Peter Schiff: To Taper, or Not to Taper

Peter Schiff talks about Federal reserve decision on tapering of its quantitative easing. Initial fed plan was to invoke the taper in September if the economic data supports it. But the actual numbers are weaker than what the Fed anticipated when it first anounced the taper.

Peter Schiff: The Gold Price Will Soar When Investors Wake up

Peter Schiff told CNBC Futures Now that he believes that the gold is going for new highs. According to him the Syriam conflict does not have that much of an impact over the gold markets worldwide.

Peter Schiff: The Market That Lives By Q.E. Dies By Q.E.

The famous Peter Schiff talks about Federal Reserve's quantitative easings. He believes, that the feds have build a phony economy in the USA and according to Schiff's opinion they will keep inflating it

Peter Schiff: First You Get The EBT Card and Then You Get The Women

Peter Schiff talks about the liberals and their impact on American economy and lifestyle. In his radio show, Schiff exposes the (new) American Dream: Surf, drink & hit on chicks while sponging off taxpayers.

Schiff talks about the young people that preffer to party, to live their lives on food stamps, and the only thing they don't want is to work.

US Citizenship: Privilege or Albatross?

Ideas that Won't Boost Employment: Money Printing, Immigrant Bashing

HuffPo Octagon: 3 on 1 Battle Over Inflation

Peter Schiff: Markets Confirms the "Recovery" is Tapering Before the Fed

Peter Schiff: Why Are So Many Americans Fleeing the US Economy?

"I think over time, more and more entrepreneurs, young people who want to make something of themselves and who find it a lot more difficult to do it here, because of their taxes and regulations – they’re going to want to leave. And I think a lot of Americans are going to want to get their money out of the US because of the inflation that I see coming and the weakness in the dollar."

Next Fed Chair Will Lead Us to "Economic Ruin", Says Peter Schiff

"The mandate the Fed needs to keep under control is sound currency, to preserve the value of our money… If it follows that mandate, then we’ll have prosperity, we’ll have lots of job creation, lots of economic growth. It’s when they try to fine tune the economy by playing around with interest rates and money supply that we have big problems in the economy."

Don’t Trust the Government, Gold Still Inflation Hedge

"The other problem I find with the inflation-to-gold ratio analysis is this: We are truly in unknown territory with the U.S. and world money supply. In 2008, when the Fed geared up its printing press, the entire balance sheet of the Federal Reserve, accumulated in its 95 year existence, was $1 trillion. For the last several years, it has been growing its balance sheet $1 trillion per year.

The only reason we don’t see rampant inflation is that the velocity of money is so low. If the economy ever picks up for real, watch out. Fortunately, or unfortunately, depending on how you look at it, there seems to be no immediate threat of that."

Read Full Article Here

Economic Lessons from Gilligan's Island: The Fallacy of GDP

Oprah Winfrey is a Racist

Peter Schiff: Investing Wisely While Banking on a Crash

The Peter Schiff Show (8/6/2013)

Lewis Lehrman: The Rise and Fall of Real Money

Working people have also discovered that the credit worthy liquid financial class with access to cheap money at the Fed and at the banks has enriched itself not only by bailout subsidies, but by cheap financing derived from its symbiotic dependence on the Federal Reserve System. This [is] a fundamental cause of the rising inequality of wealth in America.

Peter Schiff's Case for Gold

How in the world could gold be so cheap amidst all that is going on in the world? Almost every developed nation is lowering interest rates to weaken its currency and then printing more money, which weakens it even further. Shouldn’t gold be well over $2,000 by now? What is holding it down?

According to Peter Schiff of Euro Pacific Capital, a better question to ask would be: Who is holding it down? Schiff believes the big banks, along with some U.S. Federal Reserve banks, are involved.

Just what is it that has raised Schiff’s long-running suspicions? If he is right that gold has been artificially kept down, might it some day also be manipulated back up? The banks pulling the strings would certainly benefit from a rapid spike back up. And so can you.

Schiff’s Three Signals

Three signals have raised Schiff’s expectations for a sharp gold price spike, as he outlined in a recent CNBC interview:

-Weaker economic recovery: According to the latest U.S. GDP data, the American economy in Q2 grew at an annualized rate of 1.7%. However, Schiff contends that this figure is based on 0.7% inflation, when the government’s own inflation reading came in at 1.1%. If inflation is truly greater than the GDP calculations have been allowing, then GDP cannot be as high as has been reported. Schiff asserts GDP is barely in the positive, perhaps even stagnant at 0% growth.

-More stimulus required: If the economic recovery truly is that weak, Schiff believes there is no way the Federal Reserve will curtail stimulus. In fact, he argues the Fed has no choice but to increase stimulus, which the Fed has been indicating in its press releases that it reserves the right to do if incoming data warrant it.

-Inflation will take its toll: Combining a weak economy (which Schiff expects to recede into another recession) with continued easy-money stimulus can have no other effect than to unleash inflation to run amok. The Federal Reserve has also stated in its releases that it wants to coax a higher inflation rate of at least 2%. Inflation is part of its agenda, and it will not stop stimulus until it arrives.

Once these three symptoms of a diseased economy become full blown, the flight to the safety of gold will resume. Even as Marcus Grubb, managing director of investment at the World Gold Council, indicated in a CNBC interview, “This is a correction in a trend, rather than the end of that trend.”

Continue Reading Here

Peter Schiff Borrows a Meme: Audit the Vaults

Peter Schiff of Euro Pacific Capital is out with a new letter in recent days and it centers around a very odd phenomenon. The pace of physical gold demand compared to the outflows of gold ETFs and its corresponding effect on gold price.

So Schiff would like to know, what’s in the vault? The major banks, or the too big to fail institutions of TARP have managed to get themselves in into the commodities storage game. Speculation has started to run rampant that gold held in storage has either been lent out, or even sold on a fractional basis far in excess of what is on the books.

Of course what major bank would do such a thing? Not like one was just fined for manipulating energy market in California, or others being sued for manipulating the aluminum market. Oh wait.

Why Fractional Gold?

One reason behind the fractional gold is that creates a market of more gold than there actually is and will work to depress prices. Schiff maintains that such an action would be used as cover for central banks so they can avoid the embarrassment of depreciating their respective currencies.

Peter Schiff thinks a majority of the chatter originated from the January announcement out of Germany. Internal politics in the country has them wanting to return the country’s wealth to the homeland so to speak. Currently, the German government holds about 300 metric tons of gold in the NYC Federal Reserve vaults. Or about 5% of the official holdings.

When the request came in from the German government to inspect its holdings at the Fed, it was promptly denied. Repatriation of all German gold holdings at the vault is still expected by 2020.

Of course when you say it will take seven years for something that is only supposed to take up 5% of your holdings, out come the theories. Do you actually have the gold? Are you using fractional gold to bolster the amount of gold in circulation? Needless to say, it gave people pause and plenty to think about.

Bernanke’s Testimony

During his July 18, 2013 testimony, Fed Chief Ben Bernanke claimed that nobody really understands gold prices, and he doesn’t pretend to either. Find it interesting that that the head the head of the Federal Reserve has no understanding of gold prices. That’s just like the DNI saying he forgot about Section 215 of the Patriot Act. We get you are paid to lie, but at least make it convincing.

