Search Results
Results 351–400
of 482 found.
It Ain't Money If I Can't Print It!
by Peter Schiff of Euro Pacific Capital,
I have been forecasting with near certainty that QE2 would not be the end of the Fed's money-printing program. My suspicions were confirmed in both the Fed minutes on Tuesday and Fed Chairman Ben Bernanke's semi-annual testimony to Congress yesterday. The former laid out the conditions upon which a new round of inflation would be launched, and the latter re-emphasized ? in case anyone still doubted ? that Mr. Bernanke has no regard for the principles of a sound currency.
Sovereign Debt Blows Big Holes in Big Banks
by John Browne of Euro Pacific Capital,
The past few days have been very bad for the world?s largest banks. American behemoths Citigroup and Bank of America are down about 7% each. Across the Atlantic, things are far worse. BNP Paribas, Barclays, and Banco Santander are all down 13% or more... and Socit Gnrale is down an astounding 16%! Some pundits warn of an overreaction and suggest this is a buying opportunity for the beat-up financials. I disagree. Rather, I think the financials should now be considered toxic assets. Caution is justified.
Don?t be Fooled by Political Posturing
by Peter Schiff of Euro Pacific Capital,
As attention focuses intently on the negotiations to raise the debt ceiling, House Republicans have made a great show of drawing a line in the fiscal sand. They claim that they will not vote for any deal that includes tax increases to narrow the budget deficit. But we all know how the game works in Washington. With the 2012 elections looming the Republican bluster is merely a bargaining chip that they will quickly toss into the pot when they sense a political victory. In fact there are signs that such a compromise is already underway.
The Psychology of Bond Investors
We argue that as the United States takes on ever more debt and prints greater quantities of dollars, that buyers of our debt will demand higher rates of interest to compensate for greater risk. In fact, our philosophy leads us to believe that rates would currently be spiking as Washington debates whether to raise the debt ceiling yet again or default on existing debt. Instead, rates are hitting close to multi-year lows. As a result, our critics have found a seemingly valid issue. However, we believe that there are strong market reasons that are holding rates low.
Greeks Buy Time for Insolvent Bankers and Delusional Politicians
by John Browne of Euro Pacific Capital,
Last week, the Greek parliament voted by a narrow margin to pass an economically crippling austerity plan of some $40 billion in return for some $159 billon of fresh liquidity injections. Although many hailed the event as a needed first step on a long road to recovery, I believe the austerity program will make a bad situation worse. It is a flawed solution that stems from a false premise: that Greece should continue to be part of the euro zone, and continue to use the euro as its currency. To return to national economic viability Greece must abandon its use of the euro currency.
Fed Benefits from Global Fears
by John Browne of Euro Pacific Capital,
This week, in the second in a series of less-than-impressive press conferences, Fed Chairman Ben Bernanke offered market observers little hope that any additional quantitative easing programs are on the horizon. The Chairman continues to cling to the position that the economy is improving (with the recent ?soft patch? attributable to external forces) to the extent that additional Fed support will be unnecessary. Left unsaid was any guidance as to who the Chairman believes will buy the massive amounts of Treasury debt formerly swallowed up by the QE II program?
Hard to Take a Bone from a Dog
by John Browne of Euro Pacific Capital,
Only by enacting massive reforms of major entitlements, which includes cuts to Social Security and Medicaid benefits, and reductions in military and domestic spending, will America be enabled once more to balance its books, generate real wealth, and issue sound currency.
But given all that we know of how politics works in America, how many elected officials will grab the bone from the dog's mouth and pull? Regrettably, I can't assume many are up for the challenge. As a result, we must assume the worst for the U.S. dollar.
The End of Retirement
Americans are broke, the real estate market is still in secular decline, stock prices are in a decade?s long morass, real incomes are falling, public pension plans are insolvent and our entitlement programs are structurally unsound. If the pillars that seniors have relied on in the past fail to miraculously regenerate (and there is certainly no reason to believe they will), all that most retirees will have will be freshly printed greenbacks that come from a never ending policy of federal deficits and an obliging Federal Reserve.
