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Results 401–450
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No, Krugman, You're Eating America Alive
Here we go again. This week, Paul Krugman, the 2008 Nobel Prize winner in economics and the go-to guy for progressives who need a morale boost, launched another misguided attack on Austrian School economists. From his New York Times soapbox, he referred to the free-market Austrian ?hard money? philosophy as a ?zombie idea? that is inexplicably eating the brains of the voting public.
The Waves of 2011
by John Browne of Euro Pacific Capital,
2011 likely will open with a deepening recession, increasing austerity, and falling asset prices. If this is met by a new round of inflation creation and yuan revaluation, then investors should weigh whether to redeploy assets in anticipation of potential rising commodity prices. I expect these developments not to happen gradually, but to come in great waves. Smart investors will tie their fate to an investment vessel with a solid hull, because in these seas, even a hint of rot could tear a ship asunder.
The Dollar Threads a Needle
by John Browne of Euro Pacific Capital,
Forecasting the dollar?s short-term relative value is an extremely difficult exercise. Sadly, logic holds little sway in the current marketplace. However, over the longer term, I believe dollar weakness will undermine the market ? just as we saw with the dot-coms and real estate. At some point, fundamentals will be felt.
For Whom the Bell Tolls
by Peter Schiff of Euro Pacific Capital,
What lies ahead is a new era of rising interest rates, soaring consumer prices, increasing unemployment, economic stagnation, and lower living standards. Instead of stimulating the economy, quantitative easing and deficit spending will prove to be a lethal combination. Bondholders beware, the bell tolls for thee.
Wall Street Gives Uncle Sam Too Much Credit
I think the rising cost of money will become the story of 2011. Its effect on consumers, the real estate market, and government borrowing costs will be profound. Apparently, most major brokerage firms have no fear of soaring interest rates causing our economy to implode. However, it's clear to me that the bond market has already started to crack due to inflation and massive oversupply from the Treasury. Prudent investors should think twice before overlooking what could be the initial holes in the biggest bubble in world history ? the full faith and credit of the United States.
Washington Orders Another Free Lunch
by Peter Schiff of Euro Pacific Capital,
This week Washington displayed the kind of ?bipartisanship? that will bankrupt our country and wreck our currency. Coming at a time when both parties say they want to address our long-term fiscal imbalances, the compromise extension of the Bush era tax cuts should be a wake-up call to anyone who somehow expected the American leadership to ever have an ?adult conversation? about the country?s long term economic health.
Two Flawed Currencies
by John Browne of Euro Pacific Capital,
Despite America?s economic problems, the US dollar has maintained its respected status the world over ? and has even managed to maintain value in comparison to other currencies. The dollar?s charmed life stands in strong contrast to the euro, which is currently suffering from its internal flaws and the Europeans' unfortunate recognition of reality.
More Stimulus Means Fewer Jobs
by Peter Schiff of Euro Pacific Capital,
Unless politicians can be roused from their stupor, we will soon confront an imminent sovereign debt and currency crisis that will make the credit crisis of 2008 look like a happy interlude. Hopefully, when the first major shock strikes in the US, as is currently happening in Ireland and Portugal, it will finally provoke a 180-degree change of policy in Washington. Hopefully, it won't be too late to spare millions from a life of subsistence, or worse. These are my hopes, but my fear is that we are on the cusp on the largest economic downfall in modern history.
The Duel over the Dual Mandate
by Peter Schiff of Euro Pacific Capital,
Given the opposing views of the potentially parsimonious new Congress and the continuously accommodative Federal Reserve, there is a movement afoot among Republicans to eliminate the Fed?s ?dual mandate.? Prior to 1977, the Fed only had one job: maintaining price stability. However, the stagflation of the 1970s inspired politicians to assign another task: promoting maximum employment. This ?mission creep? has transformed the Fed from a monetary watchdog into an instrument of social policy. We would do well to give them back their original job.
Does the Fed Create Money?
Certain deflationists have recently gone on record saying that the increase in the Fed?s balance sheet is meaningless with regard to creating inflation because our central bank can?t print money, it can only create bank reserves. The problem with their view is that it both disregards the definition of money and ignores the process of creating bank reserves.
The Dollar Survives Again
by John Browne of Euro Pacific Capital,
As far as investors are concerned, the G-20 provided little new information, but confirmed the continuing drift. The international monetary system is still based upon the gravely flawed U.S. dollar. The Yuan will not be allowed to rise in the near term, the euro faces great political challenges, and the U.S. dollar seems continually to be devalued. Meantime, precious metals, key commodities, and hard currencies should continue to benefit.
