Friday, December 14, 2012

Peter Schiff: Anyone with Wealth in the U.S. Dollar should be Concerned


By Peter Schiff

By upping the ante once again in its gamble to revive the lethargic economy through monetary action, the Federal Reserve's Open Market Committee is now compelling the rest of us to buy into a game that we may not be able to afford. At his press conference this week, Fed Chairman Bernanke explained how the easiest policy stance in Fed history has just gotten that much easier. First it gave us zero interest rates, then QEs I and II, Operation Twist, and finally "unlimited" QE3.

Now that those moves have failed to deliver economic health, the Fed has doubled the size of its open-ended money printing and has announced a program of data flexibility that virtually insures that they will never bump into limitations, until it's too late. Although their new policies will create numerous long-term challenges for the economy, the biggest near-term challenge for the Fed will be how to keep the momentum going by upping the ante even higher their next meeting.

The big news is that the Fed is
now doubling the amount of money it is printing. In addition to its ongoing $40 billion per month of mortgage backed securities (to stimulate housing), it will now buy $45 billion per month of Treasury debt. The latter program replaces Operation Twist, which had used proceeds from the sales of short-term treasuries to finance the purchase of longer yielding paper. The problem is the Fed has already blown through its short-term inventory, so the new buying will be pure balance sheet expansion.

To cloak these shockingly accommodative moves in the garb of moderation, the Fed announced that future policy decisions will be put on automatic pilot by pegging liquidity withdrawal to two sets of economic data. By committing to tightening policy if either unemployment falls below 6.5% or if inflation goes higher than 2.5%, Bernanke is likely looking to silence fears that the Fed will stay too loose for too long. While these statistical benchmarks would be too accommodative even if they were rigidly enforced, the goalposts have been specifically designed to be completely movable, and hence essentially meaningless.

Bernanke said that in order to identify signs of true economic health, the Fed will discount unemployment declines that result from diminishing labor participation rates. It is widely known that a good portion of unemployment declines since 2009 have resulted from the many millions of formerly employed Americans who have dropped out of the workforce. But like many other economists, Bernanke failed to identify where he thinks "real" employment is now after factoring out these workers. So how far down will the unemployment number have to drift before the Fed's triggering mechanism is tripped? No one knows, and that is exactly how the Fed wants it.

A similarly loose criterion exists for the Fed's other goalpost - inflation. Bernanke stated that he will look past current inflation statistics and look primarily at "core inflation expectations." In other words, he is not interested in data that can be demonstrably shown but on much more amorphous forecasts of other economists who have drunk the Fed's Kool-Aid. He also made clear that rising food or energy prices will never fall into the Fed's radar screen of inflation dangers.

For as long as I can remember (and I can remember for quite some time) the Fed has stripped out "volatile" increases in food and energy, preferring the "core" inflation readings. But in the overwhelming majority of cases, the headline numbers are significantly higher than the core. In other words, Bernanke simply prefers to look at lower numbers. In his press conference, he made it clear that the Fed will avoid looking at price changes in "globally traded commodities," that are all highly influenced by inflation.

These subjective and attenuated criteria give Fed officials far too much leeway to ignore the guidelines that they are putting into place. If the Fed will not react to what inflation is, but rather to what it expects it to be, what will happen if their expectations turn out to be wrong? After all, their track record in forecasting the events of the last decade has been anything but stellar.

The Fed officials repeatedly assured us that there was no housing bubble, even after it burst. Then they assured us the problem was contained to subprime mortgages. Then they assured us that a slowdown in housing would not impact the broader economy. I could go on, but my point is if the Fed is as spectacularly wrong about inflation as it has been about almost everything else, will they be able to slam on the brakes in time to prevent inflation from running out of control? And if so, at what cost to the overall economy?

