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.