Gold's Allure Tied to Interest Rate
The continued bull market in the price of gold has been one of the staple discussions in the financial media for the better part of a decade. But, in that time, almost no consensus has emerged to explain the phenomenon. The truth is the main drivers for the price of gold are the level and direction of real interest rates and the intrinsic value of the dollar.
A Bad Plan Poorly Disguised
by John Browne of Euro Pacific Capital,
With our economy sagging and our international clout waning, one of the few assets upon which the US can rely is the confidence that the rest of the world has traditionally showered upon us. That confidence is the reason why the US dollar was elevated to global reserve status more than 65 years ago. With so much riding on perception, Tim Geithner?s recent statements denying the existence of a dollar debasement campaign could not be seen as anything less than foolhardy.
Never Too Big To Fail Their Customers
by John Downs of Euro Pacific Capital,
As a mortgage broker during the manic years of the housing boom, I witnessed reckless financial practices on a wide scale. As a result, I was not surprised by the ?robo-signing? mess that now threatens the mortgage sector. Unfortunately, the scandal is only a small tip of the iceberg that threatens to take down the entire US banking system.
There Was a Fed Chairman Who Swallowed a Fly
by Peter Schiff of Euro Pacific Capital,
In reality, quantitative easing will produce the exact opposite of its intended result. In the short-run, it may create the illusion of economic growth and temporarily add some service sector jobs, but once the QE ends, the growth and jobs will vanish. Then, the Fed will most likely try once again to douse the fire it started with another round of QE gasoline, creating an even larger and less manageable inferno.
An Inflationary Death Spiral
I have no doubt that Bernanke will be remarkably successful in his stated goal of driving inflation higher. I simply disagree with his nonchalance about the long-term consequences. There is currently no easy exit strategy for the Fed. There is only the prospect of Americans suffering through either a deflationary depression or hyperinflation.
Beware the Fed Tide
by John Browne of Euro Pacific Capital,
This week desperation became palpable at the Fed. In both the formulaic statement that accompanied its Federal Open Marked Committee policy decision and Chairman Ben Bernanke's unusual (and clumsy) Washington Post op-ed follow up, the guardians of our currency expressed grave disappointment at the slow pace of U.S. economic recovery and emphasized the continued threat of deflation. The Fed is now pledging to defeat this recession using any monetary means necessary. Unfortunately, their embrace threatens to smother our economy.
Five Bitter Pills or One Sweet but Deadly?
The current Chairman of the Federal Reserve believes that diluting the dollar is the cure for everything from a recession to male pattern baldness. And like other snake-oil salesmen before him, Mr. Bernanke is heavy on promises and light on results. Michael Pento presents five prescriptions that money printing can't fulfill.
The One-Sided Compromise
by John Browne of Euro Pacific Capital,
Last weekend at the meeting of G-20 finance ministers China agreed to 'look into' a revaluation of the yuan and the management of trade surpluses in return for accepting America's continued dollar debasement. They also agreed to an international self-policing regime to curb currency manipulation. Secretary Geithner?s 'victory' at the G-20, however, was a Pyrrhic one. China will now become the third-largest shareholder in the IMF, and developing economies will get a six percent larger voting share.
Keep Your Head Above Dollar
by Peter Schiff of Euro Pacific Capital,
The intent of QE2 is to lower interest rates to promote job growth and avoid the growing threat of deflation. The very idea that the economy is weak because interest rates are too high, however, is laughable. Deflation is the market's cure for asset bubbles that have recently burst, and any attempt to avert it will only weaken the economy further. What we need now is to make hard choices, not engage in more easing - to deleverage, not borrow more.
Don't Fear the Euro
When the euro hit a low of $1.1917 against the US dollar on June 7th, 2010, the airwaves crackled with assertions that the European common currency, beset by Greek debt problems and intra-union discord, was destined to trade at parity with the greenback. They were wrong. Since then, the euro has risen over 17% against the dollar, hitting $1.3961 today. The current upswing, delivered courtesy of the Fed, has at least temporarily silenced the euro?s critics.