Schiff’s best part of the letter was his what if question. Granted he’s talking about Congress, so Schiff should probably use flashcards, but it still would have been entertaining:

“Likely, Mr. Bernanke would have been shocked utterly had any Congressman had asked him to explain why the Gold Forward Offered Rate (GOFO) had dipped into negative territory. GOFO stands now below both the U.S. Federal Funds Rate and the London Interbank Offered Rate (LIBOR). Investors should appreciate two vital factors. First, gold prices may have been suppressed for years by central banks and could be set to respond as physical shortages and fiat currency debasement become clearer. Second, the enhanced value of physical possession of precious metals could be about to become manifest.”

The main goal of Schiff in this letter is like that of Ron Paul with a slight difference, audit the vaults. Lets all take a look inside.

Source: tradethenewsroom.com

The Government Makes it Very Lucrative Not to Work

Peter Schiff on CCTV (8/2/2013)

Peter Schiff: The Goverment’s Plan Is Inflation

"The government has no tools to combat inflation… The Federal Government and the Federal Reserve want to inflate away all the debt. The US government has a lot of debt, American households have debt, corporations have debt [and] it’s impossible to repay it. They want to inflate it away, but they don’t want our creditors to realize what plans we have and so we’re going to continue to misrepresent how much inflation there is…"

World Gold Council on Fundamental Gold Investing

"The case for owning gold is a simple supply and demand story, [and] it has always been that way. What’s changed over the past several months is that there is clearly a supply situation where it may be constrained. And from a demand perspective around the world, including here in the United States, there is certainly increased demand for both physical gold, as well as jewelry."

What Doesn't Kill Gold Makes It Stronger - Peter Schiff

By Peter Schiff:

I've been emphasizing for months that the current correction in the gold price is a result of speculative money fleeing the market and not any reflection of gold's long-term fundamentals. Unfortunately, there is so much money to be made (and lost) by day trading that my cautions have once again fallen on deaf ears.

Well, it looks like the so-called "technicals" are starting to support my theory, and so this month I'm going to depart from my typical discussion of market fundamentals and take a look at the COMEX gold futures market. It turns out that the same paper markets that helped drive the price of gold down are beginning to run into the hard reality of physical gold demand; their reversal may push gold to new highs.

Reading the Futures

The world of futures contracts is often confusing for ordinary investors. It is mainly the domain of institutions seeking to hedge and professional speculators. I do not recommend passive investors get involved in futures trading, but it is helpful to understand how these financial instruments affect gold's spot price.

In its most basic form, a gold futures contract is an agreement to buy a set amount of gold at the current spot price with delivery guaranteed at a future date. The attractive part is that you don't need to pay the full price up front. You can put a down payment on 100 ounces of gold today, knowing that you will only have to complete the payment when the contract comes due. If the price of gold rises in the intervening time, you've made a nice profit, because you end up paying today's price for a product that is worth more in the future. Of course, the person who sold you the contract takes a loss for the same reason. The person buying the contract is said to be "long" gold, while the seller is "short."

One of the reasons gold futures are so risky is because of the sheer quantity of gold that transactions represent. When you buy a single COMEX gold futures contract, you gain control - and responsibility for - 100 troy ounces of the yellow metal. So when the gold futures market was said to have made "big moves" this last April, that was an understatement - on April 12th, it opened with a sell off of 100 tons of gold!

It gets worse. Traders often leverage (borrow cash) to buy futures contracts, with the down payment they supply known as the "maintenance margin." The minimum maintenance margin for a single futures contract is only $8,800. If spot gold is at $1,300, then a trader can gain control of $130,000 worth of gold with less than 7% down! Depending on a combination of luck and experience, this massive leveraging can lead to either amazing profits or devastating losses.

Let's walk through an example, keeping in mind that my figures are very simplified, because a futures contract is not exactly equal to 100 times the current gold spot price. Most of the time, futures prices are a little higher than spot gold.

Say gold is at $1,300, which means a COMEX gold futures contract gives the investor control of about $130,000 worth of gold. A trader buys a contract with only a $8,800 margin. If the price of gold goes up to $1,500, the futures contract is now worth $150,000. The trader can now sell that contract and pocket the difference. He just netted about $20,000 with only $8,800 in seed money. If the trader had simply bought $8,800 worth of physical gold, he would have only earned about $1,350 in the same time period. It is not hard to see how futures trading can seem exciting and profitable on its face.

But what if the price of gold goes down in this scenario? The more the price of gold drops below the contract price of $1,300, the more the investor will be required to add to his margin to maintain the same ratio of down payment to loan value. This is required as assurance that he will not abandon the contract. In the worst case scenario, the trader cannot put up the additional funds and the entire position is liquidated by his broker.

So far, this example is of a trader "going long" with a futures contract. It can be risky, but the potential losses of a long futures trader are nothing compared to the losses someone shorting the market might experience.

Consider the same scenario above, except this time the trader has a short contract. He is desperately betting that the price of gold will drop enough for him cover his short position (buy back the contract he sold) at a lower price. After all, he can not hold the contract to maturity, as he does not actually own any physical gold, and thus would not be able to deliver to the buyer.

The key difference between long and short traders is that shorts are forced to add to margin when the price of gold goes up. Unlike a drop in the price gold, which can only go so low, there is theoretically no limit to how high the price of gold can rise. Someone betting on gold's demise with short futures contracts when gold enters a big bull market can be completely devastated by their margin calls.

It's risky enough leveraging into a deal as aggressively as futures traders do, but if traders don't understand the fundamentals of the asset underlying the contract (in this case, actual physical gold), they can get into a lot of trouble and in turn distort the price of the commodity they are trading. This is precisely what is happening now.

The Short Squeeze

When gold began its price drop in April, we saw a rush of paper gold flee the market, including record-high ETF outflows. Major money managers and hedge funds began selling their gold positions, issuing lower and lower forecasts for the year-end gold price. All of this became a major signal for futures traders to short gold.

The selling feeds on itself as the traders seek to cut their losses, or retain some of the paper profits the earned on the way up. Sometimes the selling is fueled by "stop sell orders," which are orders on the books that are automatically triggered when prices decline to a specific level, in many cases just below key technical support levels. Stops generally become market sell orders as they are hit, accelerating the decline and thereby triggering even more stops as prices fall lower. Some stops represent long positions being covered; others represent new short positions being established.

This ongoing shorting of gold builds a cycle that feeds on itself. The shorts see others fleeing the market and so continue to short. Meanwhile, the fund managers see the net-short positions increasing and so they continue to sell gold.

This cycle continued right up until gold's rebound - in July, the gold net-short positions reached record highs.

When gold began to rebound last month, a massive number of shorts were left exposed and many still remain exposed. Gold shorts are stuck holding the losing bet on an asset that is going to do the opposite of what they anticipated.

If the price rally continues, these traders will feel increasing pressure to unwind their shorts before their losses become catastrophic. This "short squeeze," as it is known in finance, will reverse the vicious cycle and could send gold dramatically higher than when the correction started.

