Fear Takes the Wheel By Peter Schiff

Fear Takes the Wheel By Peter Schiff


Over the past three or four years a strange phenomenon has developed in the global investment markets. With some exceptions, many asset classes, in particular domestic and foreign equities, commodities, and foreign currencies have tended to move in the same direction on a day to day basis. The mega-correlation has lasted so long that most now take it for granted. This leaves investors with relatively simple choices: when to get in to the market in general and when to park assets in cash and U.S. Treasuries.

However, few recall that this pattern is relatively new in the annals of financial history. Fewer still realize the reason for the current anomaly. From my perspective the most logical explanation is fear, which has become global, pervasive, and persistent. Traditionally, when investors fear inflation they buy stocks, commodities, gold, and foreign currencies, and sell dollars and U.S. treasuries. When they fear deflation they sell stocks, commodities, gold, and foreign currencies, and buy dollars and U.S. treasuries. The problem is that right now, no one knows which one to fear. Depending on the news the pendulum swings from one extreme to another on a daily basis.
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A Hell of a Decade by Peter Schiff

A Hell of a Decade
by Peter Schiff

In its recent look back on the first ten years of the century, Time Magazine proclaimed the period to be "the decade from hell." The editors made their case based on what they saw as the signature events of the last ten years, notably the ravages of terrorism, failed wars, and a global financial crisis. Taken together, these factors produced an era that Time is convinced will be remembered as one of the low points in our history.

As the media hates to dwell on the negative, the commentary was rife with notes of optimism about pending recovery. It could hardly be accidental that in the very next issue, Fed Chairman Ben Bernanke was named "Man of the Year" for his supposedly Herculean efforts to keep the economy afloat as we departed the Naughty Aughties. Although Time takes pains that to point out that the "Person of the Year" honor reflects impact rather than adulation, its profile of the Chairman was triumphant.

Even if you believe the "survived the worst/turned the corner" narrative offered by Time, it still should strike anyone as ironic that Chairman Bernanke, a chief architect of the economic problems that surfaced in 2007, should be held in such high esteem.

Apart from its misplaced reverence for the Fed Chairman, I would take issue with Time's entire characterization of what has now become history.

Under no circumstances could the past ten years be described as "the decade from hell." In fact, in terms of economic good fortune, the period shares parallels with the Roaring Twenties. I would describe this as a decade of sin that paved the way to hell.
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Mission Not Accomplished by Peter Schiff

Published 12/16/09
Although Barack Obama has refrained, at least for now, from delivering triumphant speeches in a naval flight suit, there is nevertheless a strong tone of accomplishment emanating from the President and his deputies. Over the weekend, top White House economic adviser Lawrence Summers even pronounced that the recession is now over. Without hedging his bets, Summers declared that thanks to the Obama Administration's wise stewardship, economic stimuli, and emergency bailouts, another Great Depression, set up by the prior Administration, had been narrowly averted. Summers saw no impediments to the return of sustainable growth. He may as well have delivered these remarks from the deck of an aircraft carrier.
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Peter Schiff The Truth Behind China s Currency Peg

The Truth Behind China’s Currency Peg

Peter Schiff
Campaign For Liberty
Saturday, Nov 21st, 2009

During President Obama’s high profile visit to China this week, the most frequently discussed, yet least understood, topic was how currency valuations are affecting the economic relationship between the United States and China. The focal problem is the Chinese government’s policy of fixing the value of the renminbi against the U.S. dollar. While many correctly perceive that this ‘peg’ has contributed greatly to the current global imbalances, few fully comprehend the ramifications should that peg be discarded.

The common understanding is both incomplete and naive. Most analysts simply see the peg as China’s principal weapon in an economic struggle for global ascendancy. The peg, they argue, offers China a competitive advantage by making its products cheaper in U.S. markets, thus allowing Chinese firms to gobble up market share and steal jobs from U.S. manufacturers. The thought is that were China to allow its currency to rise, American manufactures would regain their lost edge, and both manufacturing firms and the jobs formerly associated with them would return. In this narrative, the struggle centers on the United States’ diminishing leverage in persuading the Chinese to lay down their unfair weaponry. It’s a sympathetic picture, but it tells the wrong story.

