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Results 301–350
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Inflation Held in Check by Fear
by John Browne of Euro Pacific Capital,
Out of control money supply creates inflation. In light of the trillions of synthetic dollars that have been injected into the economy by the Fed over the past five years, most observers had expected prices to spiral upward. But in making these determinations, many of us forgot to factor in the supply side of the supply/demand equation. Inflation remains low now because of game changing events that have reduced the demand for money. So beware of the recovery. Any wakening of animal spirits in the U.S. will likely stir the threat of inflation, which may very well short-circuit the recovery.
Keynesians Jump The Gun on Inflation
by Peter Schiff of Euro Pacific Capital,
Regardless of what the triumphant Keynesians would have you believe, my analysis continues to be that the current combination of monetary and fiscal stimulus is driving us toward disaster. Instead of a real recovery, the US will experience an inflationary depression. Europe, on the other hand, will suffer much less, precisely because it was not seduced by the short-term appeal of stimulus.
Despite Naysayers, The Recovery Is Real
The US economy is far from perfect. Economic growth has been positive, but mediocre over the past year and a half. The unemployment rate, at 8.3%, is still elevated, higher than it ever was from 1984 through 2008. When it comes to bashing government policies, from either party, we do not take a back seat to anyone. What we cant do, because it makes no sense, is allow our dislike of current government policy to influence our view of the actual economic data. There really is a recovery underway. If it quacks like a duckit must be a duck.
Wary Investors Give US Stocks Another Go
by John Browne of Euro Pacific Capital,
Recently, the stock market has been roaring, with the S&P500 up a stunning 22% from October 3, 2011, which was the low of last year. In fact, the first month of 2012 has been one of the best Januaries on record for US stocks. On top of that, last Fridays jobs report seems to provide further evidence that we're turning a corner. However, there are many reasons to question the bestowal of bona-fide bull status on this market. It's hard to miss the artificial props in place to push up prices. Both the supply and demand sides of the equation are standing on shaky foundations.
Waist Deep in the Big Muddy
by Peter Schiff of Euro Pacific Capital,
As long as interest rates remain far below the rate of inflation, the U.S. economy will fail to equitably restructure itself for a lasting recovery. As a secondary effect, U.S. savers will likely continue to suffer from a lack of yield and a weakening currency. In the end, the collapse of the U.S. economy will be that much more spectacular due to the great lengths we have gone to postpone it.
Straightening Out the Straits
by John Browne of Euro Pacific Capital,
Recently some of the fears that investors had focused on in the 11thhour debt negotiations in Greece have drifted southeastward towards the Straits of Hormuz. An increasingly bellicose Iran threatens to throw the world economy into confusion with the potential closure of one of the worlds most important sources of energy. Catastrophic failure in Athens or the Gulf could plunge the world into severe recession if not depression. Having discussed the Eurozone at length, we focus this week on the threats posed by Iran.
Fed Plays PR Games
by John Browne of Euro Pacific Capital,
The world was taken by surprise recently by the Fed's announcement that it would publish some of its economic forecasting that forms the basis for its strategy. The Fed claims that the move will vastly increase so-called transparency, which has become a buzz word for honesty and virtue. However, the new policies do nothing to remove the cloak of secrecy that conceals still many of its most significant activities. This myth will do little to lure investors back into the markets but as an unintended consequence will reveal just how profoundly the markets are currently guided from the top.
The Dollars Lucky Streak
by Peter Schiff of Euro Pacific Capital,
All self-perpetuating virtuous cycles are vulnerable to a sudden break in the positive feedback loop. When reality rears its ugly head, and the spell breaks, the reverses can be vicious. It happened with dot com stocks, it happened with real estate, and I believe it will happen with the dollar and Treasuries. Even if Europe does not resolve its problems, the day of reckoning will still eventually arrive. The unfortunate truth is that the longer it takes, the worse it will be, as we will have that much more debt to reckon with.