An Unbalanced Ecosystem

To understand this short squeeze, imagine a brand new predator entering a pristine natural ecosystem. The newly introduced predator finds a smorgasbord of prey that have never learned to outrun, outsmart, or avoid this particular predator. Before long, the predator becomes "invasive" and begins to devastate the natural population of its easily-captured food source. Thriving on the newfound resources, the population of the invasive predator surges to new highs - until the prey population collapses.

This is akin to what has happened with gold shorts in the past three months. The more the price of gold (the prey) was driven down, the more gold speculators (invasive species) entered the market to profit from this trend, which only served to drive the price down further.

However, as in a natural ecosystem, this relationship is unsustainable. Eventually there are so many predators that they run out of enough prey to share. This forces the predators to starvation, and eventually the population drops to a sustainable level while the prey manage to grow back to a natural equilibrium.

The overwhelming problems for the shorts is that the gold they sold on the way down will not likely be for sale on the way up. My guess is that the buyers who previously stepped up to the plate were not short-term traders like the speculators who sold. These were buyers who bought gold to own it, not to trade it. For these buyers, like foreign central banks, the gold they bought is not for sale at any price (at least not a price the speculators can afford to pay). The buyers over the past few months have been lying in wait for this opportunity for years.

The result of this price decline is that gold has moved from weak hands to strong. In addition, the weakness in the price of gold has caused gold miners to shut mines, reduce capital expenditures, and limit exploration/development. So gold that was once on the market will be gone, and future supply coming from new production will be diminished. So when the market turns around, how will the shorts cover? Where will the gold they need to buy come from? When traders want back into the ETFs, where will the ETFs get the physical gold they need to buy? How much higher will prices have to rise to bring that supply back onto the market? I really have no answers to these questions, but it sure will be fun for the longs, and painful for the shorts, to find out.

What you and I can really hope for is that this massive short-squeeze becomes the impetus to focus the market back on gold's fundamentals and begins to drive the yellow metal back toward its previous highs. If I'm right that gold is still grossly undervalued, then this might be the beginning of the biggest rally we've yet seen.

Peter Schiff is Chairman of Euro Pacific Precious Metals, a gold and silver dealer selling reputable, well-known bullion coins and bars at competitive prices.

Click here for a free subscription to Peter Schiff's Gold Letter, a monthly newsletter featuring the latest gold and silver market analysis from Peter Schiff, Casey Research, and other leading experts.

And now, investors can stay up-to-the-minute on precious metals news and Peter's latest thoughts by visiting Peter Schiff's Official Gold Blog

43pc bought more gold after price plunge

The vast majority of investors either retained or added to their holdings of silver and gold after prices fell sharply in the spring, a survey suggests.

When asked whether they had made any changes to their precious metal investments over the past year, 37pc of investors said they hadn’t changed their allocations to silver and gold, while 43pc had increased their holdings.

Just 14pc of investors said they had reduced their holdings, while 4pc had switched from gold to silver. Only one in 100 said they had sold all of their holdings of the precious metals while 0.7pc had moved from silver to gold.

The survey was conducted by BullionVault, which allows individual investors to own gold and silver without taking possession.

The strong support for the metals came despite the survey being conducted in June, just after a major sell-off that saw the price of gold tumble.

Having peaked in autumn 2011 at almost $1,900 an ounce, the price fluctuated between $1,600 and $1,800 for much of the next year, before beginning a sharp decline from October 2012. In June it fell below $1,200 but staged a recovery in July, rising by 7.6pc.

Read Full Article Here

Bullion's speculative trade near its end: World Gold Council

The exodus out of gold this year, triggered by heavy exchange traded fund (ETF) selling, may nearing its end, according to an executive at the World Gold Council (WGC), who expects prices to pick up towards the end of 2013.

"We feel that speculative money has largely come out of the gold market. We feel that gold is nearer the bottom than the top right now. You'll see a stronger market towards the end of the year, and into next year," Marcus Grubb, managing director of investment at the WGC told CNBC on Tuesday.

Investors in gold ETFs have sold around 650 metric tons of bullion gold so far this year, driven by improving prospects for U.S. economy and expectations for a tighter monetary policy in the country. This is equivalent to the amount that rushed into the market eight months after the collapse of Lehman Brothers when investors were searching for a safe haven, he explained.

Contrary to what many believe, Grubb says that higher interest rates will not be negative for the precious metal.

"A lot of analysis shows if real rates stay between 0-4 percent, gold can return about 7-8 percent per annum or more. That's our point of difference with the longer term bear view of gold, even rising rates could be positive if real rates aren't too high," he said. Rising rates imply higher borrowing costs and are seen as negative for gold, which is an asset that does not pay interest or a dividend.

Read Full Article Here

Peter Schiff: Was Bernanke Just Not Feminine Enough?

A-Rod Would be a Better Fed Chairman Than Bernanke or Yellen

Focus on Big Picture, Buy Physical Gold

"When the gold speculators realize how wrong they have it and when they try to reverse those positions, I think a lot of the gold that they sold on the way down is not going to be available for sale on the way up. I think you’re going to get a huge spike in prices."

Peter Schiff on CTV: What's the pin that will prick this new bubble? (8/1/2013)

July silver imports highest in 5 years

On the other hand, gold has seen a steep decline in imports in June (only 8.908 MT) compared to 37.618 MT in May, the second lowest in last five years. Overall, in the first four months, gold imports have grown by 104.27% at 78 MT.

Experts say traders are importing more silver because of trade restrictions on gold by the Government of India since June 3. The decrease in silver prices over the last three months is also driving imports. "Due to restrictions on gold, these figures were expected and traders are waiting for gold prices to fall further before they start buying," said Kishore Javeri of Javeri and Company.

Some traders also believe that the decrease in imports is also because of the depreciating rupee. "The rupee is touching 60 and there is also market pressure to maintain the balance in imports of gold, hence the decline in gold imports," said Monal Thakkar, president of Amrapali Industries.

"Silver, unlike gold, is very erratically imported. There have been periods when silver imports have been zero. Gold imports have been consistent until last month," said Samir Mankad, director of Gujarat State Cargo Exports Ltd . He added, "Silver imports are also high due to physical inventory available to store silver."

Aram Shishmanian, CEO of World Gold Council said, "It is well known that there is a deep belief in gold and its long-term prospects in India and China. Since the sudden drop in gold prices in mid-April, which was driven by the US investment markets, this belief has been reinforced."

Source: IndiaTimes.com

Gold holds above $1,300/oz on Fed stimulus hopes

Gold held above $1,300 an ounce on Monday, but came under some pressure as the dollar steadied after mixed U.S. data last week left investors less sure the Federal Reserve would start to scale back its stimulus next month.

Early last week, strong U.S. GDP and factory figures led to losses in gold of around 3.5 percent. However, prices rebounded after data showed U.S. employers had slowed their pace of hiring, which quashed prospects the Fed will start tapering its bond-buying as early as September.

Spot gold was down 0.2 percent at $1,309.05 an ounce by 1339 GMT. U.S. gold futures for December fell $1.90 to $1,308.40 an ounce.