While the peg certainly is responsible for much of the world’s problems, its abandonment would cause severe hardship in the United States. In fact, for the U.S., de-pegging would cause the economic equivalent of cardiac arrest. Our economy is currently on life support provided by an endless flow of debt financing from China. These purchases are the means by which China maintains the relative value of its currency against the dollar. As the dollar comes under even more downward pressure, China’s purchases must increase to keep the renminbi from rising. By maintaining the peg, China enables our politicians and citizens to continue spending more than they have and avoiding the hard choices necessary to restore our long-term economic health.
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King dollar dethroned By Peter Schiff

For the most part, the value of the dollar is given cursory attention by the financial media. Typically, its movements are assigned an importance on par with much less determinative metrics such as natural gas futures and construction permits...
King Dollar Forced to Abdicate By Peter Schiff
Friday, October 23, 2009
It's only when major milestones are reached that anyone really takes notice of the dollar. We are living through one of those times.

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A Failure of Capitalism By John Browne of Europacific Capital

John Browne as you probably already know is a senior Market Strategist in Peter Schiff's Euro Pacific Capital Inc. recently he wrote an article in Goldseek radio website under the title : A Failure of Capitalism? here is a snapshot of the article :

Politicians often find scapegoats for America’s economic woes. It is rare – if ever – that they point the finger at themselves. Yet, the basic cause of the current severe economic problem lies in the machinations of government.

It is clear to even a casual observer that Congress has abused its power to tax and spend. It has taxed success to subsidize failure. It has purchased votes by enacting an unending stream of entitlement programs, financed by taxation, foreign debt and a progressive degradation of the U.S. paper dollar.

This cynical boosting of consumption at the expense of production has resulted in the American consumer now accounting for some 70 percent of United States GDP. By consuming three times what it produces, America has become the largest debtor in history. The Administration now forecasts annual deficits of trillions of dollars for the next decade. This is all the direct responsibility of Congress.

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No Exit for Ben By Peter Schiff

No Exit for Ben
Friday, July 24, 2009
Fed Chairman Ben Bernanke has reassured all that he can maintain near zero percent interest rates for an extended period without creating inflation. With these powers, one wonders if Ben would be better employed by the Justice League rather than the Federal Reserve.

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Peter Schiff on Obama Healthcare Reform Bill

Prescription for Disaster By Peter Schiff

Peter Schiff in his latest newsletter addresses the issue of Obama's Healthcare reform bill calling it "one of the worst pieces of legislation ever drafted" If passed Peter Schiff says it will reduce the quality and increase the cost of health care in America

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Peter Schiff For Senate 2010

An Important Political Message From Peter Schiff

Dear Friend, As you may know, I am seriously considering seeking the Republican nomination for U.S. Senate in Connecticut, and I’ve launched www.SchiffForSenate.com to help me gauge support for my candidacy. As one of the few economists with a record of successfully forecasting the recession, I can say with certainty that unless we return to true free-market principles, our economy will not rebound. Our families will continue to suffer. Unemployment and inflation will continue to rise. Our debt and deficits will continue to grow. It is time to change course. Unfortunately, Congress and the President are continuing down the reckless path of more spending, more government intervention and more restrictions on free enterprise and individual liberty. Socialism has never worked anywhere, and it won’t work here. Washington must have the courage to stand by our founding principles in this time of crisis. Our politicians do not understand the stakes – which is why I am considering a run for the U.S. Senate. But I am a practical man. I know that the political deck is stacked against me, and that wild card candidates almost never win. But I do have an ace up my sleeve, and that is like-minded people across the country who share my ideals. If I can’t translate that support into campaign cash, then I have no hope of defeating an entrenched political machine. Polls suggest that the race is winnable and I am ready to make the personal and financial sacrifice necessary to run. But I can’t win this race alone. If the support is there, I will answer the call. However, if the public sentiment for my campaign is not there, and I decide not to run, I will return the unspent contributions. The decision now rests with you. So make your voice heard by contributing and signing-up at www.SchiffForSenate.com. Free-market conservatives have an opportunity in 2010. With your help and support, I believe this will be our generation’s chance to make a difference for ourselves and our children. Join me at www.SchiffForSenate.com. It’s time we made ourselves heard. Best regards, Peter Schiff

That was the message that Peter Schiff have forwarded today to his fans clients and supporters , I from this blog wish Peter Schiff all the best luck with his new political venture , he can be assured that I will bring my moral and material support either from this platform or from others , I'll certainly do what little I can to promote his candidacy ...I was thinking to call Peter Schiff by phone or probably by email but I thought to wait a little bit as he is certainly very busy and stressed now with so much happening ..in anyways good luck to our candidate Peter Schiff and all the best...

