014

Need quality jobs not just low pay work [VIDEO]



Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Wednesday, October 8, 2014

Why the coming crisis will be worse than last [VIDEO]




Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, October 6, 2014

Peter Schiff on Currency debasement

To debase a currency is to weaken its purchasing power. This is often done by inflating the money supply through quantitative easing, which the Federal Reserve has been practicing for years. When a currency is debased, a unit of that currency doesn’t buy the same amount of stuff that it once did. The US dollar has been seriously debased over the last hundred years or more. 

The government debases our currency and says it is because it became too expensive to produce instead of the real reason – destructive monetary policies. The policies of central banks around the world are supposed to stabilize economies and protect the people from currency debasement. However, the truth is that these policies only enrich the politically well-connected, while hurting the poor, those on fixed incomes, and savers.

When currencies aren’t debased, prices tend to fall, not rise. This gives more purchasing power to the poor, those on fixed incomes, and savers. It also decreases the need to gamble savings in the stock market, which means you have fewer bubbles like the one we’re experiencing right now.

So the next time a friend brings up the pretty well-know fact that it costs more to produce a penny than its worth, take the time to educate them about currency debasement.


Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, September 29, 2014

It costs 1.6 cents to make a Penny now

A recent article on the Wall Street Journal’s blog draws attention to the high cost of producing a single penny – 1.6 cents each, to be exact. They blame this unsustainable price on the high cost of zinc, which makes up 97.5% of every American penny. The online publication Quartz ran with this story, giving it a new headline: “It costs 1.6 cents to make one penny because of the rising price of zinc”. Time for a short economics lesson.

An alternate, more accurate headline for this story would be, “It cost 1.6 cents to make a penny because of currency debasement.” Rather than pondering whether or not the United States should simply stop producing pennies to save money, Americans should really be thinking about the long-term effects of currency debasement that has been going on for generations.

Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Tuesday, September 23, 2014

Peter Schiff on Janet Yellen and Fed



Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, September 15, 2014

Help main street.. not only Wall Street

They [Fed] are supporting the growth of the government. They are supporting excess profits on Wall Street, but they are actually stifling the legitimate economic growth that might otherwise help Main Street.

Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Thursday, September 11, 2014

Peter Schiff: Real crash ahead

The 2008 market collapse was not the real crash. The real crash is coming...

It’s not going to be a painless situation when we give up these government narcotics -- monetary heroin -- but it’s going to have to happen, because the more we take this drug, the more damage is being done to the economy and the risk is, of course, that eventually we overdose on it, which is the destruction of the currency and a runaway inflation.

Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Wednesday, September 10, 2014

Peter Schiff on being an American Company



Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Tuesday, September 9, 2014

Is the Economic recovery real

Who are you going to believe about the economic recovery – everyday Americans or the financial media? 

Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Thursday, September 4, 2014

Forced move away from dollar

We’re flexing a lot of muscle that we don’t have. We’re irritating a lot of people that we need to suck up to. We’re creating extra incentive for people to move away from the dollar. That could ultimately be the biggest problem for the [stock market]. A big drop in the dollar and acceleration of inflation would put pressure on the Fed to raise rates.

Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Wednesday, September 3, 2014

Peter Schiff sounds US housing market alarm again

I think this[US Housing prices] is a bubble. 

The main difference between the last bubble and this bubble is the last one was a main street bubble and this one is a wallstreet bubble. This one is a more Wallstreet bubble because the principle speculators are hedge funds, private equity funds and very high net worth individuals who are paying all cash for properties. And buying them on the anticipation of selling them at a profit or renting them to Americans who can no longer afford to buy. 

I think a lot of real estate that was snapped up in foreclosure auctions, people overpaid and I think investors are just now realizing they overpaid. So I think the speculative buyers are leaving the market and there is no one to fill the void because the real buyers are absent. 

And if you look at the recent home statistics the percentage of homes bought by first time buyers is at a record low. 