The dollar, softer initially, steadied against the yen and the euro. European shares edged up to a two-month high and benchmark U.S. Treasury yields fell to 2.6 percent, below July's two-year peak of 2.755 percent but still higher than at the start of the year.

As gold pays no interest, the returns from U.S. bonds are closely watched by market participants.

Gold, seen as a hedge against inflation, had gained in recent years as central banks acted to boost their economies. Prices touched an all-time high of $1,920.30 in 2011.

In recent weeks, the Fed has said it would begin tapering its $85 billion monthly bond purchases if the U.S. economic recovery retained momentum, prompting investors to monitor housing and jobs data closely.

The next data the market will watch is the U.S. ISM non-manufacturing PMI at 1400 GMT.

"People will monitor today's ISM numbers and you may see additional liquidation with a good number there, especially if the dollar continues to strengthen," MKS SA senior vice president Bernard Sin said.

"If we fall below $1,300, the next level I would look at is $1,270."

Read Full Article Here

Peter Schiff Gets Totally Owned On Larry Kudlow's Show In Debate About Inflation

Here's some great Goldenfreude from last night's Larry Kudlow show.

Peter Schiff, the famous gold advocate and hyperinflationista, battled with economics professor Scott Sumner on the issues of inflation (or lack thereof), quantitative easing, and Janet Yellen.

What's great is that Larry Kudlow started off with a mea culpa about having once been wrong about thinking that QE would cause massive inflation, which is a rare thing in the world today.

Sadly, Schiff offered no such Mea Culpa, instead arguing that we're already seeing massive inflation (which Kudlow obviously thought was nonsense, at one point telling him to not go on a tangent).

Near the end, when Schiff finally made a point that they all agreed with (that there were too many regulations), Kudlow actually said "Good for you, Peter" in making a point that was solid.

Anyway, we're happy to see the hyperinflationist stance get clearly marginalized, and for more savvy voices like Scott Sumner (a big advocate of Nominal GDP targeting) get more attention. (via @izakaminska)

Sources: businessinsider.com, CNBC

Dollar drops broadly after weaker-than-forecast jobs data

(Reuters) - The dollar fell against the euro and the yen on Friday as weak signals on the U.S. labor market lessened expectations that the Federal Reserve would start reducing its bond purchases in the near term.

The Labor Department reported that U.S. employers slowed their pace of hiring in July, data that could make the Fed more cautious about scaling back its monthly $85 billion bond-buying program, even though the jobless rate fell to a 4-1/2-year low.

After a string of better-than-expected data this past week that had buoyed optimism about economic growth in the second half of the year, the tepid jobs data served as a reminder that the recovery faces headwinds.

Expectations that the U.S. central bank may start winding down its monetary stimulus program as early as September have buoyed the dollar this year, but those hopes have faded a bit in recent weeks, and the Fed on Wednesday offered no indication of a near-term move at the end of a two-day policy meeting.

Less stimulus could prod a rise in interest rates, potentially making the dollar more attractive for investors.

"Any misconceptions that the Fed was looking to taper in September have been blown out of the water today after the nonfarm payrolls number disappoints to the n'th degree," said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange in New York.

"The U.S. economy remains on a shaky foundation in terms of both GDP and employment. Until the foundation is strengthened, the Fed will be forced to continue its easing bias."

U.S. employers added 162,000 jobs in July, which was below the median forecast in a Reuters poll of 184,000. The jobless rate fell to 7.4 percent.

In late afternoon trade, the euro rose 0.6 percent to $1.3278, having hit a session peak of $1.3294, according to Reuters data.

Against the yen, the dollar shed 0.6 percent, to 98.98 yen, having fallen as low as 98.65 yen.

The July jobs report was in contract to Thursday's data on jobless claims and manufacturing data that showed the world's largest economy was recovering steadily. The robust data had pushed U.S. yields higher and widened the gap over German, British and Japanese bonds, and buoyed the dollar.

"This disappointing payroll number will undo some of the positive market momentum on the economy and the dollar from yesterday's strong ISM and jobless claims reports and justify the Fed's caution on quantitative easing," said Joseph Trevisani, chief market strategist at WorldWideMarkets, in Woodcliff Lake in New Jersey.

Read Full Article Here

Jobs, GDP, and the Fed: Propaganda Disguised as Information

Peter Schiff: The Government Is Lying About the Economy

“Government economic statistics is not really information, it’s more like propaganda. Individuals and investors need to look through that government smoke screen, open up their eyes and see what’s actually happening… If you look at the contracting labor force, the declining use of energy, the explosion of poverty in America and income inequality, record numbers of people on food stamps and disability, all the part-time jobs that are now replacing the full time jobs… All of this is consistent with a shrinking economy, but the government won’t admit it.”

Watch the Full Video Here

Peter Schiff: Buy Gold and Don’t Trust the Fed

“The only reason the government was able to get a GDP number as large as 1.7 is because they assumed inflation was 0.7% on an annualized basis… I don’t believe that for one minute. I believe inflation is much higher than that and if the government used an accurate GDP deflator, we would already see that the US economy is currently in a recession… The Fed knows it’s going to increase QE, but it can’t come out and say that… Because it doesn’t want the world to know just how weak the US economy is and how dependent it is on ever increasing doses of monetary heroin.”

Gold Drops for Second Day as Investors Await Fed Policy Decision

Gold declined for the second straight day as investors awaited a policy statement from the Federal Reserve that may signal whether the central bank will begin trimming its stimulus efforts.

The precious metal climbed 8.3 percent in July through yesterday, set for the biggest gain since January 2012. Fed Chairman Ben S. Bernanke said this month that it’s too early to decide whether to begin scaling back debt purchases in September, after saying on June 19 that bond buying could slow if the economy improves. The U.S. expanded more than projected in the second quarter, the Commerce Department said today.

“The market is going to be very choppy and nervous today,” Michael Smith, the president of T&K Futures & Options in Port St. Lucie, Florida, said in a telephone interview. “The data has got some investors worried that tapering may begin this year.”

Gold futures for December delivery fell 0.6 percent to $1,316.90 an ounce at 10:22 a.m. on the Comex in New York. Prices earlier rose as much as 1.1 percent.

Bullion dropped 21 percent this year through yesterday after some investors lost faith in the metal as a store of value and on speculation the Fed may curb its bond-buying program. The Fed is buying $85 billion of debt a month. While none of the 54 economists surveyed by Bloomberg from July 18 through July 22 expected policy makers to begin paring purchases at this meeting, half predicted a reduction to $65 billion per month in September.

Silver futures for September delivery slid 0.4 percent to $19.61 an ounce in New York.

Source: Bloomberg

QE Is a Euphemism for Inflation

“When the Fed monetized three trillion dollars worth of mortgages and Treasuries, by definition that is inflation. Quantitative easing is just a euphemism for inflation. We’re talking about the effect of inflation when we talk about rising prices. We already have rising real estate prices, we have rising stock prices. Inflation has caused that. But I believe consumer prices are also rising much faster than government admits.”