Gold and gold stocks are the best bets Peter Schiff

Peter Schiff: Gold and gold stocks are the best bets

Gold prices are poised for a “spectacular” and prolonged rally as the recession deepens and investors finally become disillusioned with the U.S. dollar.

So says renowned Wall Street financial forecaster and economist Peter Schiff, who loudly warned of the October 2008 stock market crash and accompanying recession as far back as 2006.

Since the global economic meltdown, the president of the Connecticut-based investment firm Euro Pacific Capital has struck a chord with rattled investors who have lost faith in America’s bedrock financial institutions. Hence, his well-received television media blitz in recent months has focused on extolling the virtues of owning gold bullion or gold equities, as well as urging Americans to get out of U.S. denominated investment assets.

In a recent on-camera interview with BNW Business News Wire, Schiff suggests that the looming prospect of a hyper-inflationary environment in the U.S. will severely debase the greenback over the next few years. And the global investment community will realize that gold represents the ultimate “store of value” as a safe haven replacement for a discredited U.S. dollar.

Hence, gold bullion and gold-related investments, such as gold equities, will prove to be the best way to shield one’s money from the ravages of a protracted and severe inflationary environment, Schiff says.

“If you really want to grow your wealth, you should own gold in the mining sector,” he adds, while also suggesting that gold equities (companies that are already in production) offer the greatest leverage to rising gold prices.
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Peter Schiff warns about Misguided government policies

In His latest newsletter the president of Europacific Capital Peter Schiff wrote on 26 June 2009 under the title Double Whammy the following :
By Peter Schiff

Misguided government policies have already dealt vicious body blows to our economy, but that hasn’t stopped politicians this week from launching two new kicks to the groin: a national health insurance plan and a carbon emissions regulation system called “cap and trade.” Even if these plans could achieve their desired ends, which is highly unlikely, I would have hoped Washington would refrain from throwing more monkey wrenches into the economy until it shows some signs of resurgence. The last thing we need right now is to further encumber our economy with higher taxes and additional regulations.

The meteoric rise in health care costs, which has become an unending nightmare for U.S. businesses and consumers, is not an accident. This painful condition has arisen from excess government involvement in the system, tax provisions that encourage the over-utilization of health insurance, and government support of an out-of-control malpractice industry. Rather than allowing more bad policy to drive health care costs further upward, we should be looking at ways to allow market forces to reign them back in.

If left alone, the free market drives quality up and costs down. Government programs produce the opposite result. Despite the president’s claim that a federal plan will bring costs down, there is no historical precedent for such faith.

Simply providing more widespread health insurance, as the Obama plan offers, is not a solution. In fact, it will aggravate the problem. Since consumers no longer pay for routine medical expenses out of pocket, comprehensive health insurance creates a moral hazard for both patients and doctors. To maximize the value of the health insurance “benefit,” most workers opt for low deductibles and co-pays. Therefore, doctors learn that their patients are not concerned with the cost of care, and so they are free to bill insurance companies at the maximum allowable rates.
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Back in the U.S.S.A. by Peter Schiff

Peter Schiff recently wrote an article entitled Back in the U.S.S.A. here is a snapshot and the link for the full article :
Harry Browne, the former Libertarian Party candidate for president, used to say: “the government is great at breaking your leg, handing you a crutch, and saying ‘You see, without me you couldn’t walk.’” That maxim is clearly illustrated by the financial industry regulatory reforms proposed this week by the Obama Administration. Read the entire artlcle here.

The $134.5 Billion Bond Seizure in Italy

The mysterious $134.5 Billion Bond Seizure found by the Italian finance police " La Guardia Di Finanza " at the Swiss Italian Border of Chiasso on two apparently Japanese Citizens raises multiple questions on whether those bonds are real or fake , both are two scary scenarios , if the bonds are real this means some foreign government is trying to dump the US treasury bonds before the hyperinflation hits ?!?!?! that's a plausible scenario , the other scenario is that some foreign government with the capacity and the technology of printing money is now into the business of printing "counterfeit US treasury bonds" and is ready to flood the market with fake US bonds ? could it be Iran North Korea the Russian Mob or the Italian Mafia , who knows ? we all remember that in the 80s , Iran have purchased a US dollar printing machine and have flooded the market with fake US dollar bills , the printing fraud was located in southern Lebanon and was controlled by Iranians ...this is a huge amount of MONEY that is 1% of US GDP , this could destabilize the markets ...the funny coincidence about this is that the arrest of these two Japanese citizens came just a couple of days after the Japanese Finance ministers publicly declared his total and full faith in the strength of the DOLLAR ...!!! all this leave us with too many question marks , only time will answer them ...