Decoupling: Alive and Well
When the global economic crisis began in 2008, many forecasters doubted that the world economy could return to growth without the U.S. consumer. Whether you are looking at ASEAN, OPEC or the EU, however, it is clear that decoupling is the order of the day; the world economy is rebuilding itself with China as its engine and hub. In the old days, it was said that when the United States sneezed, the rest of the world caught a cold. This time, they might just excuse themselves and move to the next car.
Taxes Won't Cut It
by Peter Schiff of Euro Pacific Capital,
Congressional Republicans and Democrats are engaged in a heated debate over which Americans deserve not to have their taxes raised, with both claiming that some form of tax cut will stimulate the economy. The real impediment to economic growth is not taxes, however, but the government spending that makes high taxes necessary in the first place. Rather than trying to disguise another misguided round of stimulus in the cloak of a tax cut, we should deliver what the economy really needs - genuinely smaller government.
Global Currency Meltdown
by John Browne of Euro Pacific Capital,
The Fed is being pressured to erode the value of the U.S. dollar in order making foreign sales more lucrative in nominal terms. But this form of stealth protectionism will fail just as surely as more overt trade barriers. Only when currencies are allowed to float freely will trade imbalances be corrected. Washington's attempt to force the issue is only doing harm to the world economy by introducing uncertainty and punishing the prudent. The Fed has gone radioactive, setting off a global currency meltdown. Perhaps only gold can truly shield investors from the fallout.
Gold Vs. U.S. Bonds - Which Do You Believe?
Any psychoanalyst looking at the behavior of investors today would see clear strains of schizophrenia in a comparison between the markets for gold and U.S. Treasury bonds. Low bond yields warn of deflation, while high gold prices and a declining dollar presage hyperinflation. Federal Reserve Chairman Ben Bernanke will not stop the presses until inflation has a firm and undeniable grip on the American economy. Since the chairman has shown no will to hit the brakes, you would have to be mad to ride the yield curve alongside him.
The Hail Mary
by Peter Schiff of Euro Pacific Capital,
The Fed must raise interest rates aggressively, shrink its bloated balance sheet, and allow the real recession to finally run its course. It will be much more painful now than it would have been in 2008, but at least this time the pain will end and real recovery will take hold. By forcing the federal and state governments to slash spending, sound monetary policy will allow market forces to rebuild a solid foundation upon which future prosperity may be built.
Schiff Responds to Dudley, Fed
by Peter Schiff of Euro Pacific Capital,
NY Fed President William Dudley's outrageous statements Friday closely conform to recent pronouncements from other Fed officials and confirm that a massive round of dollar devaluation is poised to begin. Seemingly overnight, the Fed appears to have altered its mandate, ditching its former goal of "price stability" in favor of "moderate price inflation." While no one is under the illusion that the Fed has kept prices stable over the last century, it used to be that the governors would at least pretend to fight inflation. Low inflation used to be the aim, now it's the enemy.
Race to the Bottom
by Peter Schiff of Euro Pacific Capital,
At one time, a strong currency was viewed as a reward for the reliability, competitiveness and growth of a national economy. Now governments look to take market share from competitors by lowering the cost of their exports through a beggar-thyself policy of habitual currency debasement. Although such a policy may benefit those who buy the products, it is a burden to the country's own workers, who have to get by on subsistence wages. More successful economies will compete on quality and innovation, rather than price alone.
Why David Tepper Is Only Half Right
Once domestic bond investors regain consciousness -and they will most likely do so in concert with foreign holders of U.S. debt and currency - a debt and dollar crisis will emerge. Then the only buyer of U.S. Treasury debt will be the Federal Reserve. An economy can't persist for very long by buying its own debt with printed money. The result will be a crumbling currency and soaring interest rates, especially on the long end of the yield curve. When rates rise despite the Fed's efforts to keep them down, that's game over for the 'recovery.'
A Candid Appraisal of the Recovery
by John Browne of Euro Pacific Capital,
Over the last two weeks, seemingly good economic news offered some shreds of optimism to a stock market that was desperate for a pick-me-up. Although it hard to begrudge the punch drunk for grasping at a little hope, however, investing is a dispassionate endeavor that calls for close and realistic analysis. Any structural changes to the economy will come slowly ? and perhaps too late. Meanwhile, whatever actions the Fed takes in the name of further stimulus will sacrifice long-term sustainability in favor of a short-term boom.
