Wednesday, October 24, 2012
American investment expert and radio show host Peter Schiff shares his thoughts about the second Presidential debate in the United States of America. In his opinion, the Presidential "debate" between Pres. Obama and Gov. Romney looked more like a Democratic Primary debate. As far as substance is concerned neither candidate won, and the biggest loser was the voter. Here is his recap of the low lights. Too bad Gary Johnson wasn't on stage to advocate for free market solutions to government created problems.
Monday, October 22, 2012
Peter Schiff takes on the inflation in the USA once again after Fox News Presidential Poll confirms that inflation is a bigger concern for voters than unemployment and the housing market combined. In fact, more than twice as many registered voters are concerned about the "inflation" tax as are worried about all other federal taxes combined!
Wednesday, October 17, 2012
Journalists, politicians and economists all seem to agree that the biggest economic issue currently worrying voters is unemployment. It follows then that most believe that the deciding factor in the presidential race will be the ability of each candidate to convince the public that his policies will create jobs. It seems that everyone got this memo...except the voters.
According to the results of a Fox News poll released last week (a random telephone sample of more than 1,200 registered voters), 41% identified "inflation" as "the biggest economic problem they faced." This is nearly double the 24% that named "unemployment" as their chief concern. For further comparison, 19% identified "taxes" and 7% "the housing market" as their primary concern. A full 44% of women, who often do more of the household shopping and would therefore be more sensitive to prices changes, identified rising prices as their primary concern.
While these statistics do not surprise me, they should shock the hell out of the establishment. According to the Federal Reserve, inflation is not a concern at all. Time after time, in front of Congress and the press, Fed Chairman Ben Bernanke has said that inflation is contained and that it is below the Fed's "mandated" rate of inflation (whatever that may be.) The Bureau of Labor Statistics is saying the same thing. The measures they use to monitor inflation, such as the Consumer Price Index (CPI) and the Personal Consumption Expenditure (PCE), show annual inflation well below 2%. In fact, the GDP price deflator used by the Commerce Department to calculate the second quarter's 1.3% annual growth rate assumed annual inflation was running at just 1.6%.
In fact, Bernanke thinks inflation is so low that he is actually worried about deflation, which he believes is a more dangerous issue. As a result, he is recommending policies that look to raise the inflation rate, not just to combat the phantom menace of deflation but to boost the housing market and reduce unemployment. He mistakenly believes these problems are the ones that concern Americans the most.
Monday, October 15, 2012
The US gained 114,000 jobs on the month, but 10,000 of them were government positions while there was a loss of 16,000 manufacturing jobs in September. "We are losing the jobs we need and gaining the ones we don’t," commented Schiff and added that the USA do not need more people working for the government, as they derive their salaries from the private sector.
Peter Schiff explained that the increase of the government jobs is not that good, because these are non-productive and they actually make USA poorer as a nation because they add to the overall tax burden and trade deficit. According to Mr. Schiff, the government employees create an imbalance in economy. The reason for this is that they do not produce anything, which will force the jobs to be lost when the economy restructures. And the reasonable question is in that case, how was the unemployment rate able to fall so rapidly?
According to a household survey, 873,000 jobs were added in September. These numbers are the largest of its kind in nearly 30 years. Schiff adds the caveat that a large number of these were part-time employment. Mr. Schiff goes on to rather bluntly hypothesize that the massive jump in part-time work came from those who have finally used up unemployment and were forced to go out and find some kind of work.
The U-6 unemployment rate, a much more effective measure of our actual employment, was virtually unchanged for the month, staying a tick under 15%. Just another reason that we all need to take official unemployment numbers with a grain of salt. With the approach of the holiday season, part-time work will spike and could potentially decrease the unemployment figure even further, which is not a real indicator of the unemployment rates fall.
Wednesday, October 10, 2012
A month ago, I presented the case for why Fed Chairman Bernanke would have strong motivation to launch another round of quantitative easing (QE) before the election. In short, it would save him his job. Now, I didn't predict with certainty that he would do so - only the few men at the FOMC knew that for sure - but it seemed likely. Shortly thereafter, Bernanke not only announced more stimulus, but promised to keep it flowing to the tune of an additional $40 billion a month until conditions improve. As I had written, this is essentially the election platform of the Obama-Bernanke ticket: we will keep the party going indefinitely.
Unfortunately, though these are two powerful men, they are not above the law of economics. While critics have dubbed this program "QEternity" or "QE-Infinity", it will end much before that. We are witnessing a massive bubble in US government debt, and we've reached the point where no one in charge believes it will ever end - an excellent contra-indicator.
Rather than going on for eternity, this third round of QE is only hastening the day when there is a flight of confidence from the dollar and US Treasuries. This will cause a sharp rise in market interest rates and surging consumer prices across America. If you think $4 a gallon gas is bad, wait till you see it going up by 25¢ or more per week.
At this point, the Fed Chairman will have a choice to make: keep printing, which will push the dollar into uncontrollable hyperinflation, or begin tightening, which will bankrupt the US government and banking system.
I have long written about this Sophie's choice confronting the Fed, but so far the printing option has been too easy. With the world only slowly abandoning the dollar as the reserve currency and the euro crisis offering a distraction, the Fed has been able to more than double the money supply without US consumers seeing out-of-control price hikes at the store. Not that there hasn't been inflation - look at housing, gas, or the stock market - but it hasn't reached crisis proportions. When prices start rising fast enough for the average person to figure out he's being screwed, then there will be riots in the streets.
Tuesday, October 9, 2012
Schiff's arguements about United States already being in another recession are based on a few different metrics. He points out that government data shows we are growing at 1.3% while inflation is currently at 1.6%. Schiff believes that if inflation is truly at 3% then United States of America is already in a recession. He is suggesting inflation numbers are being under reported or covered up for the time being.
Schiff goes on to point out another metric stating that while the Dow Jones may be higher, it has lost 80% of its value in terms of gold over the past 12 years. This comes to show that Schiff feels quite strongly that gold is the only real measure of currency for the world, so the stock markets should be measured against that instead of a flimsy fiat currency. Schiff also pointed out that the stocks are not going higher, the dollar is simply getting weaker. He finishes things off by predicting a rise in interest rates to combat inflation, sending us headfirst off the fiscal cliff.
Tuesday, October 2, 2012
To begin with, Peter Schiff has said and read a lot about this policy, which clearly is a heated subject, given the fact what his opinion on it is. According to Schiff, the Federal Reserve should have let the economy fail 3 years ago and that all the rounds of quantitative easing are just delaying the inevitable. He thinks that the bold policy of Ben Bernarke will in fact inhibit job creation and growth. He has also been quite vocal that the Fed will never succeed in producing a vibrant economy by means of money printing. Schiff has also predicted the dollar index dipping to even 20 and that the real assets like gold or silver are the best thing for investors.
Jim Rogers is the second one who has voiced his opinion on the policy. He is of the opinion that the Federal Reserve do not know what they are doing and the strategy of printing money will not do a difference to the economy. Jim has predicted another deep recession in the next 5 years and both he and Peter Schiff feel that there is a financial crisis coming.
Rogers wants to take a dig at the presidential candidates and he does not care about the outcome of the elections. According to him, neither candidate understands the real issues of the economy nor is none of them able to fix it. He has touted investments like precious metals and agriculture, even though he has stated many times that he thinks silver is a better investment than gold.