In fact home ownership among individuals is at generational lows, so prices have to come down dramatically from here before real buyers can actually afford to buy all the properties that have been bought by speculators, and at some point the speculators who own these properties, if they cannot collect enough rent to cover the cost of ownership they are going to be selling these properties, and look out below because when they put these properties up for sale, again there are no buyers anywhere near the current prices.

via RT

Tuesday, September 2, 2014

Ron Paul on Peter Schiff's final show [VIDEO]


Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, September 1, 2014

Peter Schiff on Michael Brown protestors


Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Wednesday, August 27, 2014

Did IRS destroy evidence by frying IRS harddrive


Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Wednesday, August 20, 2014

Peter Schiff: Bitcoin $350 could be a low downside target

The fact that prices have not rallied on recent good news, like eBay announcing it will accept payment in bitcoin, is a bad sign. 

Also, the recent move to regulate bitcoins is lessening their appeal with early adopters as is competition from 400 other digital currencies. 


Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, August 18, 2014

Gold not talked about enough

I talk about gold because hardly anybody else does. I do believe gold should be owned but I don't think it should be owned exclusively. I think people should have most of their money in equities. I just have a problem in the U.S. market because of the massive economic collapse I see in our future, and because our markets are overvalued.

Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Thursday, August 14, 2014

Peter Schiff's investing strategy

My investing strategy is going to do best for people who are looking to get out of U.S. investments and seek better returns abroad. As these (U.S.) stocks start to blow up, more people are going to be looking for a safer bet.

Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Wednesday, August 6, 2014

Stock Market and Housing market to collapse

The stock market will collapse. The housing market will collapse.

I think Q2 is going to be the high-water mark for the year. I think it's all downhill from here. We might not even get a 3 percent GDP, we might get less than that. And that can be bullish for gold.


Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Wednesday, July 30, 2014

Media and CNBC affecting public perception of Inflation



Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Sunday, July 27, 2014

Peter Schiff on Obamacare Intent [VIDEO]



Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Wednesday, July 23, 2014

Schiff believes people will buy gold

There is still a lot of skepticism in the market, but once we see gold go above $1,400, we will see more buyers come out ... the fear of gold going to $1,000 will be replaced by ‘I don’t want to miss out.'

Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, July 14, 2014

US Dollar much worse than Euro

I think that the dollar has much further to go down relative to the euro. As bad as things are in euro-land, they're worse in the United States. And I think we are going to push the envelope much farther than the Europeans…. The Fed will do nothing to contain inflation. That is not going to be the case in Europe.


Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Wednesday, July 9, 2014

Gold is making a solid bottom and Dennis Gartman

 Most people on Wall Street were very impressed by [the jobs numbers] yet the price of gold did not surrender any of the gains in the previous week.

So to me, we're consolidating those gains, we're putting in a very formidable bottom in gold. We still have all of the naysayers, the Goldman Sachs, Societe Generale, all these guys that were negative calling for $1,100, $1,000, they're digging in their heels, they're just as bearish as they were at the beginning of the year despite the fact that they've been wrong for six months. So you have a lot of negativity, but I think the technical picture is improving rapidly for gold.


Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, July 7, 2014

Peter Schiff on jobs quality vs quantity [VIDEO]



Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, June 30, 2014

The feds may be considering Bond market changes

The American financial establishment has an incredible ability to celebrate the inconsequential while ignoring the vital. According to a small story in the Financial Times, some Fed officials would like to require retail owners of bond mutual funds to pay an "exit fee" to liquidate their positions. Come again? That such a policy would even be considered tells us much about the current fragility of our bond market and the collective insanity of layers of unnecessary regulation.

Recently Federal Reserve Governor Jeremy Stein commented on what has become obvious to many investors: the bond market has become too large and too illiquid, exposing the market to crisis and seizure if a large portion of investors decide to sell at the same time. Such an event occurred back in 2008 when the money market funds briefly fell below par and "broke the buck." To prevent such a possibility in the larger bond market, the Fed wants to slow any potential panic selling by constructing a barrier to exit. Since it would be outrageous and unconstitutional to pass a law banning sales (although in this day and age anything may be possible) an exit fee could provide the brakes the Fed is looking for. 

Fortunately, the rules governing securities transactions are not imposed by the Fed, but are the prerogative of the SEC. (But if you are like me, that fact offers little in the way of relief.) How did it come to this?