The Fed is committing to more than a $1 trillion annual expansion in its balance sheet, an amount greater than the total size of its balance sheet as late as 2008. Most forecasters believe that the Fed will have $4 trillion worth of assets on its books by the end of 2013, and perhaps more than $5 trillion by the end of 2014. If conditions arise that require the Fed to withdraw liquidity, the size of the sales that would be required will be massive. Who exactly does the Fed believe will have pockets deep enough to take the other side of the trade?

As the biggest buyer of treasuries, it is impossible for the Fed to sell without chances of collapsing the market. Surely any other holders of treasuries would want to front-run the Fed, and what buyer would be foolish enough to get in front of the Fed freight train? The bottom line is that it is impossible for the Fed to fight inflation, which is precisely why it will never acknowledge the existence of any inflation to fight.

But perhaps the most absurd statement in Bernanke's press conference was his contention that the Fed is not engaged in debt monetization because it intends to sell the debt once the economy improves. This is like a thief claiming that he is not stealing your car, because he intends to return it when he no longer needs it. To make the analogy more accurate, there could not be any other cars on the road for him to steal.

Without the Fed's buying, it would be impossible for the Treasury to finances its debts at rates it can afford. That is precisely why the Fed has chosen to monetize the debt. Of course, officially acknowledging that fact would make the Fed's job that much harder. Without the monetization safety valve, the government would have to make massive immediate cuts in all entitlements and national defense, plus big tax increases on the middle class.

As I wrote when the Fed first embarked on this ill-fated journey, it has no exit strategy. The Fed adopted what amounts to "the roach motel" of monetary policy. If the Fed actually raised rates as a result of one of its movable goal posts being hit, the result could be a much greater financial crisis than the one we lived through in 2008. The bond bubble would burst, interest rates and unemployment would soar, housing prices would collapse, banks would fail, borrowers would default, budget deficits would swell, and there would be no way to finance another round of bailouts for anyone, including the Federal Government itself.

In order to generate phony economic growth and to "pay" our country's debts in the most dishonest manner possible, the Federal Reserve is 100% committed to the destruction of the dollar. Anyone with wealth in the U.S. dollar should be concerned that economic leadership is firmly in the hands of irresponsible bureaucrats who are committed to an ivory tower version of reality that bears no resemblance to the world as it really is.

Peter Schiff is the CEO and Chief Global Strategist of Euro Pacific Capital, best-selling author and host of syndicated Peter Schiff Show.


  1. This week, the Federal Reserve reiterated its "price inflation" target of 2% as measured by the PCE index. The full index INCLUDING food and energy. The Federal Reserve does not target core "price inflation". You and everybody in this land can measure the success of their policies by this metric. Their exists an abundance of research showing that today's core "price inflation" (excluding food and energy) is a better forecast for medium run "price inflation" including food and energy.

    Just today, the recent CPI numbers showed a drastic fall in energy prices. By your logic the Federal Reserve should do its utmost to use this fall (which is widely assumed to be permanent - well outside of this blog at least) for more stimulus. It did not, as Ben Bernanke outlined in his press conference. Gas prices in my community are falling rapidly, with a gallon going for $3.07, down dramatically. Is this all part of the government conspiracy?

    If you are so sure you know more than the Federal Reserve, please provide your forecast for inflation next year (2013). The Fed did yesterday. If you feel you cannot give a precise number, I agree, uncertainties abound. Give me a range of values with a probability distribution for them. Is seems you feel a fast increase of "price inflation" is imminent. What exactly should I prepare for?

    1. You are a liar. NOBODY "widely believes" that energy prices have fallen permanently. How could you even begin to justify that statement. Where is your data on extraction rates? Where is your data on well depletion? What an absolutely absurd comment.