Stimulus Wears Off
The artificial U.S. recovery is already starting to falter as disappointing data continues to confirm the sad truth. Recent numbers on GDP, durable goods, housing, regional manufacturing, initial unemployment claims and leading economic indicators all indicate a sharp slowdown in GDP growth. Just today the ADP Employment report showed that the private sector added a paltry 38,000 jobs in May, down from 177,000 jobs in April, weakest number since September 2010. These signs of continuing malaise comes at a time when the government is contemplating ways to dramatically cut spending.
Training Wheels Off, Crash Helmets On
Based on many pronouncements by economic policy makers, among others, it appears that the quantitative easing juggernaut that has steamed the high seas of macroeconomics for the last three years is finally pulling into port?supposedly for the last time. According to the dominant narrative, QEI and QEII helped stabilize the economy during the Great Recession and now the Federal Reserve is ready to take the training wheels off. If so, the economy may need a helmet because there is virtually no chance that it can avoid major contractions without central banking support.
Raising the Roof on Debt
by Peter Schiff of Euro Pacific Capital,
Today the U.S. government officially borrowed beyond its $14.29 trillion statutory debt limit. And even though the Obama administration has assured us that accounting gimmickry will allow the government to borrow for another few months, the breach has given seeming urgency to Congressional negotiations to raise the debt ceiling. Republicans are making a great show of linking their ?yes? votes with promises for future budget cuts. But as we go through the process, many wonder why we have a debt ceiling at all when our government has never shown any inclination to respect its prior limits.
The Institutional Gold Rush
by Peter Schiff of Euro Pacific Capital,
I've worked on Wall Street my entire life, and one thing I've learned is that large institutional investors, like pension funds and endowments, rarely veer from the herd. They manage too much of other people's money to stick their necks out alone-if their investments go bad, at least they can point to everyone else who fared just as poorly. For this reason, these funds are often lagging in their perception of crucial market changes. While many of us are buying precious metals to hedge against the collapse of the dollar, gold and silver have been taboo investments on Wall Street for years.
Bernanke Double Talk Creates Opportunity
by John Browne of Euro Pacific Capital,
Fed Chairman Bernanke?s remarks at his historic first press conference were met by a tidal wave of skepticism. Although many of the mainstream outlets characterized his performance as ?serious? and ?masterful," most rank-and-file Americans were left with a very different impression. Any casual glance at the broad internet coverage of the event shows that the public is deeply skeptical of Mr. Bernanke and the actions he is taking. If that skepticism runs more than skin-deep, it could herald a fundamental change in American politics and a restoration of sound finance in America.
Silver Takes it on the Chin
by John Browne of Euro Pacific Capital,
This week saw the type of downside volatility in the precious metals market that will be remembered for years to come. For those of us who have been long gold, and silver in particular, the memories will not be pleasant. While many had been expecting a pullback in silver, when the violence did come it was still shocking. Silver shed one third of its value in less than one week. And while gold was pulled down by the general sell off in all commodities. the yellow metal shed only 6.5% during the carnage. Those mild losses should remind us that gold is not just another commodity.
Bernanke Falls Flat
by John Browne of Euro Pacific Capital,
Despite loud huzzahs from a variety of boosters who proclaimed that Chairman Bernanke spoke with gravitas and wisdom at the first ever Federal Reserve press conference, the wider investing public clearly saw the performance as unconvincing. During and immediately after the proceedings the prices of gold and silver rose strongly to new highs as the U.S. dollar plummeted. The affair seemed to solidify the understanding that Bernanke and his cohorts have no intention whatsoever to reverse the current trend of inflation and a weakening dollar.
Silver Set to Soar as Paper Folds?
by John Browne of Euro Pacific Capital,
As a result of active ?demonetization? efforts by the IMF and its member central banks, gold and silver have experienced the type of volatility that has given conservative investors reasons not to perceive the metals as dependable cash alternatives. Instead gold and silver have become known as the asset class to hold as a hedge against inflation. However, during the 1990?s, when inflation was in general much higher than it has been since the turn of the millennium, gold and silver prices drifted lower and stagnated.