The Peter Schiff Report: If Your Next Big Mac Is Made by a Robot, Thank 'Fast Food Forward'

The Peter Schiff Report: Janet Yellen 'Only Hit the Dart Board Because Someone Moved the Board in Front of Her Dart'

Peter Schiff: Buy Gold and Silver Now, Money Printing Until We Have A Currency Crisis & More

“Gold is really setting up for a huge reversal, because once the technicals turn around and the momentum goes back to the upside…the gold that speculators sold on the way down isn’t going to be available on the way up… The people who own it aren’t going to sell it at any price, because they didn’t buy it to trade out of it. They bought it to own it, to keep it. So this is going to be a big problem for the shorts, and even people who want to re-establish longs, because I think most of the people who want to get back into the market are going to get back in a lot higher than people got out.”

Peter Schiff on Gold: 'You Have to Love a Market Everyone Hates'

Euro Pacific Capital CEO Peter Schiff is calling a bottom of sorts in gold — one of the most ardent defenders of the precious metal has launched his first gold mutual fund, which invests primarily in gold mining companies rather than in the metal itself.

Given the recent 20 percent drop in gold and 40 percent plummet in gold-mining stocks from their highs, Investment News said the outspoken Schiff is "either crazy like a fox — or just plain crazy."

The new EuroPac Gold Fund to some extent puts Schiff's reputation where his mouth is.

"The [gold mining] stocks have just been crushed," he told Investment News. "I've never seen sentiment this bad, and you have to love a market everyone hates."

Ever the gold bull, Schiff predicted the Federal Reserve's ultra-loose monetary policy would send gold to $5,000 per ounce in the next few years by stoking inflation.

"Inflation is not low," he maintained. "A lot of people on Wall Street think inflation is low because they believe the government and not their own eyes."

Mining stocks are often viewed as a leveraged play on gold, which means big swings in gold prices can be amplified at the mine level.

"The No. 1 reason gold miners have done terribly is they've done a terrible job of managing their capital. They were very profitable during the gold bull run, but they've misused all that money," Sam Lee, an analyst at Morningstar, told Investment News.

However, some assess the problem differently for gold mining stocks.

Joe Foster, a portfolio manager for Van Eck Global, told Index Universe the average cost of production across the industry is about $1,050 per ounce, but the World Gold Council put that figure closer to $1,400 per ounce.

"Unlike most industries, there's very little a mine can do when the price of its product falls below the price of its manufacturing. The realities of the business are simply crushing," Index Universe said.

Hedge fund manager Jim Rogers believes gold's price could be headed for a bottom at $1,090 per ounce, Financial Advisor reported. In mid-day trading on Thursday, gold was priced at $1,329 per ounce.

Speaking at a conference in Denver, Rogers said he suspected a gold correction could be an anomaly and that he is still long-term bullish on the precious metal.

Not for the first time, Rogers blamed Fed policies for U.S. economic woes. "The first two central banks in the U.S. went bust and the Greenspan-Bernanke Fed will, too," he predicted.

Source: moneynews.com

Peter Schiff: US Is Destroying Its Middle Class

“Obama's got a new concept, ‘the middle out’. He wants to grow the economy from the middle class out… This is the economic cart before the horse. We don’t have a strong economy because we have a strong middle class; we have a strong middle class because we have a strong economy… The reason the middle class is shrinking is because you destroyed the incentives for people to create wealth and to employ people. It’s because of the policies that were targeted at the so-called rich. That’s why the middle class is disappearing.”

Full Commentary Here

Jim Rickards: The Fed Is Just Wrong About Recovery (Audio)

“The Fed’s forecasting record has been abysmal. The Fed has been wrong four out of the last four years in terms of their growth projections… They’ve been wrong by a lot. Sometimes they project 3 1/2 to 4% growth and it comes in around 2%. Sometimes they lower the forecast to 3% and it comes in at 1.5%. So you shouldn’t put any stock in the Fed’s forecast at all. In fact, as a guide, you should kind of assume the opposite or at least a lot worse than what the Fed is saying. You have to look at the fundamental economy, which is in terrible shape.”


Listen to the Full Interview

Peter Schiff: America! We're #... 27?

Peter Schiff: The Dollar Is Going to Collapse Before the Market (Audio)

“The Fed pretends that there is an exit strategy, knowing that exit is impossible. They just have to maintain the pretense as long as they can before the market figures out the true predicament that they’re in. Now they talk about tapering in the future but they can’t taper right now. If the economy is strong enough for tapering, why wait four months, why wait six months? Why not just do it? It’s kind of like the guy who is overweight, and he constantly tells you he is going on a diet but he’s going to start next month. Why don’t you start right now? It’s easy to talk about something you’re going to do in the future. What’s hard is to actually do something in the present. No matter what Ben Bernanke says, between now and the time when he’s supposed to taper, he will come up with an excuse why he can’t. I think he already knows this.”


Listen to the Audio Interview Here

Peter Schiff on Detroit and Bernanke’s Gold Ignorance

“Bernanke is the head of a central bank. Gold is a monetary asset. Central banks hold gold as reserves… How can our chief central banker admit that he doesn’t understand gold? … It’s kind of like a coal miner having no idea what that canary is doing in a coal mine. Maybe the canary drops dead and the coal miner [says], ‘What’s up with that canary?’ And then just going about his day… If he doesn’t get out of that mine, he’s going to die too! … Gold tells you if your monetary policy is correct.”

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Peter Schiff's Commentary: The Powerful Case for Silver

After a couple generations of purely fiat currency in the United States, a lot of people have forgotten that money used to be backed by something of value - gold and silver. It wasn't until 1965 that the US stopped making its dimes and quarters out of 90% silver, and the dollar was backed by gold internationally until 1971.

In spite of fiat money's ubiquity, more and more people around the world are waking up to the dangers of paper currency and turning to gold and silver to protect their savings. Silver is particularly useful to everyday citizens around the world because of its smaller value-to-weight. A half-ounce of silver can buy you dinner. A half-ounce of gold can buy dinner for you and 60 of your closest friends. That's why for centuries, gold has been considered the money of kings, while silver is known as the people's money.

It's not hard to see the growing importance of a stable medium of exchange worldwide - look to the Cypriot banking crisis or the barter markets evolving spontaneously in economically devastated countries like Argentina or Greece. Here are places where having an stash of silver versus a roll of banknotes can mean the difference between keeping your family well-fed and having to beg for assistance.

Developed nations are also waking up to this reality, translating into record silver sales at the US Mint and other major bullion producers despite the recent correction in global spot prices. This investment demand is providing a baseline of support to silver's price and helping to re-establish silver as a universally recognized form of money.

Read Full Commentary Here

Peter Schiff: “All Evidence Points to Recession”

So you don't think that they'll roll QE back to $65 billion a month by September, like Bernanke alluded last month?

No, I think they'll step on the gas and roll it up to 125 billion or 150 billion. Because it's like drugs and a tolerance. The economy is so addicted to QE, that the more you maintain it, the more the economy needs to stay high. As the bubble gets bigger, the more air you need to sustain it.

So I don't think $85 billion is enough. They're going to have to take it to $125, $150, $200 billion, $250 billion... They're going to have to do it bigger and bigger. The minute they stop, it's going to implode.