The 'Deleveraging' Deception
There is wide agreement among economists and the financial media that our lackluster economic performance stems from continued 'deleveraging' among consumers and businesses. U.S. debt as a percentage of GDP continues to climb, however, which should put to bed any talk of a deleveraging or deflating economy. Consumers are clearly only part of the equation ? and, for now, the smaller part. The U.S. government, in fighting the claimed deleveraging, is sending the total debt level into the stratosphere. As we watch it soar upward, the dollar steadily drifts downward.
Japan Invervenes to Bail Out America.com
by Team of Euro Pacific Capital,
This week the Japanese government decided to intervene in the foreign exchange market, initiating a vigorous campaign to buy U.S. dollars, thereby stemming the rise of the yen and pulling up the greenback. The effects were immediate, with the yen falling an astonishing 3 percent on the day of the announcement. The media spin doctors cast the Japanese decision as an attempt by the island state to prop up its own fragile economy. The intervention was actually done to help American consumers buy more cars and electronics from Japan.
Does the Fed Ultimately Control Interest Rates?
In forecasting the consequences of current economic policy, many pundits are downplaying the risks associated with the surging national debt and the rapid expansion of marketable Treasury securities. In the end, central banks can only temporarily distort the savings and demand equation. The more the Fed prints, the higher the eventual rate of inflation will be. If mainstream pundits truly believe the Fed can supplant the entire public and private market for debt indefinitely, then we won't want to be around when that fantasy inevitably becomes a nightmare.
Don't Doubt the Double-Dip
A few weeks ago Nouriel Roubini, widely regarded as one of the more pessimistic figures on Wall Street, made headlines by raising his forecasted likelihood of a 'double-dip recession' to a terrifying 40 percent. The vast majority of 'mainstream' economists described these predictions as far too gloomy. Roubini, however, may be right. As the high from last year's monetary and fiscal stimulus wears off, there is a good deal of evidence suggesting that the U.S. economy is weak and deteriorating, and that a renewed contraction in GDP is a near certainty.
Buy and Hold Still Holds
by John Browne of Euro Pacific Capital,
As Americans have justifiably lost faith in the stock market, the classic buy-and-hold investment strategy has fallen from favor. The problem is that retail investors are wrongly equating the performance of stocks as a class with the trajectory of American stocks in particular. Fortunately, buy-and-hold still works in many parts of the world. Meanwhile, retail investors sitting in U.S. bonds and bank accounts will ultimately pay a steep price through inflation.
Bernanke Out of Bullets, But Not Bombs
For good or ill (mostly ill), the Fed can never run out of ammunition. Their bullets cost nothing to produce. Unfortunately, unconventional monetary tools can cause far more damage to the economy than regular policy. We must understand that the Fed can shower liquidity directly on the consumer in any amount it wants. The political pressure to do so will only increase as unemployment rises and economic growth falters. Therefore, rather than fearing phantom deflation, investors should prepare their portfolios for the real upcoming battle with intractable inflation.
Flying Blind
by Peter Schiff of Euro Pacific Capital,
Today's weak GDP numbers have finally caused the mass of economists to revise downward their formerly optimistic recovery forecasts, with many finally entertaining the possibility of a "double dip" recession. It should be obvious by now that these economists only have the capacity to describe where the economy is moving in the short-term...they have no ability to explain the reasons behind the macro trends or make predictions that go beyond the next data release.
The Fed's Biggest Bubble
Even top-flight Wall Street analysts seem to believe that the Fed's doubling of the monetary base after the credit crunch has not had an inflationary impact on our economy. Their logic can be summed up like this: "The money the Fed created and dropped from helicopters has all been caught in the trees." In other words, the Fed is creating money, but it is just being held as excess reserves by the banking system instead of being loaned to the public.
Carts and Horses
by Peter Schiff of Euro Pacific Capital,
In a CNBC debate last week, former Labor Secretary Robert Reich presented a set of contradictory beliefs that unfortunately reflect the conventional wisdom of modern economists. In a discussion with Wall Street Journal columnist Stephen Moore, Reich correctly and comprehensively listed the reasons why American consumers could spend so lavishly before the crash of 2008 and why they can no longer keep up the pace.
Happy Birthday Social Security?
In his weekly radio address this past Saturday, President Obama happily commemorated the 75th anniversary of Social Security. This milestone, however, is nothing to celebrate. For although the president spoke earnestly about the 'obligation to keep the promise' of Social Security, in reality, the program will wreck the government's finances within 10 years.