US Treasury bonds sales in sharp decline

Foreign governements and Investors have been very shy lately when it comes to purchasing US treasury bonds , according to the The Treasury Department the sales of Treasury bonds have dramatically dropped in the month of April compared with the month of March from $US55.4 billion in March to $US11.2 billion in April.
Both China, the largest holder and buyer of US Treasury Bonds and Japan have dramatically reduced their purchases, other Foreign governments and private investors have done the same .
US investors have been sending their money abroad, too. US residents invested $23 billion in long-term foreign securities in April, up from just $1 billion in March.
China alone owns 10 per cent of America's publicly held debt.

For the first time in 11 months China's holdings of US Treasury bonds fell - to $763.5 billion in April, according to US government data .

The figure is down from March's $767.9 billion, was the lowest since June 2008

DON'T BAILOUT CALIFORNIA says Peter Schiff of Euro Pacific Capital

Obama Should Tell California to Drop Dead says Peter Schiff
DON'T BAILOUT CALIFORNIA! "Just as government guaranteed mortgages lead the market to make overly risky home loans, federally guaranteed state obligations will set the stage for yet another crisis."
"Federal backing of California bonds would effectively turn them into Treasury bonds, with the added appeal of being exempt from California state income tax. Therefore, the Treasury will be at a competitive disadvantage when it looks to issue its own debt to Californians. If it then has to guarantee the bonds of all the other 50 states, why would any Americans buy Treasuries when they can get identical credit quality on better terms from the states? The only real buyers left would be foreigners, who are already queasy about the Treasuries they own."
-Peter Schiff of europac.net
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Treasuries, Dollar ‘Only Game in Town’ as China Buys

By Daniel Kruger and Susanne Walker

June 1 (Bloomberg) -- For all the hand-wringing over the dollar’s slide, the expanding U.S. deficit and the nation’s AAA credit rating, the bond market shows international demand for American financial assets is as high as ever.

The Federal Reserve’s holdings of Treasuries on behalf of central banks and institutions from China to Norway rose by $68.8 billion, or 3.3 percent, in May, the third most on record, data compiled by Bloomberg show. The Treasury said bidding from foreigners was above average at its $101 billion of note auctions last week.

U.S. government securities have tumbled 4.3 percent so far this year, the worst performance since Merrill Lynch & Co. began tracking returns in 1978, as so-called bond vigilantes drove up yields to punish President Barack Obama for quadrupling the budget shortfall to $1.85 trillion. The purchases by foreigners show that, at least for now, there’s little chance of buyers abandoning the U.S. or threatening the dollar’s status as the world’s reserve currency.

“The U.S. Treasury market is the widest, deepest, most actively traded market in the world,” said Jeffrey Caughron, an associate partner in Oklahoma City at The Baker Group Ltd., which advises community banks investing $20 billion of assets. “There’s really no other game in town.”
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National Dems will take Peter Schiff Seriously

Democrat Dodd to get another Republican challenger in the Person of Peter Schiff , Peter Schiff, a Connecticut-based brokerage firm owner who has been widely hailed for predicting the U.S. financial meltdown Schiff is straight out of the Ron Paul libertarian wing of the republican party, Peter says he's "leaning towards" challenging Chris Dodd's reelection next year, a move that could make the contest a nationally watched media event. "It's better than 50-50 "Peter Schiff said , anouncing that he will make up his mind later on ...National Dems say they would take Schiff seriously, because of his personal wealth and because his predictions have made him something of a YouTube folk hero
Full Article at My Left Nutmeg

Decline and Fall: A View From 2089

By BEN STEIN
Published: May 23, 2009

THE future is now. To see how history might look back on our economic crisis, we bring you this excerpt from “The Decline and Fall of the United States of America,” Beijing University Department of Western Hemisphere History (Beijing Press, 2089):
The demise of an economy as mighty as that of the United States as of 2000 cannot be accounted for by anything less than deeply mistaken and foolish decision-making within that nation’s ruling circles.

No amount of foreign competition or resource shortage has historically caused such a catastrophe. However, policy actions undertaken without proof or even evidence of their efficacy have historically done so. (See “The Decline and Fall of the Roman Empire,” Gibbon, 1776.)

Starting from an extremely strong economic and fiscal position in the year 2000, with surpluses running far into the future in the federal budget and a highly positive outlook for its ability to handle its future pension and health obligations, the United States, under the administration of George W. Bush, a Republican, undertook one of the most mystifyingly self-destructive policy actions yet seen in a democracy.