The more easing we do now, the bigger the government gets, as the national debt gets bigger and bigger. The Fed has to monetize more debt.

What happens when the budget deficit is $2 or $3 trillion a year?

The more QE we do now, the bigger the government gets because its able to run bigger deficits, so its just more QE will have to do tomorrow to sustain it all.

Speaking of recession, I just read that the second largest employer in the United States is a temp agency.

Yes, I think something like 10% of the entire nation's workforce is now temp. They can't afford full-time workers, the government has made it too expensive. That's a big sign that we never had a real recovery. We have a smaller labor force.

Only 47% of Americans have full-time jobs. But we actually have fewer people working full time. What we have is part-time jobs to replace the full-time jobs that are being lost.

So some people have two jobs now: The same guy working two places counts as two jobs. But its just one guy.

The economy is shrinking. There's more and more people on food stamps, welfare, and disability. So all the anecdotal evidence says we're still in a recession. It's just the government's phony numbers that say otherwise... It's a phony recovery that will fade if the Fed stops.

The analogy everyone wants to use is that the economy is a bicycle and the QE is the training wheels. The truth is that QE aren't the training wheels, they are the only wheels we got. The economy is just a frame. We're rolling on QE.

To take the analogy further, I'll say the bicycle is heading towards a cliff. If we don't remove the wheels, we'll go over the cliff. Either way, we're aiming for a fall. But it is far better to fall now then to go over the cliff and drop a great distance to your death.

But the Fed doesn't care, the Fed doesn't want that short-term pain, so they'd rather kill the economy in the long run — which is where we're headed.

Read Full Interview Here

The Peter Schiff Show (7/16/2013): Got a License to Walk that Dog?

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Santelli & Peter Schiff: The Fed Will Lose Control

“I think eventually you’re going to see a real attack on the dollar and the US Treasury market and the Fed’s ability to maintain artificially low interest rates without destroying the dollar… Eventually the Fed is going to lose control of this. And I think the biggest danger is when you start to see the bond market and dollar selling off simultaneously. You throw in a rally in gold and that’s basically the triple threat – you’ve got all the warning bells that the end is near.”

Peter Schiff: Is Shorting Treasuries The Next Big Trade?

New Report: The Powerful Case for Silver (Video)

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Peter Schiff Dissects Gold Bull Market and US “Recovery” (Audio)

“The fundamental narrative behind this [downward] move [in gold] is wrong. What’s giving the shorts the motivation to sell is a number of false beliefs. One, that the US economy is recovering. It’s not. Two, that inflation isn’t a problem. But it is. And three, that the Fed’s about to tighten. When they’re not! So I think everything the market is anticipating is wrong. And therefore their expectations of a lower gold price are based on assumptions that are all wrong. When they figure that out…I think the price goes way up.”

Peter Schiff June Jobs Report -- Once again, the Devil is in the Details!

Peter Schiff: New Jobs Report Is Actually Dismal on BNN.ca

“We lost another 6,000 manufacturing jobs… You know where all the big job gains are? It’s in leisure and hospitality. We have more people in America now working in bars and restaurants than ever before. These are not good jobs, they are low paying, part-time jobs and you cannot build an economy on these types of jobs… The numbers are going to get worse. The jobs that we are creating – these phony jobs – are a function of all the cheap money and all the excess spending and borrowing that goes along with it.”

Mr. Schiff goes to Washington. Peter Schiff's - First Congressional Testimony

Peter Schiff Letter: GREEN INVESTORS MISSING GOLDEN OPPORTUNITY

“Gold's second quarter price plunge is now the largest on record, dropping 23% in the last three months to finish a little over $1,200. Wall Street is gloating that a new metals bear market is upon us. A Duke professor even forecast gold returning to its "fair value" of $800 or lower. Naturally, he was quick to point out that he wasn't offering investment advice, only academic speculation.

For those of us who examine commodity fundamentals, the overwhelming conclusion is that the yellow metal simply cannot stay at these low prices for much longer. Gold is nearing a point at which miners are forced to scale back their operations, thereby pinching supply. Not only is diminished production likely to halt gold's downward trajectory, but an imminent supply crunch could also propel gold back to new highs. The likelihood of a strong rebound is supported by both a struggling mining industry and gold's performance during the last great bull market of the 1970s.

Domestic Policy vs. Commodity Fundamentals

If you listen to the US financial media, you might think gold's price is solely determined by events in the domestic economy. The generally accepted narrative of gold's correction is fairly straightforward: the US economy is slowly recovering with seemingly low inflation, and the Federal Reserve is now hinting at unwinding its quantitative easing programs by this time next year.

I've argued against these renewed recovery fairy tales for months, reminding my readers and the media that the fundamentals of gold remain very strong. The recovery mindset is mostly driven by misguided consumer sentiment, unreliable government data, and, most importantly, the Fed's ongoing injections of cash into the economy.

As far as tapering or even ending QE, even the IMF agrees with me that the Fed has "no clue" how to do this. Last month, when Bernanke simply mentioned the idea of halting QE within the next year, global markets went into a tailspin. Imagine how much worse things would be if the Fed were to stop talking and actually take action to taper.

Meanwhile, it is important to remember that gold is a global commodity. While the US has a huge impact on global financial markets, gold itself has no special allegiance to any particular nation-state.

With the latest drop in gold's price, the time has come to take a closer look at these commodity fundamentals.”

Read Full Letter Here

Peter Schiff: "U.S. Bond Market Is a Ponzi Scheme"

Gold Market Rhyming

With thanks to Peter Schiff for digging out this gem, we should point out the article was from 1976, written just a few days after gold completed its mid-1970s correction from nearly US$200 to US$100 an ounce.
The similarities with today’s mainstream commentary on gold are striking. We obviously don’t know if gold bottomed last week or whether there’s more downside to come. But we do know that gold is a very popular investment to rubbish right now.
Financial journalists, like hedge fund traders, find it easy to go with the momentum. When you don’t understand something, you let the price action do the talking, or the informing. So if gold has declined by nearly 40% over the last two years then it must be a bad investment, right?
So the journalist looks around to find out why gold is in such a rut. He or she gathers all the chestnuts and starts preparing the story: Gold doesn’t pay interest, the US economy is recovering, interest rates are heading higher, stocks offer a better long term return, gold just sits there and does nothing, etc etc.
All these arguments suddenly seem to resonate with people who bought gold simply because it was going up in the first place, without understanding why they actually owned it. Perhaps they owned too much. So they sell in a panic. But someone is on the other side of that transaction, buying as the price gets cheaper.
At some point it reaches a crescendo — the panic selling and the value buying — and the market finds a bottom. We don’t know whether the market has reached a bottom now or not. But we do know that there are many parallels to this gold market and the one in the 1970s.

Read Full Article Here

The Golden Cycle - Peter Schiff

By Peter Schiff:

The New York Times had the definitive take on the vicious sell off in gold. To summarize one of their articles:

Two years ago gold bugs ran wild as the price of gold rose nearly six times. But since cresting two years ago it has steadily declined, almost by half, putting the gold bugs in flight. The most recent advisory from a leading Wall Street firm suggests that the price will continue to drift downward, and may ultimately settle 40% below current levels.