What Happened in 2011Whats up for 2012?
by Peter Schiff of Euro Pacific Capital,
This all lends itself to a volatile, but nearly flat trend for stocks and bonds in 2012. Fundamentals dont yet support a run-up, but easy money may put a floor underneath assets over the short run. Unless the situation were to change, we believe aggressive dips in stock markets represent buying opportunities. We tend to think bonds will underperform equities in 2012, given their dramatic outperforming in 2011.
2012 Offers Few Reasons for Optimism
by John Browne of Euro Pacific Capital,
In 2011, politicians of the U.S. and EU set their economies on a rendezvous with economic and financial disaster. If one assumes as I do that no leader on either side of the Atlantic has the courage to face the music, then there can be little reason for optimism in 2012.
The Corporate Cash Myth
Despite huge amounts of cash on their balance sheets, America's largest companies are as broke as the rest of the country, and not only are they in no position to hire workers, but higher interest rates could result in more layoffs at a time when the nation can least afford it. Given these factors, economists, journalists and politicians should be applauding corporate cash reserves not deriding them. Given that a real recovery will not come until America as a country has paid down some of its debt, we should not be urging our corporations to throw caution to the wind.
Obama Gets Real
by Peter Schiff of Euro Pacific Capital,
History has proven time-and-again that capitalism works and socialism does not. Taking money from the rich and redistributing it to the poor does not grow the economy. On the contrary, it reduces the incentives of both parties. It lowers savings, destroys capital, limits economic growth, and lowers living standards. Maybe Obama should take his eyes off the teleprompter long enough to read some American history. In fact, he could start by reading the Constitution that he swore an oath to uphold.
Risky Moves Spark Quick Rally
by John Browne of Euro Pacific Capital,
In order to win for itself as many economic cards as possible, we can expect Germany to continue playing economic brinksmanship. The high stakes game will continue creating extreme market volatility. Various bodies such as the Fed, ECB, EU, IMF and G-20 likely will continue to issue calming statements to cover a building crisis of confidence in paper currencies and sovereign debt. Meanwhile, greatly increased liquidity threatens high future inflation. In such an environment, precious metals remain a hedge against inflation and a form of insurance against possible catastrophe.
Manipulated U.S. Rates See Saw Gold Prices
by John Browne of Euro Pacific Capital,
The Super Committee has followed the path of least resistance and maximum irresponsibility. Given the likely after-effects, the outcome should be judged as criminal dereliction of duty. It should now be crystal clear to even the most casual observer that a solution to the U.S. debt crisis will not come from within, but will be imposed, perhaps brutally, from without.
Whose Fuse is Shorter?
by Peter Schiff of Euro Pacific Capital,
Any significant reversal of the current upward dollar trend could provide a long awaited catalyst for nations holding large dollar reserves to diversify into other currencies. My guess is that Merkel understands the great advantage the U.S. has enjoyed as the issuer of the worlds reserve currency. I believe she covets that prize for Europe, and based on her strategy, it is clearly within her reach.
The Beginning of the End of Fiat Money
by John Browne of Euro Pacific Capital,
Last week, the G-20 meetings did not produce an expanded bailout fund for the eurozone. While this may bode well for the long-term solvency of the member-states (moral hazard and all), it has also triggered a market reaction that I expect to help destabilize the common currency. Yesterday's market moves suggested that this development is good for the dollar and bad for gold. Allow me to step back from the stampeding herd to evaluate whether they are, in fact, moving in the right direction.
Greek Democracy Could Be Costly
by John Browne of Euro Pacific Capital,
Financial planners and politicians could be faced with a possible depression accompanied by a breakdown of confidence in fiat currencies if either the euro or the EU collapses. As the worlds second currency, the euros collapse would create a massive currency crisis in the European Union, the worlds largest economy, possibly triggering a massive depression. With both the dollar and the number two global currency (the euro) facing an uncertain future, investors would likely be wise to maintain some exposure to stores of value, such as precious metals.