But now that Fed policies have herded investors out on the long end of the curve, they want to take steps to make sure they don't come scurrying back to safety. They hope to construct the bond equivalent of a roach motel, where investors check in but they don't check out. How high the exit fee would need to be is open to speculation. But clearly, it would have to be high enough to be effective, and would have to increase with the desire of the owners to sell. If everyone panicked at once, it's possible that the fee would have to be utterly prohibitive. 

Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Wednesday, June 25, 2014

Stocks are going up because value of money is going down [VIDEO]



Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, June 23, 2014

Schiff on Bitcoin, Gold and Dollar [Video]


Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Friday, June 20, 2014

Schiff: Put some money in Gold

You shouldn’t have all your money in gold; just have some. Most people don’t have any. I tell people to put 10% to 15% of your money in gold.



Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Wednesday, June 18, 2014

Peter Schiff on why McDonalds can win more business with higher minimum wages



Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Tuesday, June 17, 2014

Peter Schiff vs Steve Liesman of CNBC

Thus far 2014 has been a fertile year for really stupid economic ideas. But of all the half-baked doozies that have come down the pike, an idea hatched by CNBC's reliably ridiculous Steve Liesman may in fact take the cake. In diagnosing the causes of the continued malaise in the U.S. economy he explained, "the problem is that consumers are not taking on enough debt." And that "historically the U.S. economy has been built on consumer credit." His conclusion: Consumers must be encouraged to borrow more money and spend it. Given that Liesman is CNBC's senior economic reporter, I would hate to see the ideas the junior people come up with.



Steve Liesman
Peter Schiff


Just as most economists believe that falling prices cause recession, rather than the other way around, Liesman believes that economic growth is created when people tap into society's savings in order to buy consumer goods that they could not otherwise afford. But consumption does not create growth. Increasing productive output allows for greater consumption. Something needs to be produced before it can be consumed.

Liesman is also mistaken that consumer credit has been the historic foundation of growth in the United States. It may surprise him to know that consumer credit was largely unknown until the second half of the 20th Century. Before that, people simply did not, or could not, buy things on credit. They tended to pay in cash .Credit cards did not become ubiquitous until the 1970's. It was also much more common for Americans to save money for an uncertain future, the "rainy day," that we were always being warned about. But savings rates now are only a fraction of where they had been for most of our history. Consumers now expect to borrow their way out of any crisis. Yet the American economy enjoyed some of its best years before consumer credit ever became an option.    

What Liesman is really advocating is that consumers borrow money to buy things they cannot afford. What kind of economic advice is that? Especially now that one third of Americans have less than $1,000 saved for retirement; a statistic so shocking that even CNBC recently cited it as a cause for concern. Does he really think that these savings-short Americans should take on even more consumer debt? Does creating a nation of bankrupt seniors who are too broke to retire ever create a more prosperous society?

Contrary to Liesman's asinine contention, it's not consumer credit that built the U.S. economy but its opposite - savings! Under-consumption not excess-consumption is what made America great. By saving instead of spending, consumers provided society with the means to increase investment and production that led to rising living standards for all. Unfortunately, it's consumer credit that is helping to destroy what savings once built.


via http://news.goldseek.com/EuroCapital/1402668780.php

Monday, June 16, 2014

Peter Schiff: USA in bad condition

The last couple of years are based on a very misguided sense of what’s going on. What has driven the strength of the US market is the false belief that the Fed has saved the US economy. We are on the verge of a much worse financial crisis than we had in Year 2008, because the Fed re-inflated all the busted bubbles, all the while the fundamentals have been eroding.

If they do stop QE, interest rates are going to rise substantially, and we won’t be able to pay $1-T a year in interest. The country is in really bad shape.


Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Thursday, June 12, 2014

Do consumers need more debt ?


Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Wednesday, June 11, 2014

Economy should bounce after cold winter

An analysis of the bad winters reveals a clear tendency for the economy to bounce back strongly in the following quarter. This confirms the theory that pent up demand gets released in the spring. In the ten 2nd quarters that followed the ten snowiest winters, annualized GDP averaged a strong 4.4%, or almost four percent higher than the prior quarter. (The snap back was even more dramatic in the five snowiest winters, when the differential was more than five percent.) Based on this, we should see annualized 2nd quarter growth this year of at least three or four percent.

