How Do We Really Cut the Burden of Government? Cut Spending!

In all of the talk about tax reform, nobody is considering the more fundamental problem facing America – the size and scope of the federal government.
Peter Schiff has described the Republican tax plan as ‘tax cuts masquerading as reform.’ When it’s all said and done, Americans aren’t going to get tax relief. They are going to get big government on a credit card. The balance will come due down the road.
The real issue is the total cost of government. In an article originally published on the Mises Wire, Ryan McMaken argues that if Republicans really want to ease the burden of government, they need to cut spending.
Washington, DC is currently in the middle of the ‘tax reform’ process, which as Jeff Deist, points out, is ‘ a con, and a shell game.’ Tax reform proposals, Deist continues ‘always evade and obscure the real issue, which is the total cost – financial, compliance, and human – taxes impose on society.’
Tax reform is really about which interest groups can modify the current tax code to better suit their own parochial interests. The end result is not a lessened tax burden overall, and thus does nothing to boost real savings, real wealth creation, or real economic growth. It’s just yet another government method of rewarding powerful groups while punishing the less powerful ones.
Not surprisingly then, the news that’s coming out of Washington about tax reform demonstrates that the reforms we’re seeing are only shifting around the tax burden without actually lessening it. The central scam at the heart of the matter is that DC politicians are more or less devoted to ‘revenue neutral’ tax reforms. That means if one group sees a tax cut, then another group will lose a deduction, or even see an actual increase in tax rates.
This is why many middle-class families may be looking at a higher tax bill. David Stockman explains:

This post was published at Schiffgold on NOVEMBER 28, 2017.

Trusting the Fed: Will the White Knight Save the Day?

As we reported last week, investors are in an era of ‘irrational exuberance.’
The US stock market is at all-time highs. Meanwhile, market volatility is at lows not seen since the 1990s. In an odd juxtaposition of seemingly contradictory points of view, investors realize the market is overvalued, but at the same time, they believe it will continue to go up. According to a Bank of Ameria survey, 56% of money managers project a ‘Goldilocks’ economic backdrop of steady expansion with tempered inflation.
In an article published at the Mises Wire, economist Thorsten Polleit adds some further analysis and asks a critical question.
Credit spreads have been shrinking, and prices for credit default swaps have fallen to pre-crisis levels. In fact, investors are no longer haunted by concerns about the stability of the financial system, potential credit defaults, and unfavorable surprises in the economy or financial assets markets.
‘How come?’
In simplest terms, most investors now believe the Federal Reserve will ride in like a white knight and save the day.
After all, the Fed saved the day before. Surely it will do it again. Peter Schiff put it this way during an interview on The Street.

This post was published at Schiffgold on NOVEMBER 22, 2017.

Tax Cuts Without the Reform

Last week, the House passed its version of ‘tax reform,’ along party lines. The final vote came in at 227-205, with the entire Democratic caucus opposing the bill. Thirteen Republicans joined the Democrats in voting no.
The debate now shifts to the Senate where things will likely become more contentious. Wisconsin Republican Sen. Ron Johnson has already announced he opposes the current Senate plan. And the Senate bill differs from the House version – significantly putting off corporate tax cuts for a year. If the Senate can get something passed, the two chambers will have to figure out a compromise plan.
Peter Schiff has been saying the Republicans aren’t even really attempting to reform the tax system. He called the GOP plans ‘tax cuts masquerading as reform.’ Peter is not alone in this thinking.
As Peter said, reform means fundamentally changing the tax system. That’s not happening. There may be some good things in the tax plan – but we can’t really call it reform. And without significant reform of the system, it becomes questionable whether or not the plan can actually spark the economic growth being promised.
Dan Kurz of DK Analytics also contends that the Republican plan isn’t true reform.

This post was published at Schiffgold on NOVEMBER 21, 2017.

Stock Market Bubble Floating on Currents of ‘Irrational Exuberance’

Last week, Peter Schiff did an interview on The Street and talked about the US stock market, saying, ‘Well, the bubble keeps getting bigger.’ We’ve been talking about this ballooning bubble for months. After a while, it’s easy to blow us off as pessimistic contrarians who just don’t get it. But amazingly, large numbers of investors also believe the stock market is way overvalued.
But they keep buying anyway.
Bank of America called it ‘irrational exuberance.’
The latest fund-manager survey by Bank of America Merrill Lynch found that a record 48% of investors say the US stock market is overvalued. Meanwhile, 16% of investors say they are taking on above-normal risk. That’s also a record, eclipsing risk-taking during both the dot-com and housing bubbles.