    2. Most of the difficulty with inflating the monetary base is it depends where the money goes. Inflation reported at shadow stats the way they used to track it ie the correct way shows a much higher inflation rate. A lot of the money is going into bank reserves and money velocity is way down, in that way inflation is staying manageable, because it isn't being loaded into circulation. The problem becomes interest rates, the fed cannot keep them this low without risking creditors cutting off treasury buying, which would collapse the market. It is essentially walking a tightrope where if it raises rates, collapse, keeps monetizing eventually that money starts circulating more normally and prices skyrocket, lastly it can try to back out the market by not monetizing but again the bond market would collapse and destroy most banks again. The other reason inflation isn't as high is America's number one export is dollars, and they are busily infalting asset bubbles in other countries that are pegged to the dollar. With countries choosing to stop using the petro dollar, more and more will stay in the US also bad for inflation.

    3. Don't know what country you're living in but where I live the electric bill is MUCH higher than it was just a few years ago.

    4. To the Anonymous at 7:10.
      Thanks for calling me a liar, that really makes your argument much stronger and makes me more inclined to take you seriously. All research by the Federal Reserve or the IMF has pointed to temporary factors for the rise in commodity prices last year. Indeed they are falling now. Unless these factor recur which seems unlikely, commodity price falls will be permanent (meaning they won't increase as much again as they did a couple of years ago). Google it, you'll find the link. Obviously you might think that they are wrong. In which case, give me your forecast!

      To Dave Schuman:
      Why does it make sense to assume no substitution in the CPI of any goods since 1990, as shadowstats does? How many tape players do you still buy? How many LPs? How many 5.25'' floppy disks? If more people are now vegetarian than 20 years ago shouldn't the weights for tofu be increased and the ones for steak be decreased? Assuming no substitution in the CPI is nonsense, the average consumer buys very different goods and services today than 20 years ago, I am sure you do. Cell phones? Flat screen TVs? Tank-less water heaters? The list goes on and on. "Price inflation" as measured by shadowstats is nonsense. You can see this most clearly in his graph 13 on his No445 hyperinflation update. Do you really believe that people are worse off by 1/3 compared to the early 1970s? In other words to you really believe that per capita GDP in the US has been shrinking dramatically since the early 1970s in real terms, come on...

      To Mike:
      And my gas bill is much lower. What do individual goods and services prove? Nothing. Look at the whole index, the CPI or the PCE to judge "price inflation", not individual goods or services. I can give you almost as many counterexamples: Apparel, Electronics, Used cars all have seen much less price increases than average.

    5. So skyrocketing medical care, housing cost's, commodities, these don't count somehow?
      And simply because we buy different products is irrelevant, technology changes, but given advances in technology prices should generally be falling not perpetually moving upward. Hedonic adjustment, and substitutions are jargon and nonsense to conceal Keyensian arguments against inflation, and keep the govt line that inflation is low. How about America's productive capacity, the balance of trade, median incomes, the list goes on, America is living on its past generations credit card, except in movies and technology, and war making. I would think that a bottle of coke 10 years ago (2 litre) was under $2 and is now almost $3 could be a good example, not to mention gas prices, all the evidence is for the insidious tax of inflation, to deny it because of hedonics is just a waste of time to argue,

    6. "If you are so sure you know more than the Federal Reserve"

      That's one of the problems with central planning: there will always be arguments about who is the smartest smarty-pants in the room. And it will be the guy with the force of government behind him who gets to decide what is "right".

      Another problem with this line of thinking is that there is no way to know what might otherwise have been. With the incredible advances in technology and productivity, shouldn't the basics of life like food, shelter, energy, medical services, and clothing cost less today than they did 30 years ago, in both real and nominal terms? I would think so.

      We should have undergone an incredible period of "deflation" (oh, the horror of falling prices!) with all the increases in productivity and innovations in technology in my lifetime. And even over the last four years, yes, the Fed has "kept a lid on inflation" to some extent (ignoring some things and speaking domestically), but shouldn't there have been market-clearing price declines across most sectors since 2008? I'm talking on the order of 20-50% or more?

      So whether price inflation is 2% or 12% in 2013, and whether anyone can agree on what the right measure is, let alone the right "target", why is the default assumption that there should be a small group of smarty-pants who are allowed to try to force what the prices of things should be for 300 million people?