However, the raft of statistics that have come in over the past few weeks does not show that this is happening. A horrific trade deficit report came in this week widening to $47 Billion, the highest since July 2012. The data out this week also showed that consumer spending fell .1% in April (for the first time in a year), and that productivity falling in the 1st Quarter by 3.2% in the face of higher labor costs, which grew at 5.7% annualized. And although May's 217,000 increase in non-farm payrolls was in-line with expectation (following the big miss in ADP data earlier in the weak) it nonetheless represents a significant slowdown from April's 288,000 pace. The level of hiring did nothing to push up the labor force participation rate, which remained stuck at a 35 year low of 62.8%. Predictably, almost all of the jobs added were in low paying sectors that will not contribute much to overall purchasing power, like hospitality (mostly bars and restaurants), healthcare, and education. The report included a big drop in the number of construction workers added, which is the latest sign that the real estate sector is decelerating. 

But even if growth picks up in the 2nd quarter to 4%, my guess is that most analysts will herald the news as confirmation that the economy is back on track, and discussion of the weather will disappear. However, since half of that four percent will have been borrowed from Q1, Q2's higher growth rate will also be weather-related. But while everyone blamed first quarter weakness on the weather, very few will likely cite it as a cause for any potential second quarter strength. But if you add the minus one percent from Q1 to a potential plus four percent from Q2, the average would still only be just 1.5% growth for the first half of 2014. Despite this, the Fed has yet to revise down its full year 2014 growth estimates of 2.8% to 3.2% that it made at the end of last year. To grow at 3% for the year, even with 4% growth in Q2 (which is above the current consensus estimate), the economy would have to grow at 4.5 percent for the entire second half. Good luck with that.

Summary

So yes, the winter was bad, and yes it had an effect. But it was not likely the driving force of the first quarter slow-down and its effects should be very confined. But that won't stop the pundits from gnawing on that particular bone as long as they can get away with it. Unfortunately, they can get away with it for a long time.

Tuesday, June 10, 2014

Peter Schiff on Lou Dobbs


Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, June 9, 2014

Cold weather used as excuse for poor economic data

Economists, investment analysts, and politicians have spent much of 2014 bemoaning the terrible economic effects of the winter of 2014. The cold and snow have been continuously blamed for the lackluster job market, disappointing retail sales, tepid business investment and, most notably, much slower than expected GDP growth. Given how optimistic many of these forecasters had been in the waning months of 2013, when the stock market was surging into record territory and the Fed had finally declared that the economy had outgrown the need for continued Quantitative Easing, the weather was an absolutely vital alibi. If not for the excuse of the bad weather, the entire narrative of a sustainable recovery would have been proven false.

Remarkably, this optimism was largely undiminished when the preliminary estimate for first quarter GDP came in at a shocking minus one percent annualized. This number, almost four percentage points lower than the forecasts from the end of 2013, hinted at an economy on a path toward recession. Still, the experts brushed off the report as a weather-related anomaly.

In contrast, I spent the better part of the last five months arguing that the weather was a straw man. I saw a fundamentally weak and contracting economy being artificially propped up by Fed stimulus, illusory accounting, and massive federal deficit spending. 

However, while it is difficult to precisely measure the effects of bad weather on the economy, a fresh look at the historical data does tell me that a bad winter usually has an economic effect, but not nearly enough to support the oversize excuses being made by our leading pundits.


via GoldSeek http://news.goldseek.com/EuroCapital/1402072982.php

Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Thursday, June 5, 2014

CNBC interviews Peter Schiff


Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Wednesday, June 4, 2014

Middle class suffers from inflation

There is a growing belief among economists, highlighted in a recent debate I had with Nouriel Roubini, that higher prices are actually a benefit to consumers. They believe that the growth created by inflation is worth more than the cost imposed at check-out lines. Instead, we are simply getting another dose of 1970s-style stagflation as higher prices simply amplify the pain of a stagnant economy and diminished employment opportunities.