In Defense of the 1%
by Peter Schiff of Euro Pacific Capital,
Last week, I spent the afternoon visiting the Occupy Wall Street demonstrations in lower Manhattan. I brought a film crew and a sign that said 'I Am The 1%, Let's Talk.' The purpose was to understand what was motivating these protesters and try to educate them about what caused the financial crisis. I went down there with the feeling that much of their anger was justified, but broadly misdirected.
Greek Bondholders at a Loss
In a best case scenario, Western governments increasingly accept that creative destruction is a part of capitalism that bad debts must be liquidated fully, honestly, and quickly to make room for new growth. In the more likely scenario, the EU's structural divide keeps it walking a middle road between bailouts and default of its weaker members, while the US refuses to accept reality until it risks becoming the largest sovereign collapse in history. Let's hope laissez-faire prevails, but invest like we know better.
President Obama Announces Plan to Boost College Tuitions
by Peter Schiff of Euro Pacific Capital,
President Obama today announced a plan that will ensure students are able to commit to higher levels of federally backed student loans. By limiting student obligations to repay, and by passing more of the repayment burden onto taxpayers, colleges and universities will be able to continue to raise tuitions at a rate that outpaces nearly every other cost center in the American economy. The move will come as a great relief to an education establishment increasingly concerned that students might no longer be able to afford skyrocketing tuition rates.
Greeks May Look North
by John Browne of Euro Pacific Capital,
If the citizens of Greece follow the Icelandic lead, a larger sovereign debt crisis will likely follow. In such a scenario all fiat currencies will likely suffer. However, those considerations will merit little concern from those throwing Molotov cocktails on the streets of Athens. In the end, Greek politicians will cater to their constituencies rather than their creditors. We should all prepare for that.
Herman Cain's Hidden Nine
by Peter Schiff of Euro Pacific Capital,
Herman Cain has been gaining much traction with his 9-9-9 Plan, a bold proposal to replace our dysfunctional tax code with what could be a simpler and more economically stimulative. While I don't agree with the full spectrum of Mr. Cain's policy choices, I applaud his courage on the tax front. Judging by his rising poll numbers, this appreciation is shared. However, the plan has deep flaws the most glaring of which is its creation of a hidden payroll tax which represents a fourth "nine" This serious pitfall has been unmentioned by Mr Cain and overlooked by those who have analyzed his plan.
The Bottom Line #6
What we can learn from the past is that in the current environment, being nimble, buying at major fear-induced selloffs and, even more importantly, selling into strength, is a strategy that will outperform the buy-and-hold crowd. For nimble traders, volatility represents opportunity. Having someone by your side to help calm the fear and quell the exuberance helps the returns a lot. Its when you have volatility like weve seen of late, or after the Great Depression, or experienced in the Japanese market over the last 20+years, when you really need a good execution strategy to stay profitable.
A Hair Trigger Rally
by John Browne of Euro Pacific Capital,
While a meeting between two Euro leaders (Sarkozy and Merkel) may have galvanized Eurozone politicians into more dramatic group action, the new Facility fails to address the intractable political problem that solvent countries are tiring of funding profligate neighbors. It also fails to reverse the fundamental structural problems that plague the euro. Just a few weeks ago, when the EFSF bailout fund was announced, it was widely trumpeted as a cure-all. However, even $2 trillion would be a paltry sum with which to confront any debt problems erupting from larger countries such as Italy.
Fiddling While the Euro Burns
by John Browne of Euro Pacific Capital,
Last week, eurozone finance ministers postponed, the most difficult decisions on the Greek debt crisis. The assembled powers could have forced an orderly Greek default or they could have taken steps to push Greece out of the union. Instead, they simply bought time until the next major rollover of Greek debt-which comes due in November. Much of the prevarication can be attributed to political disagreement in Germany, where some see the current crisis not only as a means to further European unification, but also as an opportunity to extend German influence throughout the continent.
Currency: The Hidden Portfolio Risk
by Peter Schiff of Euro Pacific Capital,
In the spirit of sharing our favorite dollar-alternatives, I recently sat down with Axel Merk, founder and president of Merk Investments, who is a well-known authority in the international currency arena today. That conversation resulted in a new report, entitled Peter Schiff's and Axel Merk's Five Favorite Currencies for the Next Five Years, which is now available for free download. In a world where gold is in the quadruple-digits and the S&P has downgraded US debt, we both feel it's high time every American consider diversifying his or her portfolio to mitigate currency risk.
