Peter Schiff: Fed Induced Phony Recovery is Bullish for Gold

Here’s Peter Schiff of Euro Pacific Capital pointing out that the recent positive GDP numbers indicate that America is spending money – money that is just created by the Fed.  The GDP “is goosed.”   If the Fed decides to take all that easy money away, the propped up markets – stocks, housing, etc. – will collapse.  This, combined with the fact that most people don’t see the value of gold in this environment, makes Schiff even more bullish on the metal.

Ray Dalio: How the Economic Machine Works

Ray Dalio of Bridgewater Associates narrates this video, which gives a simplified explanation of how an economy really functions when controlled by a central bank, such as the US Fed.  He shows how there are short and long-term cycles which govern credit, debt, inflation and productivity.  Dalio ends the video with some simple rules to help maintain a healthy economic system:

  • Ensure debts don’t rise faster than income
  • Ensure income doesn’t rise faster than productivity
  • Try to keep increasing productivity as much as possible


Jim Grant: Let’s Talk About Our Monetary Problems Using ENGLISH

Jim Grant on CNBC today discussing:

  • The ‘bad idea’ to attempt to resolve the national debt problem by minting a trillion-dollar platinum coin. Supporters say the US Treasury would be able to deposit said coin with the Federal Reserve to act as an asset, backing part of the outstanding debt.
    • As Jim notes, this is not an honest approach to discussing the root problem – which is based in the monetary system, itself.
    • Besides that, the idea is preposterous and just shows how crazy this system has become.  Things don’t hold value because someone says they have value.  A thing has value based on the public/market demand for that thing.
  • Prior to 1971, government spending was constrained by both interest rates and the fact that there was some semblance of a gold-backed currency via Bretton Woods.  But today, we have neither constraint – the Fed’s zero percent interest rate policy combined with the current, purely fiat monetary system has created the unstoppable spending spree that has led us to these extreme levels of debt.  If there is anything left at all as a bar against further spending, it is the debt ceiling.  But even that is now being threatened with a proposal to remove it entirely.
  • The just announced appointment of Jacob Lew as Treasury Secretary.  Jim is holding judgement in order to see if there will be any honest discussion regarding the real problems of the monetary system.

Expect Currency War to Continue in 2013

Author of Currency Wars, Jim Rickards explains that the Fed’s easing programs have thus far failed to create their desired inflation, which, in their view, is required to boost US exports.  Although Japan will be allowed to weaken their currency, all the other currencies of the world will be strengthened as the US strives to further weaken the US dollar. Of course, gold is still the currency of choice to preserve wealth.




Expanding the discussion, Lauren Lyster interviews Jim Rickards, where he clarifies the Fed’s tactics:

  • The economy has failed to recover despite the Fed’s actions so far because the consumer has not been willing to spend or invest.  Hence money velocity has remained nil.
  • The Fed is trying to induce more spending by: (1) Forcing a negative interest rate as an incentive for more borrowing, and (2) Scaring the public into buying stuff through the threat of future inflation.
  • The inflation, they hope, will be the result of all the currency wars with other nations, especially China – cheapening the dollar will make imports more expensive.

It’s a race between the Fed trying to achieve their goals and the whole system imploading because of a loss of confidence in the dollar.

Jim Rickards on War – Currency or Otherwise

In his book Currency Wars, Jim Rickards reveals his participation in war games sponsored by the Secretary of Defense in 2008. The objective of these particular games was to discover how nations of the world might use financial instruments to wage war on each other and to gain some perspective on their effectiveness.  In the video below, he goes a step further and hypothesizes on what events might take place between the US and China as the world economy continues to slide into the toilet.  Rickards ends the video with a probable sequence of events that will take place if we stay on the current path.

Greed, Fear, Bubbles and Market Madness

Grant Williams, of Vulpes Investment Management, provides us with a brilliant presentation explaining how greed and fear play into the making of economic bubbles.  After giving a few examples of historic bubbles of the past, Williams then goes on to describe two bubbles in the present.  Spoiler alert!

Williams presents the latter two bubbles happening today as one nearing a collapse and the other in a “sweet spot” ready to enter the hyper-inflating mania phase.

Total Destruction of the Economy

G. Edward Griffin, author of The Creature from Jekyll Island, explains how the Federal Reserve’s main goal is to support the banks – that’s it. The Fed creates money from nothing and gives it to the banks to keep their operations going.  All their actions benefit the banks, and screw the rest of us.

It was fun getting screwed for a while – while we didn’t even know what was happening.  Up until now, the US and most of the western world has benefited greatly from this system. We’ve been living the dream. It was the best kind of dream – a wet dream.  It’s time to wake up and see the mess we’ve made.

Too Much Debt!

Update: January 11, 2013

Congress lived up to their reputation and kicked the can once more.  Essentially, tax rates were raised (such as on those making $450,000 or more and estate taxes went up from 45% to 40%) but spending cuts were deferred for a couple months, entailing yet another round of political saga to come.  So, as the following chart from Casey Research shows, the deficit situation has not gotten any better.  In fact, according to the CBO, it’s worse – earlier estimates had not even considered the interest payments, so the annual deficit will be $60 billion more than originally anticipated.

Fiscal Cliff - Budget Deficit Details

September 22, 2012

On January 1, 2013 the US will face the real possibility of falling off a fiscal cliff and may take down much of the global economy with it. Specifically, the cliff is represented by three factors, which policy makers must overcome in order to avoid another severe recession – or worse, depression.