The good news for Roubini and his ilk is that inflation does indeed help some people…the very rich. I have long argued that Fed stimulus and quantitative easing only result in the formation of asset bubbles that unevenly favor the rich, while misdirecting capital away from savings and productive investments that would benefit everyone else. Economists had blamed the recent disappointments from mass-market retailers like Walmart, Target, Best Buy, Staples, Dick’s Sporting Goods, and Pet Smart (to name but a few) on the ravages of winter weather rather than weak fundamentals. But yesterday the upscale vendor Tiffany’s issued a boffo report that showed net income up an astounding 50% over first quarter in 2013. The rich seemed to have little trouble braving the elements to buy baubles on Fifth Avenue, yet average Americans were too thin-skinned to make it to Dick’s Sporting Goods.

While the world talks about the dangers of deflation, which offers no harm to economies or consumers, actual inflation is everywhere to be seen and nowhere acknowledged. Instead, we get a universal agreement that the middle class must continue to suffer so that the Fed and financial speculators can continue to revel in the charade.

Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, June 2, 2014

Food prices going higher

Rising food prices are a major problem for many Americans struggling to make ends meet in our listless economy. Exactly how much more pain does the Federal Reserve want to inflict on the middle and lower classes before it relents and stops creating even more inflation?

Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Wednesday, May 28, 2014

Gold demand and prices to sky rocket



Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Tuesday, May 27, 2014

Schiff says Inflation problem bubbling

We do have an inflation problem and a bubble. Commodity prices are rising. Maybe you haven't noticed but gold is at $1,300.

Peter Schiff is an investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, May 26, 2014

Peter Schiff: Gold, Inflation CNBC interview



Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Wednesday, May 21, 2014

Schiff says Inflation is hurting the economy

It's my opinion that economies are served by falling prices, by increased production, increased efficiencies, that lower consumer prices, that that's what makes people better off. And I think the idea that central banks need to deliberately create inflation because it's somehow a necessary ingredient to economic growth is wrong. 

Inflation is actually worsening the problems in the economy.


Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Tuesday, May 20, 2014

Peter Schiff: Why deflation could help consumers

The consumer doesn't need inflation. What we need is more production and falling prices because that's what grows an economy, that's what leads to higher living standards — when workers can buy more with the money they earn


Peter Schiff is an investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, May 19, 2014

Peter Schiff vs Nouriel Roubini



Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Thursday, May 15, 2014

US Dollar tanking against Pound

While the darkening skies may not be visible to Americans, the foreign exchange markets have taken notice. 

[Recently] the U.S. dollar hit a five-year low against the British pound, a nearly three-year low against the Swiss franc (notwithstanding three days in March that traded slightly lower). 

The weakness in the dollar portends a weaker U.S. economy and a strong likelihood for more Quantitative Easing from the Federal Reserve. It also confirms that Europe's strategy of limited "austerity" did not deliver the catastrophe that many on the left, including Paul Krugman, had predicted.

Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Wednesday, May 14, 2014

GDP report are just excuses

As they have done with the recent jobs reports, most economists pin the bad GDP number on the hard winter. This is a dangerous game to play. If GDP now fails to respond strongly to the return of warmer weather, the truth of a fundamentally weakening economy will become that much easier for everyone to see. But with asset bubbles forming across many sectors of the economy, the truth can be a serious hazard. Nothing pricks a bubble quicker than a loss of confidence.

Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Tuesday, May 13, 2014

Schiff: Sell in May and go away

After last year's stunning 29% rally in U.S. stocks, Wall Street virtually assured investors at the end of last year that the good times would continue. 

If not for the super-charged mergers and acquisitions market, which according to the Wall Street Journal accounted for $638 billion of transactions thus far in 2014 (the highest level of activity in almost 20 years), and the rock bottom long term interest rates provided by the Federal Reserve, markets could be tanking. 

What's worse is the fact that the first five months of the calendar are usually the best for market performance (hence the Wall Street adage "sell in May and go away.") 

If this is how we have fared during the seasonally strong part of the year, beware the latter as the summer doldrums set in and the Fed (in theory at least) is set to wind down its QE program.


Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, May 12, 2014

Peter Schiff compares stock market rally to music getting better

While there are plenty of reasons to be cautious about America's economic future (the growing geo-political tensions in Ukraine for instance - explored in detail in my latest newsletter), Wall Street has found ways to ignore all of them. My advice to investors is to ignore the swelling crescendo coming from the paid musicians. Take a look at the sheet music instead. They may play it like a fanfare but it is written like a dirge.

Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Thursday, May 8, 2014

One day in future we are going to be shocked at how Gold was so cheap

One day we're going to look back at $1,700 with nostalgia. People are going to be shocked at how inexpensive gold was when it could be snapped up for such a bargain price.

Wednesday, May 7, 2014

Solution to our problems is to remonetize gold

Ultimately, the solution to our problems is going to involve a re-monetization of gold. But by the time they re-monetize it, the price is going to be substantially higher than it is now.

Tuesday, May 6, 2014

Peter Schiff was right

Peter Schiff warns CNBC viewers on August 2006 

"What's going to happen is that the American consumer is basically going to stop consuming and start rebuilding his savings, especially when he sees his home equity evaporate. And when you have the economy 70 percent consumption, you can't address those imbalances without a recession."

Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, May 5, 2014

Largest exodus from labor force

Last month April, almost a million Americans left the labor force in one month. I think that's the largest exodus from the labor force since they began keeping the statistics.

Better than 80 percent of them potentially were just made up by the government because over 240,000 of the jobs were the result of the birth-death assumptions where the government simply assumes that new businesses were created in April and that they hired people.

Thursday, May 1, 2014

Schiff: Gold has bottomed most probably

The fundamental case for gold has also never been stronger. From a gold short seller's perspective, this will prove to be the equivalent of a perfect storm. Their losses will be severe.

Any major geopolitical concerns, particularly if there is a deterioration of the situation in Ukraine, will add to gold's appeal. I also expect renewed physical demand from emerging markets like India and China. Most likely prices have bottomed, as too many speculators are looking for lower prices. 


Tuesday, April 29, 2014

Consensus believes Fed will end QE

I believe the consensus expectation that the U.S. recovery is real and that the Fed will end its [QE] program and normalize interest rates is wrong. When the Fed has to admit that its forecast of a sustained recovery is wrong, it will come to the aid of a faltering economy with even more QE. When that happens, gold will rally.

Thursday, April 17, 2014

Central banks helping gold

Central banks around the world, particularly the U.S., are going to continue to create more and more inflation. If we have interest rates at zero and you have the central banks guaranteeing that if you hold on to the paper they are printing that you will lose money, that is a great environment for gold.

Monday, April 14, 2014

Inflation used as tool to reduce workers income

In circumstances where wages cannot be legally reduced, as is the case for unionized or minimum wage workers, layoffs are often the employer’s only option for keeping costs in line with revenue. However, inflation allows employers to do an end run around these obstacles. 

In an inflationary environment, rising prices compensate for falling sales. The added revenue allows employers to hold nominal wage costs steady, even when the raw amount of goods or services they sell declines. When inflation rages, higher skilled workers will often demand, and receive, pay raises. But low-skilled workers, who lack such leverage, are usually left holding the bag.

In other words, politicians can impose a high minimum wage to pander to voters, but then count on inflation to lower real labor costs, thereby limiting the unemployment that would otherwise result. 

So what the government openly gives with one hand, it secretly takes away with the other. Workers vote for politicians who promise higher wages, but those same politicians also create the inflation that negates the real value of the increase. But while government takes the credit for the former, it never assumes responsibility for the latter. The same analysis applies to labor unions. 

Based upon political protection offered by friendly officials, unions can secure unrealistic pay hikes for their members. But the same governments then work to reduce the real value of those increases to keep their employers in business.

Friday, April 4, 2014

American middle class

The wealth that America enjoyed was unprecedented in the world. The American standard of living was unequalled anywhere on the planet. That’s not the case today. There are people who live better than Americans, but in the 1940s, 1950s, that was not the case.   

The American middle class was the envy of the world. And it wasn’t created because of government programs, it wasn’t created because of consumer spending, it was created because of the freedom that enabled our entrepreneurs to succeed.

We were able to invest and save and produce whereas other governments stifled that type of innovation. If anybody had a bright idea, they came to America to implement it. Because we didn’t have all the government roadblocks that other countries had. It was the freedom that led to our prosperity. I can only image how high our standard of living would be today had we maintain our 19th century freedom throughout the 20th century.


via http://www.theepochtimes.com/n3/576824-peter-schiff-what-needs-to-happen-to-bring-production-back-to-the-us/
  

Thursday, April 3, 2014

How America can be great again...