Don't Panic on Metal Tumble
by John Browne of Euro Pacific Capital,
Given the swift rise of gold and silver during the first half of 2011, precious metals were due for a correction especially following the parabolic increases that we saw in August. Markets never go up in a straight line, and often the biggest downward movements occur in bull markets. These sharp movements are common in gold, especially during short periods of financial panic. For instance, gold fell more than 25% in the second half of 2008, and almost 15% from February to April 2009. Yet after the dust settled in those earlier corrections, gold resumed its upward march with even more gusto.
Land of the Poor, Home of the Sick
Thanks to a series of destructive government policies and incentives, a health care crisis has been steadily building in America for a generation or two. But the release yesterday of the Kaiser Family Foundation's annual survey reveals that the problem of unaffordable healthcare is becoming epidemic. According to the report, health insurance premiums have jumped nearly 10% in 2011 for the typical family, compared to a 3% increase in 2010. The average annual cost for family health insurance now exceeds $15,000 per year, about 30% of median household income!
Germanys Inner Struggle Stifles EU Action
by John Browne of Euro Pacific Capital,
The leaders of Europe have been criticized for their inability to deal expeditiously with the Eurozone debt crisis. Many view the paralysis through the prism of self interest: taxpayers of the EUs creditor nations are simply unwilling to finance spending of the blocs debtors. But the hesitancy can also be ascribed to the growing voter dissatisfaction with the entire structure of the Eurozone, and in particular a chasm between German voters and German leaders.
Twist Paves the Way for QE III
by Peter Schiff of Euro Pacific Capital,
But many of those who oppose QE3 do so because they believe the economy doesnt need more stimulus not because the stimulus itself is causing the economic weakness. As a result when the economy deteriorates, support for QE III could grow. In the end QE3 will likely be far more popular than another bank bailout, which may be on the table if the Fed fails to rescue the banks it may be pushing over the edge with Twist. But our zombie economy does not need to be perpetuated by more QE. It must be allowed to die so that a living, breathing, self-sustaining economy can replace it.
The Bottom Line #5
Today marks the third anniversary of the death of Lehman Brothers, not the first, nor the last, bank or broker-dealer to require emergency meetings of exalted officials to take place over a weekend, but it is the only one that resulted in a complete loss for shareholders and significant losses for bondholders. Whether you see this as the example of the officials getting it right or stunningly wrong really depends on where you sit, and it should color your perspective on everything that has occurred since.
Big European Leaders Flex Muscle
by Peter Schiff of Euro Pacific Capital,
Today marks the third anniversary of the death of Lehman Brothers, not the first, nor the last, bank or broker-dealer to require emergency meetings of exalted officials to take place over a weekend, but it is the only one that resulted in a complete loss for shareholders and significant losses for bondholders. Whether you see this as the example of the officials getting it right or stunningly wrong really depends on where you sit, and it should color your perspective on everything that has occurred since.
How the Government Can Create Jobs
by Peter Schiff of Euro Pacific Capital,
On Tuesday, September 13, Peter Schiff will testify before the House of Representatives Subcommittee on Regulatory Affairs, Stimulus Oversight and Government Spending. The hearing entitled, "Take Two: The President's Proposal to Stimulate the Economy and Create Jobs" will examine federal job creation efforts. Mr. Schiff is well known for his views on how federal regulatory activism and irresponsible monetary and fiscal policy is actively destroying jobs in America. The following statement from Mr. Schiff will be read into the Congressional Record this morning.
German Court Opens Door to ber-Empire and ber-Collapse
by John Browne of Euro Pacific Capital,
In the early days of September, financial markets worldwide were nervous. Investors and governments were waiting for a crucial ruling of the Federal Constitutional Court of Germany, a ruling that could have triggered the imminent collapse of the worlds second currency, the euro. This past Wednesday, the court ruled that the German bailout of Greece did not violate the German Basic Law (i.e. constitution), and investors breathed a collective sigh of relief.