Inflation Destroys Real Wages
In the same vein as medieval physicians believed bloodletting would cure illness, modern snake-oil economists still perilously cling to their claim that rising wages and salaries are the cause of inflation. With my recent debates with these mainstream economists, I?ve heard the following: ?without rising wages, where does the money come from to push prices higher?? I was tempted to respond, ?where do the employers get the money to pay those higher wages?? But economists tend to get a little nasty when you make them feel stupid.
Late to The Party?Once Again
by Peter Schiff of Euro Pacific Capital,
The only thing more ridiculous then S&P?s downgrade of U.S. sovereign debt was the market?s severe reaction to the announcement. Has S&P really added anything to the debate that wasn?t already widely known? In any event, S&P?s statement amounts to a wakeup call to anyone who has somehow managed to sleepwalk through the unprecedented debt explosion of the last few years. Given S&P?s concerns that Congress will fail to address its fiscal problems, on what basis can it conclude that the U.S. deserves its AAA credit rating? If S&P has genuine concerns, the AAA rating should be reduced now.
Will Precious Metals Survive the Double Dip?
by John Browne of Euro Pacific Capital,
It is rare for precious metals to appreciate in parallel with the broader stock market. Yet, this has been the case in the two years since the stock market began coming back from the 2008 financial crisis. Although metals have outperformed US equities over that time frame, it is noteworthy that stocks have gone up at all. Since January 2, 2009, the S&P is up about 50%. While gold is up 68% and silver is up a staggering 267%. With rising interest rates, oil at over $100 a barrel, and the recovery running out of steam, many investors are wisely asking if the markets are set for a sharp pullback
The Symptoms of Nuclear Hysteria
by John Downs of Euro Pacific Capital,
Imagine you invented a machine that revolutionized travel. Your invention could cut travel time and improve the ability for business to deliver freight efficiently. The invention would add trillions to global GDP. If released, it would be universally used and admired. However, based on the safety assessments, analysts predict that if used your invention would cause the deaths of 300,000 Americans per year and countless more around the globe. Would you still release it? If not, imagine a world without cars. Now, the bigger question: why isn't this same measure used when judging nuclear energy?
Core Incompetency
For years the Federal Reserve has told us that in order to detect inflation in the economy it is important to separate ?signal from noise? by focusing on ?core? inflation statistics, which exclude changes in food and energy prices. Because food and energy figure so prominently into consumer spending, this maneuver is not without controversy. But the Fed counters the criticism by pointing to the apparent volatility of the broader ?headline? inflation figure, which includes food and energy. The Fed tells us that the danger lies in making a monetary policy mistake based on unreliable statistics.
Housing Will Remain a Government Program
Recently, the Obama Administration seemed to flash a rare sign of laissez-faire thinking when it issued a report calling for the ?winding down? of Fannie Mae and Freddie Mac, the two taxpayer-guaranteed institutions now responsible for backing at least 90% of the US mortgage market. In its press release, the Administration acknowledged that the private sector should be the ?primary source of mortgage credit," and that their goal is to ?bring private capital back to the mortgage market."
The Inflation Knuckleball
For the past 40 years or so, every country on the planet has relied on fiat money. To a very large extent, this means that the national economies are far more exposed to the whims of their central bankers than they have been in the past. So, if central bankers go off their meds, the danger to the currency becomes profound. Unfortunately, at America's Federal Reserve, it seems the inmates are now running the asylum.
The Insidious Effects of Japan's Disaster
by John Browne of Euro Pacific Capital,
While the world?s attention has been focused on the physical destruction wrought by the Japanese earthquake, the attempts to contain the fallout from the Fukushima Daiichi plant, and the problems that Japan faces to rebuild its infrastructure, few have illustrated how long-lasting the radiation's effects may be. There has also been little mention of how large radiological events could impact economies of countries outside the immediate fallout zone. In reality, the disaster could make as much of an impact on investors in New York, London, or Sao Paolo as it makes on an investor in Tokyo.