The rout says a lot about consumer confidence in the worldwide recovery. The sharply reduced rates of inflation combined with resurgence of other, more economically productive investments, such as stocks, real estate, and bank savings have combined to eliminate gold's allure.

Although the American economy has reduced its rapid rate of recovery, it is still on a firm expansionary course. The fear that dominated two years ago has largely vanished, replaced by a recovery that has turned the gold speculators' dreams into a nightmare.

This analysis provides a good representation of the current conventional wisdom. The only twist here is that the article from which this summary is derived appeared in the August 29, 1976 edition of The New York Times. At that time gold was preparing to embark on an historic rally that would push it up more than 700% a little over three years later. Is it possible that the history is about to repeat itself?

At the time The Times article was written gold had fallen to $103 per ounce, a decline of nearly 50% from the roughly $200 it had sold for in the closing days of 1974. The $200 price had capped a furious three-year rally that began in August of 1971 when President Nixon "temporarily" closed the gold window and allowed gold to float freely. Prior to that decision gold had been fixed at $35 per ounce for nearly two generations. That initial three year 450% rally had validated the forecasts of the "gold bugs" who had predicted a rapid rise in gold prices should the dollar's link to gold be severed. The accuracy of these formerly marginalized analysts proved to be a bitter pill for the mainstream voices in Washington and Wall Street who, for reasons of power, politics and profit, were anxious to confine the "barbarous relic" to the dustbin of history. Incredulous as it may seem now, with gold still priced at $35 per ounce, official forecasts of both the Secretary of the Treasury and the Chairman of the Federal Reserve were that demonetizing gold would undermine its value, and that its price would actually fall as a result.

Of course government experts could not have been more wrong. Once uncoupled from the dollar, gold's initial ascent in the early 1970's was fueled by the highest inflation in generations and the deteriorating health of the U.S. economy that had been ravaged by the "guns and butter" policies of the 1960's. But the American economy stabilized during the mid-years of the 1970's and both inflation and unemployment fell. When gold reversed course in 1975 the voices of traditional power elite could not contain their glee. When the gold price approached $100 per ounce, a nearly 50% decline, the obituaries came fast and furious. Everyone assumed that the gold mania would never return.

Although the writer of The Times piece did not yet know it, the bottom for gold had been established four days before his article was published. Few realized at the time that the real economic pain of the 1970's had (to paraphrase The Carpenters 1970's hit) "Only Just Begun". When inflation and recession came back with a vengeance in the late 1970's, gold took off (to quote another 1970's gem), like a skyrocket in flight. By January 1980, gold topped out at $850 an ounce. The second leg of the rally proved to be bigger than the first.

The parallel between the 1970s and the current period are even more striking when you look closely at the numbers. For example, from 1971 to 1974 gold prices rose by 458% from $35 to $195.25, which was then followed by a two-year correction of nearly 50%. This reduced total gains to just under 200%. The current bull market that began back in 2000 took a bit longer to evolve, but the percentage gains are very similar. (We should allow for a more compressed time frame in the 1970s because of the sudden untethering of gold after decades of restraint.) From its 1999 low to its 2011 peak, gold rose by about 650% from $253 to $1895 per ounce, followed by a two year correction of approximately 37%, down to around $1190 per ounce. The pullback has reduced the total rally to about 370%. The mainstream is saying now, as they did then, that the pullback has invalidated fears that rising U. S. budget deficits, overly accommodative monetary policy, and a weakening economy will combine to bring down the dollar and ignite inflation. But 1976 was not the end of the game. In all likelihood, 2013 will not be either.

The biggest difference between then and now is that until 1975 ordinary Americans were barred by law from buying and owning gold. About the only route available to participate in the earlier stage of the precious metal rally was by hording silver dimes, quarters and half dollars minted prior to 1965. My father indulged in this process himself by sifting through his change, the cash registers of any merchant who would allow him (exchanging new non-silver coins and bills for silver), and by sifting out silver coins from rolls he bought from banks. It was a time-consuming process, and most of his friends and family members thought he was crazy. But the $10,000 face value worth of those coins he collected had a melt value of over $230,000 when silver hit its peak.

By the mid 1970's none of the problems that initially led to the recession in the early years of the decade had been solved. Contrary to the claims of the "experts" things got much worse in the years ahead. It took the much deeper recession of the late 1970's and early 1980's, which at the time was the worst economic down-turn since the great Depression, to finally purge the economy of all the excesses. The lower marginal tax rates and cuts in regulation implemented by President Reagan and tight money under Volcker helped get the economy back on track and create investment opportunities that drew money away from gold. As a result gold fell hard during the early 1980's. But even after the declines, gold maintained levels for the next 20 years that were three to four times as high as the 1976 lows.

Although the economy improved in the 1980's, the cure was not complete. Government spending, budget and trade deficits continued to take a heavy toll. The U.S. was transformed from the world's largest creditor to its largest debtor. When the time came to face the music in 2001, the Fed kept the party going by opening the monetary spigots. Then when decades of monetary excess finally came to a head in 2008, the Fed open up its monetary spigots even wider, flooding the economy with even more cheap money.

Unfortunately just like 1976, a true economic recovery is not just around the corner. More likely we are in the eye of an economic storm that will blow much harder than the stagflation winds of the Jimmy Carter years. And once again the establishment is using the decline it the price of gold to validate its misguided policies and discredit its critics. But none of the problems that led me and other modern day gold bugs to buy gold ten years ago have been solved. In fact, monetary and fiscal policies have actually made them much worse. The sad truth is that as bad as things were back in 1976, they are much worse now. Whether as a nation we will be able to rise to the occasion, and actually finish the job that Ronald Reagan and Paul Volcker started remains to be seen. But I am confident that the price of gold will rise much higher, and that its final ascent will be that much more spectacular the longer we continue on our current policy path. Don't believe the mainstream. Just as before, they will likely be wrong again.

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

Source: http://www.streetinsider.com/Commodities/The+Golden+Cycle+-+Peter+Schiff/8463244.html

Jim Rickards: Buy Gold, Not Stocks

“Fundamentally, the case [for gold] hasn’t changed. It has to do with Fed money printing and instability in the international monetary system… [The Fed] needs to drive nominal GDP, they need negative real rates, they need more inflation, or else [US] debt will be un-payable. And that’s good for gold.”

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“The definition of inflation is an expansion in the money supply… The Fed is buying $85 billion a month of Treasuries and mortgages. Where do you think that money is coming from? It is being created into existence out of thin air by the Federal Reserve… Eventually our trading partners are going to stop absorbing our inflation. The dollar is going to tank… and all this inflation that we’ve been exporting is going to hit us like a tsunami.”

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PETER SCHIFF: Japan's Magic Elixir Of Economic Revitalization Is Only Fueling Stock Market Bubbles

By:  Peter Schiff 
Tuesday, June 25, 2013  
This piece is excerpted from the June 2013 edition of the Global Investor newsletter. See the full version here.
Source: businessinsider.com

The Japanese stereotype of excessive courtesy is being confirmed by the actions of prime minster Shinzo Abe who is giving the world a free and timely lesson on the dangers of overly accommodative monetary policy. Whether or not we benefit from the tutorial (Japan will surely not) depends on our ability to understand what is currently happening there.