We have the capacity to be a great country again. I don’t believe we are a great country right now. People believe that we are, but I think that’s false. It’s a facade. I think beneath the surface, as I said, it’s a disaster. If we are ever going to reclaim what we lost, we are going to have to reclaim the freedom that we lost. 

We became a wealthy nation because of the freedom that we once enjoyed. To reclaim that wealth, we need to restore the freedom we surrendered in exchange for false promises of security and equality.  

Wednesday, April 2, 2014

Debt will undo us Americans

Janet Yellen may talk about tightening someday, but she will continue to move the goalposts to avoid actually having to do so. As global investors finally realize that the Fed has no credible exit strategy from its zero interest policy, they will fashion their own exit strategy from U.S. obligations. Should this happen, interest rates will spike, the dollar will plunge, and inflation’s impact on consumer prices will be far more pronounced than it is today. This is when the inflation tax will take a much larger bite out of our savings and paychecks. 

The debt that sustains us now will one day be our undoing.

Tuesday, April 1, 2014

The day of reckoning

Right now we are consuming what other people produce. So somebody has to do the production. The question is: Why is the world so willing to let America enjoy the fruits of their labor? When are the people producing those goods going to want to consume the goods themselves? 

Now right now, they are content to accept our IOUs [debt], because they figure “well we are going to spend them in the future.” They think they are building their future; they are saving dollars that they can spend in the future. Of course they don’t realize that the dollar is not going to have much value in the future, so there will be almost nothing to buy.

But I also think that most of these developing economies are under the false impression that their economic growth, the success of it, lies in their ability to export—it doesn’t. The key is production. 

And people forget that nations don’t export just to export. They don’t export to create jobs. You export to pay for your imports. And if you are not importing anything, then there is no reason to export. Because what people want are consumer goods. 

So you either produce them yourself or you trade for them. But to send your consumer goods out and have nothing in return, except Treasury bonds, our trading partners aren’t benefiting. We are benefiting because we get to consume things; we did not produce anything to pay for it. 

Friday, March 28, 2014

Fed threatens to end stock market party

So if cutting and taxing are off the table, we can expect borrowing and printing. That is exactly what has been happening. In recent years, the Fed has bought approximately 60% of the debt issued by the Treasury. This has kept the bond market strong and interest rates extremely low. But a country can’t buy its own debt with impunity indefinitely. In fact the Fed, by winding down its QE program by the end of 2014, has threatened to bring the party to an end.

Thursday, March 27, 2014

America borrowing way out of recession

America is trying to borrow its way out of recession. We are creating debt now in order to push up prices and create the illusion of prosperity. To do this you must convince people that inflation is a good thing…even while they instinctively prefer low prices to high. But rising asset prices do little to help the underlying economy. That is why we have been stuck in what some economists are calling a “jobless recovery.” 

The real reason it’s jobless is because it’s not a real recovery!  So while the current booms in stocks and condominiums have been gifts to financial speculators and the corporate elite, average Americans can only watch from the sidewalks as the parade passes them by. That’s why sales of Mercedes and Maseratis are setting record highs while Fords and Chevrolets sit on showroom floors. 

Rising prices to do not create jobs, increase savings or expand production. Instead all we get is debt, which at some point in the future must be repaid.

Wednesday, March 26, 2014

Schiff not short markets because of US Dollar

As the Fed has to print more and more money to keep these asset bubbles inflated, it will diminish the value of the dollar.

Although I don't think there's a lot more upside in the stock market, I'm not looking for a collapse. But what I am looking for is a dollar collapse, so that even if the market continues to move higher, it's nominal highs only. It's not real highs adjusted for a loss of purchasing power in the dollar.

Being short the stock market is like being long the U.S. dollar. I don't want to borrow U.S. dollars in order to short U.S. stocks, so I don't have short positions, and I haven't had them

I do not believe that the Fed is going to take away the punch bowl. They're going to keep spiking the punch bowl until the patient dies of an overdose of drugs. That's what's going to happen. The economy's going to completely pass out at some point and it's not going to matter how much stimulus the Fed gives us.

http://www.cnbc.com/id/101512786

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