The Treasury Auction Shell Game
by Peter Schiff of Euro Pacific Capital,
Very few people have the time to sift through the data released by the Treasury Department in the wake of its bond auctions. But the numbers do provide direct evidence of the country?s current financial condition that in many ways mirror a financial shell game that typifies our entire economy. Despite continued deterioration of America?s fiscal health, the Treasury is still attracting buyers of its debt. Market watchers take these successful auctions as proof that our current monetary and fiscal stimulus efforts are prudent. But who?s doing the buying, and what do they do with the bonds?
Saudi Arabia: More Secure Than It Appears
by John Browne of Euro Pacific Capital,
As revolution spreads throughout North Africa and the Middle East, many fear that the forces that toppled regimes in Tunisia, Egypt, and possibly Libya, will spread to the Gulf oil states, particularly Saudi Arabia. The specter of radicalized Islamist elements taking control of the world?s second largest oil producer is a justifiably harrowing prospect. However, Saudi Arabia?s political dynamics are very different from the Middle Eastern states that are in revolt. Understanding these forces should assure us that a doomsday scenario is unlikely.
Quake Response Puts Yen on the Line
by Peter Schiff of Euro Pacific Capital,
One of the immediate financial consequences of the catastrophic Japanese earthquake is that Japan needs to call on its huge cache of foreign exchange reserves to rebuild its shattered infrastructure. To pay for domestic projects, Japan will require yen ? not dollars, euros or Swiss francs. In order to maintain Japan?s position as a net-exporter of manufactured goods and net-buyer of US debt, the yen needs to stay down. So, the G-7 group of the world?s leading economies has intervened in the foreign exchange market by selling yen holdings, thereby pushing the currency down.
Japanese Fallout May Hit Treasuries
by John Browne of Euro Pacific Capital,
As the fourth largest economy in the world, behind the EU, US, and China, any major setback in Japan likely will have widespread repercussions. Japan is also the third largest holder of US Treasuries, behind the United States and China. While it is too early even to assess the Japanese damage accurately ? let alone to forecast the full implications ? it is possible to see the potential for a meltdown of the US Treasury market and international monetary system. Current estimates hold that the Japanese disaster has already lowered world economic growth by a full percentage point for the year.
Interest Rates Are on the Launch Pad
A few months ago, the recovery cheerleaders reached a crescendo when expanding consumer credit stats and surging US trade deficits provided them with ?evidence? of an economic rebound. In declaring victory, they overlooked the very nucleus of this past crisis: namely, the enormous debt levels and bubbling inflation that created fragile asset bubbles. In reality, only a reduction in US debt levels or increase in the value of the dollar would have signaled a budding recovery; but, thanks to the Federal Reserve and Obama Administration, there is virtually no way those results will ever be seen.
A Little Understanding Goes a Long Way
by Peter Schiff of Euro Pacific Capital,
As the world confronts one of the most critical periods of economic upheaval that it has ever seen, it is clear that our most influential economic stewards have absolutely no idea what they are doing. But, like kids with a new chemistry set, they are nevertheless unwilling to let that stand in the way of their experimental fun. As they pour an ever-growing number of volatile ingredients into their test tubes, we can either hope that they magically stumble on the secret formula to cure the world?s ills, or more pragmatically, we can try to prepare for the explosion that is likely to result.
Taps for the Dollar
It now appears that the United States has finally succeeded in its efforts to destroy confidence in the U.S. dollar. Given the currency's reserve status, its ubiquity in financial markets, and the economic power and political position of the United States, this was no easy task. However, to get the job done Washington chose the right man: Fed Chairman Ben Bernanke. Thanks to Bernanke's herculean efforts, investors across the globe have now been fully weaned from their infantile belief that the U.S. dollar will remain the ultimate safe haven currency.