    7. Anon at 8:33.
      The reason for having a central bank (the government) in control of the currency is market failure due to asymmetric information and external effects. Without a central bank (in the free banking era in the US for example) bank failures and panics were much more common and widespread. Before 1860 when banknotes circulated as currency, their individual discount value was unknown once used outside of the immediate area where they were issued. In a much more integrated economy 150 years later this problem would be crippling.

      If prices had fallen over the last four years by the magnitude mentioned (20-50%) every single business (small or large) which had borrowed before 2008 would have failed. Many more households would have defaulted, all banks (absent government bailouts) would have failed. We would have seen riots in the streets, justifiably. Even retirees probably would not have been happy...

      The reason why we have not seen falls in the price of medical services is commonly referred to as Baumol cost disease or the Harrod-Balassa-Samuelson Theorem. Productivity increases are often much slower in services (health care, higher education) than in manufacturing. Thus increasing relative prices in the former compared to the latter.

      Dave Schuman:
      Of course they count! Look at the CPI, everything you mention and everything I mentioned and gas and steak are included using the weights (regularly updated) of the purchasing behavior of the average household. Using these weights consumer prices have increased a bit less than 2% last year.

      I am not sure why allowing for the substitution from tape players and LPs to iTunes and CDs is nonsense. This seems evidently sensible to me. So does adjusting at least somewhat for quality changes. My computer is a lot better (and now also includes a CD player! And a TV! And a phone!) than the one I bought in 1990. Why does it make sense to not change ANYTHING in the CPI since 1990 as shadowstats does? How is arguing like this a waste of time? I personally use my cell phone a lot, don't you?

      I am not sure what you mean when referring to the US productive capacity which surely is much higher (measured by potential GDP per person) compared to 20 years ago, you yourself also refer to massive productivity gains. One part of the argument does not seem to match the other.


      I'm not sure what mr. Anon here is arguing that there's no inflation or the CPI is reliable. The above link is a good starting point on the CPI. So spend a couple days @ and you'll find all the resources you need to better understand my point.

    9. To the anon arguing that a central bank is necessary due to "information asymmetry and external forces": are you seriously arguing that the Fed has more/better information than the millions of free individuals making independent decisions about their own savings and purchases? That is more than ludicrous.

      And as to the alleged panics of the free-banking era, first, I've read differing accounts of their frequency and breadth; second, the failures that did occur were contractual failures (a bank failing to keep the gold or silver to match the noted they issued); and third, as such these failures were failures of the promises of paper currency - much like the promises made for our paper today.

      And at the end of the day, all you're proposing is that you (or someone) is smart enough to somehow have the "right" to control money for everyone else. I tell you what, why not allow competition in "legal tender" and lets check back a year later. (and don't tell me we already have competition - guys with guns will show up at my office if I try to pay my employees in something other than fed notes.)

    10. To Dave Schuman:
      That link is quite good. It argues that the CPI OVERSTATES "price inflation" not UNDERSTATES it as for example shadowstats incoherently tries to argue. Thanks for this! Did you read it? It talks about the problems of NOT substituting in the index and NOT doing adjustments for quality which you label "Keynesian" above. I did not know that Mises wiki is a Keynesian outlet. They list one for one the arguments I made above...

      To anon at 9:00.
      Correct, I expect the Fed to be MUCH MUCH better at this than myself. I don't want to spend countless hours to pour over banks' balance sheets to assess the quality of banknotes. I would expect that many people would find this even less appealing than I. The bank knows its type outsiders do not and face very high information costs. Also even if you are willing to do this, any counterparty in a trade might not. This is the problem of external effects (not forces). Hence government monopoly can solve these blatant problems of market failure.

      As an employer I would never accept private promises of payment, management has always better information about the state of the firm. Enron here is a prime example, how did the shares which employees received work out in the end? That's just the example most commonly used as form of payment with private assets. Many people here on this board, including the author are very skeptical of banks, why are you so happy to accept their banknotes without question?