Should We Cheer The FHFA Lawsuit?
by John Downs of Euro Pacific Capital,
Last Friday the Federal Housing Finance Agency (FHFA) lawsuits were filed against seventeen banks and financial institutions for $200 billion in subprime loan losses. The victims of the alleged fraud? Fannie Mae and Freddie Mac, and therefore the taxpayers. The suits claim that Fannie and Freddie, then two of the largest investment bodies in the world, had been ruthlessly hoodwinked by bankers into buying low-quality, and potentially fraudulent, mortgage-backed securities. In exchange for fees and commissions, big banks and loan companies stuck the taxpayers with a mountain of bad debt.
More of the Same
by Peter Schiff of Euro Pacific Capital,
No real economic growth or job creation is going to occur until the failed policies of both Obama and Bush are reversed. In his speech the President mourned the death of the American dream. Obama should stop killing it. To revive that dream we need to revive the American spirit that produced it in the first place. That means returning to our traditional values of limited government and sound money. Unfortunately we are still headed in the wrong direction.
Job Killer in Chief
by Peter Schiff of Euro Pacific Capital,
This morning many on Wall Street were stunned by the big fat zero put up by the August jobs report, the worst showing in 11 months. The data convinced many previously optimistic economists that the United States will slip back into recession. I believe that we have been in one giant recession all along that was only temporarily interrupted by trillions of useless and destructive deficit and stimulus spending. Unfortunately, the August numbers will increase the talk of government efforts to stimulate the economy.
There They Go Again
by Peter Schiff of Euro Pacific Capital,
Picking up where they left off in 2008, the media is in the midst of a campaign to ignore and undermine the presidential candidacy of Ron Paul. Political pundits just do not know what to do with a candidate who fails to fit into the blue and red boxes that form the simple narrative of American politics. They are perturbed by the grass roots nature of the campaign, by the strange honesty and earnestness of the candidate and his supporters, and the odd mixture of conservative values and liberty-minded policies. And like most adolescents, they reject what they don't understand.
German Court Wields Huge Economic Power
by John Browne of Euro Pacific Capital,
With investors now emerging from a state of panic after the harrowing losses of late July and August, stock markets are now rising and gold is finally falling after a record run that pushed its price north of $1,900 per ounce. The buoyant mood is largely undergirded by the hope that on this Friday, August 26th, Fed Chairman Ben Bernanke will announce another round of stimulus to stop the U.S. economy from slipping back into another recession.
Political Theater
Unfortunately issues can be complicated, but the image of strength is simple. Mitt Romney leaning over a hay bale in Iowa while thrusting a finger at an audience heckler is the campaign moment most clearly relished by his supporters. What he said to the heckler was immaterial; he just looked strong doing it. There is a very similar dynamic in the financial world in which, during times of uncertainty, investors often blindly follow the crowd while seeking safety in numbers. They flock to U.S. Treasuries simply for the aura of safety, not for any inherent virtue of the asset.
Paper Currencies Finally Redeemed for Gold
by John Browne of Euro Pacific Capital,
The basic unwillingness of politicians to face economic and financial realities has caused the United States and European Union to face currency collapse. The politicians are content literally to paper over the problem with massive amounts of newly printed currency. This means that savvy investors, facing major real losses, are turning increasingly to gold. In essence, even though currencies are no longer on a gold standard, they are increasingly being redeemed for gold in the marketplace.
Krugman's War Cry Won't Avert Depression
Mr. Krugman believes that we can grow our way out of this recession like we have in the past few. Unfortunately, we are dealing with a completely different animal. In every past recession the government under the guidance of Keynesians, decided to put off deleveraging in return for artificial growth. Well, that tab has come due. Since these economists keep trying to spend like its WWIII, we are moving inexorably closer to causing Great Depression II. If policymakers and economists fail to understand that the progenitor of a depression is debt, they will also be unable to provide a solution.