Morgan Opens Gold Window
by John Browne of Euro Pacific Capital,
Earlier this month, J.P. Morgan made an important announcement: the bank would now accept gold as collateral for loans. The move appears to have been well-timed, the price of gold and silver climbed steeply, based largely on political turmoil in the Middle East. But why should Morgan?s decision be of interest to anyone outside the bank? It can be argued that J.P. Morgan is the world?s premier major bank. As such, its decision to accept gold as collateral offers a rare glimpse into the very private financial decision-making of some of the largest and most sophisticated investors in the world.
Arab Autocracies and US Inflation
Civil revolt is currently spreading across the Arab world. What began in Tunisia has now metastasized into Bahrain, Egypt and Libya. Though two dictators have been ousted, the chances that these regimes will fundamentally transform from autocracy to a system of free markets and property rights are also up in the air. There are many unknowns, but what is known is that the turmoil has had an immediate and significant impact on the price of oil. It is also evident that global consumers continue to get pummeled by rising food and energy prices.
Geithner's Failed Makeover
To counter the increasing demands that government reduce its micromanagement of the economy, the Obama Administration offered a fig leaf in the form of a white paper entitled "Reforming America's Housing Finance Market." In addition to marking the official end of the Bush era "ownership society," where increasing the level of home ownership was a national priority, the document contains a recommended regulatory overhaul of the FHA as well as Fannie Mae and Freddie Mac, that intends to bring the share of government owned home loans from the current 95% to 40% over the next 5-7 years.
Financial Disconnect
by John Browne of Euro Pacific Capital,
The printing of fiat money is likely to be able to sustain a false economic recovery for some time. But, eventually, the cost will be a rapid erosion of the value of the US dollar ? not just in real terms, but also against almost every other foreign currency. Despite possible short-term corrections, gold and silver holdings are likely best to shield investors from the perils that lie ahead.
The Two Faces of Ben Bernanke
by Peter Schiff of Euro Pacific Capital,
When the rest of the world no longer links their currencies to ours, the Fed will truly not have to worry about fueling global inflation. Instead, all of its inflation will burn through our banks accounts right here at home. And that blaze, so concentrated, will burn a lot hotter than the fires we see abroad.
Is The US Rally Sustainable?
by John Browne of Euro Pacific Capital,
The impressive recovery experienced recently by the US stock market is unlikely to be sustained through natural means. When the markets do ultimately turn south, the Fed will surely arrive on the scene with more liquidity. When that happens, the very currency upon which these investments are based will erode from under them.
The Cause and Evidence of Inflation
The fate of the US dollar in the future may not be all that different from the fate of Enron shares in 2001. In the 1990s, Enron was one of the most respected corporations in America, and the share price soared. But once the accounting scandal broke, and Enron?s profits were proven to be illusory, the purchasing power of its shares plummeted. Eventually, the shares became worthless.
Inflation is Here to Stay
There is no escaping the conclusion that inflation will continue to surge. Inflation is, after all, the increase in money supply. And there appears to be no escaping the likelihood of massive floods of new money rolling off presses around the world, especially in Washington. But to a degree that is virtually ignored by many economists, a currency?s purchasing power is not only affected by money supply growth but also from the mere perception of it.
A Mockery of a Sham
by Peter Schiff of Euro Pacific Capital,
We do not need more regulation. Government interference has done enough damage already. We simply need to return to a sound monetary policy and get the government out of the mortgage and housing markets. Unfortunately, that?s not going to happen.
Pie in the Sky
by John Browne of Euro Pacific Capital,
Investors would be well-advised to retain a jaundiced view of all political statements, especially those of central bankers and politicians positioning themselves for the next election. In 2011, investors should focus their eyes not on the sky, but at the brick wall our Union is fast approaching.