    11. You're right. I give up. How could I ha e failed to see how brilliantly the Fed had managed the economy over the past decade?! There have been virtually no price distortions or malinvestments to speak of, and my retired father is foolish to have hoped that his lifetime of frugality would see him through his old age with a moderate return on his savings.

      Sarcasm aside, you are a master of the bait and switch. What bank notes do we skeptics accept without question? Are you talking about the Federal Reserve's notes whose current and future value are subject to change at the whim of the printer-in-chief? I think the questions with which we consider these notes is the root of our skepticism. And where counterparty risk is a concern, shouldn't market participants be able to take that risk on themselves without the ever-benevolent and altruistic Bernanke monopolizing that unto himself? There is profit in risk just as there can be loss. And there are market solutions to information asymmetry and risk that dont rely on force or the threat of force.

    12. Did you actually read the article? It says that the CPI is based on a fixed dollar amount, which does not exist, and that just because the Dow is 11,000 now doesn't mean it's worth 11 times what it was in 1969. You took 1 small section of the article to justify what you are trying to "prove" not what the article articulated that it's a flawed measure of economics.

    13. This Anon's been bait an switching on here for a couple weeks. ( Unsubstantiated claims intermingle with logical fallacies and fundamental misunderstandings. Not worth your time to debate (at this point). If you insist, however, the easiest way to see (s)hes not serious is to ask ONE question and TRY to get a position on it. Good luck.

      For example, Anon 12:14, what was the price of a bottle of Coke pre-Fed and how does that compare with the 2012 price? How was this accounted for?

      I love the rants about 'market failure'. It's easy to spot the armchair economists with no real life experience on how markets work. If you've ever been to a street market in a third world country (currently live in one, lived in many) then you understand the market doesn't 'fail'. Only government intervention allows for this. No 'shortages' of tomatoes, even when there's a poor crop. No 'demand insufficiency' when the corn harvest comes in stronger than expected. Most of these market participants can't read, but the ones that are there week after week somehow manage to turn a profit for their products. No taxes, no intervention, no coercion. Just voluntary mutually beneficial exchange.

    14. Dave Schuman:
      Why do you keep digging? Get the link you posted, it is 522 words long. The majority of these deal with the CPI overstating inflation not understating it as shadowstats claims. It lists the same reasons I have above. It is not a small section, it is the main section. Once more, in my reading the main flaw mention in YOUR LINK is overstating inflation with the CPI. It is this flaw which the BLS addresses to remove substitution bias and quality adjustments, how I am in any way misrepresenting what is stated on "Mises wiki"?

      I have responded to all questions asked, haven't I? I am not sure how the price of a Coke pre-Fed is relevant. The price was a nickel until the 1950 for a long time, it is now more than $1. My point is that this is not failure of policy. The original question seemed to suggest that nobody would buy the $1 bottle of Coke in a hypothetical scenario. I pointed out that this is in fact happening as we speak. How I am not expressing my position and clearly answering the question? In a similar fashion I was asked whether I suggested the Fed had more/better information than individuals. I answered in the affirmative and took a clear position as to why I thought so, backing it up with hopefully easy to follow logic. It seems that some people imagine (yes this is unsubstantiated conjecture) having their current salary and being able to shop with prices in the 1950s, 1920s, or 1890s if only the Federal Reserve hadn't been up to its evil ways. That's ludicrous.

      Markets for tomatoes and many many more are not plagued by market failure, because they don't suffer from asymmetric information / external effects. I agree with you. Very often, government failure is also much more of a concern in most countries at most times, I agree with you also. It seems you are exercising bait and switch here. I never claimed that ALL markets are subject to market failure, but banks and financial markets in general are very prone.

      However some markets do suffer from known inefficiencies. Banking is one where this problem is particularly wide-spread and crucial. How do financial markets serve the vast majority of people in all the developing countries you have lived? Very poorly in the absence of mechanisms to address the failure.