Taxes were lowered sharply for well-off and other taxpayers, while government expenditures rose in almost every area, civil and defense. This, in short order, led to a multiplication of the size of the federal budget deficit.

The theory behind this puzzling behavior was known as “supply-side economics.” Magically, it was supposed to increase productivity, the number of hours worked, and tax receipts to the point that the losses in federal revenue were more than offset. There never was any historical evidence that this would happen, at least not as a consequence of the tax cuts, and the deficit, in fact, grew. So did class antagonisms over the ever-larger share of the national income taken by the wealthy.
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Peter Schiff: Housing's Big Picture Isn't Pretty

While economists and real estate investors "celebrate" the slight deceleration in the pace of home price declines in the recent data, a quick look at home price trajectories over the past 100 and 50 years reveals little to cheer about and much to be feared.
More significant than small month-to-month changes is the flow of home price patterns over decades. In his book Irrational Exuberance, Robert Shiller determined that in the 100 years between 1900 and 2000, home prices in the U.S. increased by an average of about 3.4% per year. These figures have not been adjusted for inflation. If they had, home prices would have outpaced inflation by only the slimmest of margins.
This 100-year period includes the Great Depression, when home prices sank significantly, and it also involves decades in which our current home mortgage infrastructure simply did not exist. The second half of the century, with its baby boom, heightened inflation, suburban expansion and institutionalized mortgage apparatus, was much kinder to home prices. Even so, in the 50 boom years between 1950 and 2000, home prices increased an average of 4.4% per year. Even this pace barely beat inflation.
By all accounts, the home price boom that began in late 1997 (when the high of the previous 1989 peak was finally eclipsed) and topped out in June 2006 was extraordinary. The Case-Shiller 10-City Index, an amalgam of the home price trends in 10 of the largest U.S. cities, gained on average 19.4% per year during that time. The movements had very little to do with market fundamentals and everything to do with distortive government policies, a national mania for real estate wealth and a torrent of temporarily easy credit.
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Who, Me? Yes You!

by Peter Schiff May 15, 2009 :
When, during the invasion of Iraq, the United States Government issued its famous deck of playing cards with the 52 arch villains of the Iraqi police state, Saddam Hussein’s face adorned the Ace of Spades. If the Obama Administration wanted to engage in a similar public relations campaign for the real estate crisis, the top card should be reserved for Alan Greenspan.

Yet in a speech this Tuesday before the National Association of Realtors, Sir Alan “the-bubble-blower” claimed that his low interest rate policies in the early and middle years of this decade had no effect on mortgage rates or real estate prices. As a result, he claims no responsibility for the subprime mortgage crisis. But even current Treasury Secretary Timothy Geithner, who shared interest rate policy responsibility as governor of the New York Fed during the Greenspan regime, recently admitted that overly accommodative policy helped inflate the bubble. So what does Greenspan know that everyone else doesn’t?

His primary defense is that mortgage rates were a function of long-term interest rates which were simply not responding to the movement in short term rates, which he did control. While it is true that the flow of capital from foreign creditors with excess dollars did keep long rates low despite rising short rates, this “conundrum” was not the leading factor in the housing bubble. Although rates on thirty-year fixed rate mortgages are based on long-term bonds, by 2005 such loans had become an endangered species. The housing bubble was all about adjustable-rate mortgages with 1-7 year teaser rates primarily based on the Fed funds rate.

The rock bottom teaser rates, permitted by the 1% Fed funds rate, were the primary reason that many home buyers were able to qualify for mortgages they couldn’t otherwise afford, and in turn, to bid up home prices to bubble levels. By pushing down the cost of short-term money, the Fed enabled homebuyers to make big bets on rising real estate prices. Without the Fed’s help, few borrowers would have “qualified” for these risky mortgages and real estate prices never would have been bid up so high.

Greenspan expresses exasperation now, as he did then, that his careful nudging of interest rates higher by quarter point increments did not translate into corresponding increases in long-term rates. Unfortunately, according to Greenspan, the markets would not cooperate with his wise guidance, and to his dismay, mortgage rates fell despite his best efforts. As they say in Texas, this dog will just not hunt. If the “measured pace” of his quarter point hikes were too slow to produce the desired effect, why didn’t Greenspan jack up the pressure? With interest rates far below the official inflation rate for many years during the bubble, he certainly had plenty of room to maneuver. The claim that he was unhappy results of his rate hikes, despite his having done nothing to adjust that policy, is ridiculous.
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