Bernanke?s Golden Dismount
Benjamin Bernanke has been a very, very good friend to gold investors. However, some of those who have benefited from his largesse now fear that the recent selloff in gold indicates an imminent end to Bernanke?s monetary high-wire act. Most assume that a cessation of the Fed?s stimulative efforts, if it were to occur, would spell the end of gold?s bull run. But a closer reading of Bernanke?s economic philosophy and the Fed?s own recent history, shows that once a central banker begins a strenuous routine, it is very hard, if not impossible, for them to dismount.
The Great Debt Shift
by John Browne of Euro Pacific Capital,
If one were asked to describe the major global economic changes that have unfolded since the financial crisis began, a good starting place would be the massive shift of debt from the private to the public sector. Attempting to arrest a deepening crisis, governments all around the world have bailed out businesses and companies by transferring bad debts to the public books. Although these moves have provided some current stability (after all, governments are much less likely to default), the long-term consequences may be dire.
Pricey Eats
From all accounts it appears that the world is in the early stages of a major leg up in food prices. The major macroeconomic trend will likely drive economic policy and the investment outlook for years to come. Although mainstream pundits like to focus on cyclical drivers like the weather, the real force behind the move is secular. The U.S. is leading the world in a pandemic of monetary inflation that is helping to cause commodity prices, food in particular, to skyrocket across the globe.
China's Inflation Problem Looms Large
by Peter Schiff of Euro Pacific Capital,
The global economy has become so unbalanced that government ministers recognize that something has to give. To a very large extent the distortions are caused by China?s long-standing policy of pegging its currency, the yuan, to the U.S. dollar. But as China?s economy gains strength, and the American economy weakens, the cost and difficulty of maintaining the peg become ever greater, and eventually outweigh the benefits that the policy supposedly delivers to China. In the first few weeks of 2011 fresh evidence has arisen that shows just how difficult it has become for Beijing.
Stuart Rothenberg and the arrogance of honesty
by Peter Schiff of Euro Pacific Capital,
In retrospect, it wasn't just me whom Mr. Rothenberg overlooked, but the entire Tea Party movement. I'm sure, back in 2009, he said many similarly dismissive things about the campaigns of Rand Paul and Marco Rubio. Fortunately, he was wrong. Hopefully, as more and more voters finally get sick of politics as usual, pundits like Mr. Rothenberg will have to find a more honest line of work. After the campaign was over, I had a job to go back to. As a creature of Washington, I doubt Mr. Rothenberg has similar choices.
Will The Tea Party Congress Bring Recovery?
by John Browne of Euro Pacific Capital,
If the Republicans make good on their campaign promises, we will see cuts in government spending and an end to fiscal stimulus. Given that short-term stock market performance is very much dependent on such government assistance, the current rally is hard to fathom. Meanwhile, gold and silver have experienced a counterintuitive correction (although to be honest, pundits are making much more of this 4% pullback than the size of the move merits). Could it be that the markets now believe that fiscal restraint in Washington is the best pathway to growth?
Forever Stamps Tell Us Much
by Peter Schiff of Euro Pacific Capital,
Sure, without a federal bailout there is a chance the Post Office will go under, and forever stamps will end up lining bird cages. However, given the track record of government bailouts and the clout of unionized postal workers, chances are very high that the Post Office will always get the bailouts it needs. As a result, forever stamps are a better bet than Treasury debt. They also have prettier pictures.
Rising Rates Reveal Debt Reality
Right now, the US national debt is the biggest subprime ARM of all time. Much like homeowners who thought they could afford a mortgage that was 10 times their annual incomes, Messrs. Krugman and Wesbury are blinded by deceptively low current rates of interest. These ostriches won't poke their heads up to see the writing on the wall: low rates and quantitative easing cannot coexist for long. As rates continue to rise, the reality of US insolvency will be revealed.
No, Krugman, You're Eating America Alive
Here we go again. This week, Paul Krugman, the 2008 Nobel Prize winner in economics and the go-to guy for progressives who need a morale boost, launched another misguided attack on Austrian School economists. From his New York Times soapbox, he referred to the free-market Austrian ?hard money? philosophy as a ?zombie idea? that is inexplicably eating the brains of the voting public.
Results 351–400
of 482 found.