      And where are my logical fallacies? Where are fundamental misunderstandings? I noticed that you did not reply to my earlier posts on substitution in the CPI. Do I take this to mean you agree that you suffered from fallacies when you argued against substitution (endorsed by the Mises Institute link for example) or when you claimed the CPI does not include essential goods and services which everybody buys? Where are the fallacies and misunderstandings? I have outlined my positions in all posts at length directly responding to the questions asked and attacks on my own position (even ad hominem ones).

      And finally, nobody is backing up their Austrian economics telling me what type of "price inflation" to expect next year. The author of the blog is not (using ambiguous terms like "strong", neither is Mr. Schiff.

    15. Too many posts to keep track of for responding, in addition to working. I will address what I see as the most pertinent issues, which have not been addressed by others.

      I believe it is your insistence on asymmetric information and external effects is the issue. What exactly does asymmetric information mean? It means that one party knows more than another in any given transaction. You are telling me that this only happens in some 'markets', and thus justifies intervention in these markets. Let's examine a particular case, say, tomatoes since we were on the subject. You mean to suggest that every party to every transaction in the market for tomatoes has all available knowledge? That is, every market participant is omniscient? If this is indeed your position I would love a detailed explanation.

      The point is, in every market for every good there exists a discrepancy in the knowledge between participants. Every single market has 'asymmetric' knowledge. No market participant (whether an individual or a group of individuals) has perfect knowledge. This is precisely the role of the entrepreneur, to identify these discrepancies (that is profit opportunities) and provide value to market participants. He does this by buying/selling/providing services, by participating in the market where he has identified a profit opportunity.

      Why is this 'asymmetry' so visibly prevalent in banking? Precisely because of the cartelized nature of financial markets, both domestically and internationally, and the huge amount of intervention. Market participants who HAVE knowledge and perceive profit opportunities are impeded from acting upon them. Think, the non-crime of insider trading. This causes greater inefficiencies and eventually crises.

      As far as the Coke example, you told us before that the Fed's record on inflation is spectacular and impeccable (cant remember the exact verbiage or in which post). I would hardly say that a 95% increase in prices over the lifetime of an organization whose original explicit mandate is that of 'controlling price inflation' is impeccable.

      I have not made any ad hominem attacks, but I will say I have employed less than amicable language. I must admit this does not benefit my (our) cause. I admire your persistence, and after reading your posts to RWs reply most recently I believe that I have preemptively misjudged you. I do apologize.

      I await your response to the above.

    16. Thanks Scootsmcgoo for the last paragraph, I appreciate it.
      In response to your points:

      To speak to the Coke example first. The Federal Reserve does not promise fixed prices. I outlined the reasoning for not aiming for zero "price inflation" in one of my posts. The main ones are the zero-lower-bound for interest rates and downward wage rigidities (money illusion), too many posts indeed. Thus the goal is around 2% but STABLE "price inflation". On this goal the record is very very good. You may not like this goal, but you know what it is, and can thus prepare for it.

      On asymmetry:
      For tomatoes, there is some asymmetry but it is not as pronounced or crucial to the transaction. You can tell if a tomato is ripe or not by the color, so can the producer. The producer may have additional information about the quality but you can inspect one easily as well (size, color, smell). You can also first buy one, bite into it, and then with very little hassle return for more.

      Banks role is to channel savings from households to investors. Say you live in a small town of Springfield. There are many small businesses asking for loans to get started or to expand. All think they have great ideas, some are crooks. Banks specialize in this business of distinguishing one from the other. Without banks, households (especially those with relatively modest savings) would face daunting if not impossible information costs to find out who is creditworthy and who is not. Obviously (following Akerlof's trailblazing example), the crooks would be willing to offer the best terms to any lender, the crooks will just take off with the money. The honest businesses get left behind. Households will now not lend to anybody, the market for credit breaks down. Many small businesses cannot realize valuable project, growth and innovation suffer, households are poorer.