For now most economists still believe that Abe has stumbled upon the magic elixir of economic revitalization. His commitment to pull his country out of the mud by doubling the amount of yen in circulation, and raising the nation's official inflation rate to 2%, had conferred rock star status on the formerly bland career politician. But just one year after his first critical raves arrived, the audience is heading for the exits. As it turns out, the Japanese miracle may be a simple tale of confidence easily gained, and just as rapidly lost.

In many ways the 75% nine month rally in the Nikkei 225 (that began when Abe was elected prime minister in September 2012), and the subsequent crash that began on May 22, is not all that different from the turbocharged rally, and spectacular crash, that occurred in technology heavy Nasdaq more than a dozen years ago here in the United States.

At the time that Pets.com (the company behind the iconic Sock Puppet) made its IPO, other high flying tech stocks had racked up 1000% gains. While investors scratched their heads, pundits offered reasons why common sense no longer applied to the new economy. We were told that valuations, revenue and profits no longer mattered. And to an extent that now seems absurd, the investing establishment bought into the insanity. But then a funny thing happened, investors woke up and realized that they had nothing but a handful of magic beans that couldn't grow a beanstalk. When the fog lifted, stocks plummeted...Wile E. Coyote style.

This time around investors in the Japanese market were similarly deluded by fairy tales. Leading economists told them that Japan could cheapen its currency to improve trade, use inflation to create real growth, increase prices to encourage spending, and drastically increase inflation without raising interest rates. In short, monetary policy was seen as substitute for an actual economy.

Initially at least the economic data seemed to confirm the success of Abe's program. The leading indicator was the yen itself, which dropped like a stone. Given the widely held view that a weak currency is the key to economic success, the 25% decline in the yen was welcomed as good news. Soon thereafter, the inflation that Abe so eagerly sought began to materialize in various sectors of the economy. When the Nikkei reacted positively to these developments, momentum traders from around began to take notice, thereby creating self-fulfilling prophecy.

But it's no great trick to weaken a currency. Any two bit economy could accomplish that objective. For a nation like Japan that imports nearly all of its raw materials it was inevitable that a drastically cheaper yen would to push up prices. However the rest of the plan, the part about surging exports and growing economic activity, has been much harder to achieve. In fact the data has been downright disheartening. The plunging yen has failed to reverse Japan's weakening trade balance which has declined for 28 straight months. The trend finally sent Japan into an overall trade deficit 10 months ago for the first time in 30 years. The latest data confirms that while the yen value of exports has increased, actual trade volume has fallen.

While the broad economic data failed to impress, economists and investors were nevertheless hopeful that Abenonmics would eventually work its magic. But recently the bottom has fallen out in a way that should have surprised no one, but somehow managed to do just that. Beginning in April Japanese Government bonds began to sell off sharply. Previously, the Japanese government could borrow funds for 10 years at just 36 basis points.

The truth is that the sub 40 basis point yield on Japanese Government bonds was the most important data point for their economy. At those levels, Japan needed to spend 25% of its tax revenue to service its outstanding debt. While that figure is high, most it is manageable given Japan's high savings rate.  However, with a national debt that exceeds 200% of GDP, the Japanese government could quickly become insolvent in the face of higher debt service costs. If rates on 10 year debt were to ever match the 2% of their inflation target, more half of total tax revenue would be needed to service debt payments.

But the central premise of Abenomics seems to be that the Bank of Japan could push up inflation to 2% without raises the rates on long-term debt. To do this one would have to assume that bond investors would accept negative interest rates, even while a falling yen was eating away at principle and returns on alternative investments would be expected to be more attractive. Such an outcome is not consistent with human behavior.

As a result, in late May a strong sell off in Japanese government bonds caused yields to nearly triple to almost 100 basis points on 10 year debt. And while one percent doesn't sound like much, it was the rapidity of the ascent that got everyone's attention. This grim, but very simple, reality seems to have hit Japanese stock investors with a panic unseen since Mechagodzilla took aim at Tokyo. Knowing that even moderately higher rates could counteract any economic gains made by stock market or export growth, the faith in Abenomics has seemed to evaporate almost overnight. Sounds a little like the dot-com bubble, doesn't it?

Peter Schiff Still Pro-Gold Despite Slide

Peter Schiff: Is Now the Time to Sell Gold?

“If [gold] does [drop to $1,000], I don’t think it’s going to stay there very long. I think the price is going much higher. Not only than where it is now, but higher than $1,900, which was the peak of this recent move. I think this decline is being driven entirely by speculators.”

Reality Will Clobber Japan: Peter Schiff

The incredible rise of Japanese stocks, and the gut-wrenching correction that recently ensued, have only one parallel for Peter Schiff: The dot-com bubble of the late 1990s and 2000.

In both rallies, investors shifted away from accepted means of valuation, and were instead "deluded by fairy tales," Schiff said. As tech stocks skyrocketed, "We were told that valuations, revenue and profits no longer mattered."

And as Japan embarked upon a policy of massive quantitative easing, "monetary policy was seen as a substitute for an actual economy."

Now the Japanese Nikkei index sits nearly 20 percentage points below its late-May peak. But Peter Schiff, the CEO of Euro Pacific Capital, said it could get much worse.

"The Japanese government could quickly become insolvent," Schiff said. This would happen if Japanese bond yields continued to rise, for "if rates on the 10-year debt were to ever match the 2 percent of their inflation target, more than half of total tax revenue would be needed to service debt payments."

But Miller Tabak's chief economic strategist, Andrew Wilkinson, does not believe that Schiff's concern is a serious one. "My opinion is that it probably won't happen," Wilkinson said regarding Schiff's nightmare scenario.

"The nature of the Japanese bond market is that the majority of investors are domestic. So I don't see foreign investors throwing in the towel as being a big-picture driver here."

Read Full Article Here

Peter Schiff on the False Gold Narrative

“We know at $1,200 [an ounce], the majority of gold mines can’t even mine [gold] profitably. So gold is now trading for less than the cost of producing it, and of course in order to produce it you have to own a gold mine, which is very hard to do. So the price of gold can’t stay down here for a long period of time, because then the gold companies will shut down and there will be no supply.”

Peter Schiff: Where is the Bottom in Gold?

Peter Schiff: The Future of Gold

“Really what’s happened, there’s been a crash in confidence. There’s been a crash in investor expectations when it comes to the price of gold. There actually hasn’t been a crash in the price. I think the sentiment is wrong, that the public is wrong, that the professional investors are wrong. Remember – the guys that are ultra bearish on gold right now are the same guys that were extremely bullish when it was at the highs at 1900. The consensus doesn’t have a very good track record when it comes to gold.”

Bernanke’s Exit Strategy Is a Bluff

“Unless Ben Bernanke comes clean and admits there’s no tapering, that there’s no exit strategy, that he is going to increase – not diminish – QE, then the markets are going to keep falling… The whole thing is a bluff. There is no exit strategy, there is no tapering, but he can’t admit that.”

Watch the Full Video Here