This post was published at Schiffgold on NOVEMBER 15, 2017.

Ron Paul: Republican Tax Plan Increases the Most Insidious Tax

Ron Paul has identified an increase in what he calls the ‘most insidious tax’ buried in the GOP tax reform bill.
A lot of Americans have put a lot of hope in tax reform. As Peter Schiff said in a recent Fox Business interview, the prospect of economic growth spurred by tax reform and other Trump policies have generated a great deal of optimism. But the question remains: can the GOP Congress deliver? And even if Congress does get a reform package passed, some question whether it will actually lead to the economic growth promised. Absent spending cuts, the tax plan will increase the federal debt even further. Evidence indicates high debt levels retard growth.
In a recent article published on the Mises Wire, Ron Paul identified another problem with the Republican tax plan. It actually increases the most insidious of all taxes – the ‘inflation tax.’
Paul acknowledged the tax plan has some positive elements such as increasing the standard deduction, creating a new family tax credit, eliminating the death tax, reducing the corporate tax rate, and lowering taxes on small businesses.

This post was published at Schiffgold on NOVEMBER 7, 2017.

In Fed We Trust…Or Do We?

There’s been a lot of focus on the Federal Reserve lately.
Earlier this month, the central bank launched efforts to shrink its balance sheet after years of quantitative easing. Most analysts also expect one more interest rate increase this year. Then there is rampant speculation about who will take the reins at the Fed when Janet Yellen’s term ends early next year. Many observers think Trump will pick a more hawkish Federal Reserve chair who will increase the pace of ‘normalization.’
But Peter Schiff has said ultimately the Fed doesn’t want to do anything to upset the status quo. And at this point, the central bank is between a rock and a hard place. It can normalize, which will ultimately pop the bubble, or it can continue with its easy money policies and wreck the dollar. Peter has said the Fed will ultimately sacrifice the dollar on the altar of the stock market.
In a recent article published on the Mises Wire, economist Ryan McMaken weighs in, arguing along these same lines. He says the Fed won’t do anything that will spook the markets. That means we can expect more ‘easy money.’ But this raises a question – what happens when the next recession rolls along?

This post was published at Schiffgold on OCTOBER 30, 2017.

Some Doubt about the Economic Benefits of GOP Tax Reform

There’s a lot of optimism out there that passage of the Trump tax plan will juice the economy. Many analysts say tax cut optimism is one of the factors that continue to push stocks up, and that has created headwinds for gold and silver. But as we’ve pointed out, there are reasons to question this mainstream narrative.
Now some in the mainstream are even starting to question the mainstream narrative.
There are two major problems with putting hope in GOP tax reform.
In the first place, despite some appearance of progress, it remains questionable whether Congress can pull it together and actually get anything done. Multiple failures to repeal, or even significantly reform, Obamacare didn’t create a lot of confidence in the Republican Congress. There are a number of potential sticking points, including a proposal to eliminate the deductibility of state taxes.
Second, as Peter Schiff pointed out, the plan as presented won’t likely create the economic growth it promises. Why not? Because it’s going to balloon the deficit and that is historically bad for economic growth.

This post was published at Schiffgold on OCTOBER 30, 2017.

Are Cryptocurrencies Inflationary?

There’s a debate raging over what, exactly, bitcoin and the thousand or so other cryptocurrencies actually are. Some heavy-hitters are weighing in with strong, if not always coherent opinions:
Jamie Dimon calls bitcoin a ‘fraud’
JPMorgan Chase CEO Jamie Dimon did not mince words when asked about the popularity of virtual currency bitcoin.
Dimon said at an investment conference that the digital currency was a ‘fraud’ and that his firm would fire anyone at the bank that traded it ‘in a second.’ Dimon said he supported blockchain technology for tracking payments but that trading bitcoin itself was against the bank’s rules. He added that bitcoin was ‘stupid’ and ‘far too dangerous.’
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Peter Schiff: Even at $4,000 bitcoin is still a bubble
One of the best-known among the bears, investor Peter Schiff, is now making his case in even stronger terms for why bitcoin has advanced ever farther into bubble territory.
Schiff, who predicted the 2008 mortgage crisis, famously referred to bitcoin as digital fool’s gold and compared the cryptocurrency to the infamous bubble in Beanie Babies.