      Banks now make it their business to solve this problem for both households and businesses. Households rely on bank deposits as a relatively safe way to alleviate the problem of acquiring loads of information individually and also to keep high liquidity (deposit insurance eliminates the risk for households at the cost of modest moral hazard which leads to more regulation for banks).

      The bank works as an information hub for Springfield, bankers accumulate information on the local economy and the prospects of small businesses. After some years, banks will hopefully get better at this and fewer and fewer crooks will get loans. This also means that banks need to make loans with deposits they accepted, fractional reserve banking is the only way to solve the problem. This gives rise to the possibility of errors and bubbles if this mechanism breaks down. Then the issue becomes a cost benefit analysis. Banks have been used for centuries as a source of relatively cheap and easy to get (you know where to go as a small business) loans. Curtailing them would lead to a huge hit for everybody, growth tanks. That's an important external effect. It is also the reason why a society without a developed financial sector will not grow.

      In my opinion (mainstream economics) these problems argue for government intervention in financial markets (providing a safe asset namely central bank money, the possibility to function as lender of last resort, deposit insurance, regulation of bank activities, leverage limits and so on.) Talking with libertarians in the past, I know that their position is that these interventions make the problem even worse than it was before. I disagree. I believe that the evidence over the last centuries is showing that without somewhat developed financial markets and effective central banking the phenomenal increases in living standards in the US would have been impossible. Recent excesses notwithstanding (which need to be analyzed and rooted out, and yes, I agree, that the problem of regulatory capture and the revolving door is severe and not addressed as of yet.)

  2. Awesome! And spot-on!

    The only part missing was how to identify when the inflationary Crack-Up Boom will be imminent:

    When rates start to rise - triggering excess reserves to be lent out - causing a commodity super-boom - causing a rush for the exits and the death of fiat $.

  3. Can anyone explain why the monetary base has not substantial risen recently?

    1. The freaking money is in the banks, not being lent out. The pricks, like Bernanke are too scared to give it directly to the people. Same old, same old. Shit on the ordinary folks

  4. Terrifying, but 100% correct. The can is getting too heavy to kick for much longer...

    1. Or in other words, the eggs are about to scramble.

  5. To summarize: The U.S. Dollar is Sonny Corleone, the Federal Reserve is the toll booth, and Ben Bernanke and the FMOC are the banksters wielding the tommy guns. You know the rest.

  6. A key to understanding Austrian Economics which most Austrian Economists fail to understand is that the real world operates far slower than our imaginations. This is because the real world is far, far larger and more complex than a brain (about 6" wide) is capable of realizing. Austrian Economists consistently underestimate how far down the road the perverts can kick the can, or how long they can manipulate the price of gold downward, or how high unemployment can go before everyone understands that they are in the greater depression. Patience Doomcasters, your day will come.....slowly.

    1. I think you're on to something there. I finally gave up on my t-bond short fund today.

    2. You are correct about the slow rate of change in the economy due to policy initiatives. I definitely see the ten year note yielding below 1% before the masses begin to regain a realistic view of US creditworthiness. Once it happens though, I think the rush for the exits will be rapid. This is a bubble of epic proportion, the bursting of which will be incredibly awesome in a majestic sense. Most of the wealth will go into precious metals and other commodities due to the fact that stocks are also quite overvalued, and will likely remain so as a result of Fed intervention. It won't be until people collectively understand that the game is up that they will begin to abandon the currency altogether. We are fortunate to be alive during this time in history. What we will witness and experience during this collapse will completely alter the psyche of humanity. The wealth, comfort, pride, and sense of entitlement will be purged. I speak of the relative wealth of Western society, of the average American who unconciously believes in his heart of hearts that free lunches really do exist and money really does grow on trees. Most readers of this blog will likely not suffer to the extent of the average person due to your understanding of why it happened and whatever preparations you may have made. Humanity sometimes becomes becomes proud and corrupt. And as gold is made pure through fire so is mankind.

  7. I'm all for the perverts manipulating the price of gold downward:)