Gold is Antidote for Treasury Trap
by John Browne of Euro Pacific Capital,
Last week Fed Chairman Bernanke raised eyebrows and denied history when he asserted in front of Congress that gold doesn't qualify as money. Yesterday he took the unprecedented step of announcing that the Fed would keep interest rates near zero for at least the next two years. In very short order thereafter it required much more of the money that he believes in (U.S. dollars) to buy the money that he doesn't believe in (gold). It was beyond unusual for the Fed to make such an explicit time commitment on monetary policy.
The Fix is In
by Peter Schiff of Euro Pacific Capital,
Until interest rates are allowed to rise to appropriate levels, more resources will be misallocated, additional jobs will be lost, government spending and deficits will continue to grow, the dollar will keep falling, consumer prices will keep rising, and the government will keep blaming our problems on external factors beyond its control. As the old adage goes, 'insanity is doing the same thing over and over again and expecting different results.'
The Center of Gravity Shifts Slowly
To an extent not fully appreciated by the investing public, financial markets are influenced by human emotion just as much as they are by economic data, corporate earnings, and dividend yields. Of all human motivations, fear is perhaps the most powerful. When people get scared, the fight or flight instinct forces us to take action. Simple dangers prompt simple responses. If we unexpectedly encounter a bear on our driveway, we immediately run into the house and call animal control. But its harder to know what to do when financial danger stalks the stock market.
Gold is the True Reserve Currency
The reliance upon the U.S. dollar as the worlds reserve currency and safe haven asset has created a perverse, but deeply entrenched, mindset among global investors. In fact, many believe the major financial players have no alternatives to owning U.S. debt and dollars. They argue that the market for U.S. dollars and Treasuries is the only financial pool large enough to handle the massive liquidity that sloshes around the globe on a daily basis. This idea makes a mass exodus from U.S. debt holdings seem impossible.
Debt Deal is a Blank Check
by Peter Schiff of Euro Pacific Capital,
I expect that as soon as our creditors decide that they are no longer willing to lend to us at ultra-low rates of interest, we will refuse to repay what they have already lent. Besides default or major cuts to domestic spending, inflation provides the only other means for the government to deal with this intractable crisis. Once we go down that path, we risk high inflation turning into hyperinflation, which would decimate the remainder of our economy. So, as our leaders congratulate themselves for saving the nation, the reality is that they may have just sold it down the river.
Debt Deal is a Blank Check
by Peter Schiff of Euro Pacific Capital,
I expect that as soon as our creditors decide that they are no longer willing to lend to us at ultra-low rates of interest, we will refuse to repay what they have already lent. Besides default or major cuts to domestic spending, inflation provides the only other means for the government to deal with this intractable crisis. Once we go down that path, we risk high inflation turning into hyperinflation, which would decimate the remainder of our economy. So, as our leaders congratulate themselves for saving the nation, the reality is that they may have just sold it down the river.
Gold Faces Short-Term Price Trap
by John Browne of Euro Pacific Capital,
Gold appears set on a very strong upward path. However, in the short term, if global recessionary forces re-emerge and/or investors become euphoric over the US dodging a debt default, gold could face a significant price correction. If governments inflate wildly in a futile attempt to avert a pending depression, leading to stagflation, then gold should rebound in priceMy forecast should not be construed as an appeal for investors to sell their gold and try to time their way back into the market. Rather I would suggest that there may be some discounted buying opportunities in the coming months.
Obama Demagogues Default
by John Browne of Euro Pacific Capital,
Many of the key people responsible for Americas historic mess, including the President, Treasury Secretary Geithner, former NEC Director Summers, and Fed Chairman Bernanke, have pronounced publicly that a failure to lift the debt ceiling will cause a catastrophic Treasury debt default. This is simply not true. The US Treasury has tax revenues that cover the service of its current (staggering) debt of some $14.3 trillion. Yet, that doesn't mean the US government won't be forced to default in other ways.
Results 301–350
of 483 found.