Take Your Pick: Sinking US or Soaring BRIC
by John Browne of Euro Pacific Capital,
If America is headed for depression, then US equity, real estate and even bond investments may become increasingly risky relative to the BRICs. Investors still holding US securities and bonds might wish to follow the example of the People?s Bank of China and begin harvesting their dollar gains. With the proceeds, investors should allocate to economies showing growth based on genuine demand and solid fundamentals.
Dr. Keynes Killed the President
by Peter Schiff of Euro Pacific Capital,
Modern-day Keynesians seek to significantly increase debt levels in an effort to boost aggregate demand. In their view, only once recovery takes hold due to government spending, money printing, and borrowing does a discussion of deficits become appropriate. The U.S. has persisted under this theory for close to a century. As a consequence, Washington is now entirely dependent on the reserve currency status of the dollar and the continued hibernation of bond vigilantes. It's almost as if the federal government is daring its foreign creditors to pull the plug.
No Exit - Stage Left or Right
by Peter Schiff of Euro Pacific Capital,
The coming doses of quantitative easing from the Federal Reserve will finally spark adverse reactions, first in the dollar and later in the bond market. When a falling dollar forces consumer prices and long-term interest rates to rise, the Fed's actions will be rendered impotent. The Open Markets Committee will have to make a horrific choice: fight inflation by tightening policy into a weakening economy, or fight recession by allowing inflation to burn out of control. It's obvious that they will choose inflation, all the while pretending that it doesn't exist.
Why Jobs Have Gone AWOL
There are three primary reasons why the U.S. is suffering from structurally high unemployment: a pervasively irresponsible monetary policy, the continued attenuation of our manufacturing base, and an overleveraged consumer who must now reconcile his balance sheet. In reality, the latter two conditions are a direct result of the first. They are the result of a government that seeks to micromanage the cost of money and the rate of economic growth.
Monetary Cards on the Table
by Peter Schiff of Euro Pacific Capital,
The economic world seemed to be drifting into two opposing camps: the Washington-based 'stimulators,' who insist that more government debt is the best means to end the financial crisis, and the Berlin- and London-based 'austerians,' who argue that debt is the crisis itself. If recent economic data and currency movements can be considered votes of confidence, then the stimulators should be sweating.
America, the Odd Man Out
by John Browne of Euro Pacific Capital,
At long last, a good portion of mainstream economists now concede that a 'double-dip' recession is in the cards for the United States. To head off the pain, 16 top economists sent an open letter to the President urging him to 'stimulate' the economy with a massive new round of government spending. We feel this is a recipe for turning a recession into a depression.
A Precious Metals Bubble?
by John Browne of Euro Pacific Capital,
In the first few days of July, the prices of gold and silver appeared to break a five-month upward trend by drawing back about 5 percent from the record June peaks. Despite many similar corrections that have occurred frequently during the long bull market in precious metals, pundits nevertheless looked to draw bold and significant conclusions from the drop.
Why Not Another World War?
by Peter Schiff of Euro Pacific Capital,
There is overwhelming agreement among economists that the Second World War was responsible for decisively ending the Great Depression. The truth is, however, that America cannot spend its way out of the current crisis, no matter how great a spectacle it creates. Even if the government spent on infrastructure rather than war, it would still have no means to fund it, and there would still be no guarantee that the economy would grow as a result. Instead, what the country needs is more savings, more free enterprise, more production and a return of American competitiveness in the global economy.
Government Policies Pushing Towards Depression
by John Browne of Euro Pacific Capital,
As leaders around the world look to tighten the reins on out of control spending, President Obama and his Democratic supporters in Congress believe that their stimulus actions have succeeded and should be redoubled. Armed with nothing more than faith in government and a belief that spending is both a means and an end, it appears that the U.S. stimulus policy will continue. The net result of these efforts will not be a more vibrant economy, but the perpetuation of fear and confusion in the business community and the continuing expansion of deficits that will lead inevitably to higher taxes.
In the Shadow of the Dragon
by John Downs of Euro Pacific Capital,
For investors, the Chinese push into frontier markets may offer promising returns in the medium-term. For example, emerging market bonds have rallied every quarter since the end of 2008, and posted record inflows this year. Unfortunately, accessing frontier markets has historically been difficult for small investors. Poor accounting practices, corruption, lack of local knowledge, and illiquidity are risks to be considered. For the right investor, though, there are increasing opportunities to invest in these markets via enterprising Chinese firms.
Results 401–450
of 483 found.