  1. The Bush Tax Cuts are set to expire at the end of 2012.  At a time such as this, when the economy is stagnant, any tax increases will only serve to further sour any potential business activity. On the other hand, the government annual deficit spending is already at $1.2 trillion and if revenues aren’t increased, budget deficits will only get worse.
  2. Mandatory budget cuts are set to take affect. Last year, when congress was unable to agree on a long-term plan to tackle the never-ending growth of the national debt – now over $16 trillion – the temporary measures they initiated allowed for a small ceiling increase, while putting in place a special super-committee to study the situation and recommend policy. The super-committee came and went without any agreement, which automatically instituted a $1.2 trillion cut in government spending – half from domestic spending and half from defense spending. These cuts are set to go into affect starting in January, 2013 at about $100 billion per month and last for nine years.
  3. The debt ceiling is again being breached. Last year, when the ceiling debate was the centerpiece of discussion, lawmakers were unable to reach agreement on a debt reduction policy. They were only able to conclude a temporary measure, allowing for a small increase in the ceiling while the super-committee furthered the discussion. The current debt ceiling limit of $16.394 trillion is coming up fast.

It should be obvious that the real problem is that there is simply too much debt!  But then again, what should one expect when the whole monetary system has become based on debt? In today’s world, money only comes into existence when someone is willing to borrow it from the banking system. This is why the Fed and all the other central banks try so hard to keep interest rates low – as  more money is borrowed, the banks are able to use fractional reserve banking methods to increase money availability even more. The economy keeps chugging along as long as people and companies are willing to borrow more.

But this debt-based system obviously has its limits, as the current economy has been showing. People and companies are unwilling to burden themselves with more debt.  The Fed’s policies have been trying to overcome that by keeping interest rates low so that the government can keep spending borrowed money in order to sustain the perception that the economy is okay.

It is impossible for the governments to ever repay these debts, which is why the central banks will continue to employ “QE” measures, just as they did in early September, when the ECB in Europe, followed by the US Fed, and finally the Bank of Japan all embarked on major money-printing policies to keep the debt-game going a bit longer.

In relative terms, it wasn’t that long ago when money was based on real, tangible assets, such as gold and silver – assets that couldn’t simply be conjured up out of thin air.  These are the real assets that people should be seeking now, especially since saving cash in a savings account yields next to nothing in interest. Plus, as the governments of the world continue to print money to cover unpayable debts, the value of all fiat paper money will only continue to decline.

However, investors in precious metals will want to get their priorities straight.  Many gold bugs, for example wish to keep their precious metals close – where they can actually touch them. Possession is nine-tenths of the law, after all.  Having physical possession of one’s precious metals has benefits, especially in the case of a complete financial collapse, which some say is inevitable, given the shape of the current over saturated debt system.  Having real money to barter with under those circumstances may be priceless.

On the other hand, not everyone is comfortable holding physical precious metals in substantial quantities. Private storage can be a risk, which should be weighed carefully.  For those concerned about the safety of private storage, or even those seeking diversification can look into alternative ways to hold precious metals. One convenient method is to use Exchange Traded Funds (ETF) traded on stock exchanges. Whether open-ended funds like GLD and SLV or closed-ended funds like PHYS and PSLV, the investor should be aware that there are still risks to overcome, such as the stock market itself.

Yet there are other ways people can invest in precious metals.  Companies such as BullionVault allow their clients to buy and sell precious metals online, via an internet browser.  Once purchased, the metal is physically stored in various geographically separated regions of the world. This immediately accomplishes two things – diversifies assets across national boundaries, which reduces some sovereign risks and also relieves the investor of personal storage responsibilities.

Perhaps some combination of all of the above methods, or others not covered can be sought after for the potential precious metals investor.  When the debt-system finally collapses, people will wake up and remember what real money really is and wonder why they never thought about it before.  It’s funny, isn’t it?  Something so vital to every day activities, yet so little thought is given to what money really is. It’s good that some people are waking up early.

Ron Paul on the Fed’s Decision Today

Today the Federal Reserve gave the markets exactly what they had been expecting – more money printed out of thin air to purchase US debt (US Treasury and Mortgage Backed Securities).

  • Fed to buy $40 Billion in MBS per month
  • Fed to continue Operation Twist
  • Fed expects interest rates to remain at low levels until at least 2015
  • Fed gives no time limit on this easing policy, but will continue indefinitely

Read the complete Fed press release and see the full recording of Ben Bernanke’s press conference. Bloomberg’s wide array of commentators on today’s Fed decision included Ron Paul, who explains how all this money printing is destroying the value of the US dollar.




G. Edward Griffin: The Federal Reserve is a Cartel

Eighteen years ago, G. Edward Griffin wrote The Creature from Jekyll Island and exposed the Federal Reserve’s true nature.  Since that initial writing, the knowledge of the fact that the Fed is not a government institution, but a privately owned central banking cartel has expanded in public awareness. In this remarkably lucid interview with Casey Research’s Louis James, Griffin discusses:

  • The growing size of government
  • The decline of the purchasing power of the US dollar
  • The two-party political system is really a cover for a one-party system
  • The realistic expectations of public awakening prior to a collapse
  • The Fed is a cartel. Furthermore, it’s a partnership between the bankers and politicians
  • Why we have not seen hyperinflation (yet)
  • The system has changed from a free enterprise, competitive system to a politically connected, non-productive system, which will inevitably lead to totalitarianism
  • The possibilities for America to reverse course and avoid catastrophe