This post was published at DollarCollapse on OCTOBER 22, 2017.

Can Tax Cuts Grow the Economy Without Government Spending Cuts?

Last week, we asked an important question about Trump’s tax reform plan: Can it deliver?
Despite rampant optimism about tax reform, there are a number of problems. In the first place, it remains uncertain whether or not Congress can even get anything done. Second, as Peter Schiff pointed out, the plan as presented won’t likely create the economic growth it promises.
Peter focused on the fact that the plan isn’t truly reform. It’s tax cuts masquerading as reform. Then there is the issue that it promises to decrease revenue without actually cutting spending and shrinking the size of government. There is strong evidence showing high debt levels retard economic growth.
In a recent article published on the Mises Wire, economist Frank Shostak explains precisely why cutting taxes without accompanying decreases in government spending won’t spur economic growth over the long-term.
President Donald Trump proposed last month a tax plan that would lower the top individual tax rate to 35% from 39.6%. It would also lower the corporate income tax rate to 20% from 35%.

This post was published at Schiffgold on OCTOBER 20, 2017.

Ron Paul on the Stock Market: Delusions and the Madness of Crowds (Video)

Stock markets continue to surge higher on a seemingly endless upward trajectory. On Tuesday, the Dow Jones crossed the 23,000 mark for a time and closed just below that threshold at 22,997.
It almost seems like this can go on forever, but Ron Paul said it would eventually come to an end during an interview on CNBC Futures Now last week. He said it reminds him of ‘delusions and the madness of crowds.’
Of course, as Paul pointed out, even though we don’t know exactly when it will eventually crash, the market can’t go up forever. And Paul offered a sobering warning.
‘My position is the longer it lasts, the bigger the bust.’
So what’s really behind the meteoric rise in stocks? Paul echoed what Peter Schiff and other contrarians have said – it’s a big bubble pumped up by central bank intervention.

This post was published at Schiffgold on OCTOBER 18, 2017.

Is Silver Set to Soar?

Could silver be set to soar?
Analysts Barron’s spoke with recently think so.
An article published on the business journal’s website last week predicted the white metal will emerge as a winner for the second straight year.
With a per-ounce price of $17.41 for silver futures as of Friday, analysts say the white metal is poised for a big climb, particularly as the gold-to-silver ratio stands well above historical averages.’
Peter Schiff talked about the silver-gold ratio over the summer, noting it is historically very high. This means silver is extremely undervalued. The current silver to gold ratio stands at nearly 76:1. This means you can buy almost 76 ounces of silver with one ounce of gold. Consider the historic average ratio hovers around 16:1, and the modern average over the last century is around 40:1. As Peter said, ‘This is silver on sale.’
It’s one of the greatest silver sales of all time, relative to the price of gold.’

This post was published at Schiffgold on OCTOBER 16, 2017.

Fed’s Monetary Tightening Could Become a Havoc-Wreaking Juggernaut

The price of gold has fallen four straight weeks, primarily driven down by anticipation of Federal Reserve monetary tightening. The kickoff of the Fed’s balance sheet normalization program and the expectation of rising interest rates have helped spark a dollar rally. But few people seem to be paying any attention to the pitfalls of quantitative tightening. In fact, the Fed’s policy to push interest rates higher could turn out to be a havoc-wrecking juggernaut.
We’ve already discussed the impact rising interest rates will have with the government more than $20 trillion in debt. Any substantial interest rate increase would crush the US budget under interest payments. Analysts have calculated that if the interest rate on Treasury debt stood at 6.2% – its level in 2000 – the annual interest payment on the current debt would nearly triple to $1.3 trillion annually.
But the Fed has an even more basic problem. It has inflated a stock market bubble. This attempt to shrink the balance sheet may well pop it. Peter Schiff pointed this out during his podcast earlier this month.
I don’t know why the markets are excited about the prospect of a plan to shrink the Fed’s balance sheet, because if the Fed actually shrunk the balance sheet, the markets wouldn’t like it because it would put dramatic upward pressure on interest rates which are not good for stocks.’

This post was published at Schiffgold on OCTOBER 6, 2017.