Peter Schiff: The Bigger the Boom, the Bigger the Bust (Video)
During the New Orleans Investment Conference, Peter Schiff participated in a panel discussion with Ben Hunt and Mike Larson. They talked about bubbles, booms and busts.
Hunt called it the “bubble of everything.” But he said the “gravitational force” created by all of the assets central banks have purchased over the last year have changed the “bubble-popping process.” That makes it hard to predict when things will actually start to deflate. He said it will take something the undermines the market confidence that central banks can bail us out. Hunt said inflation was possibly the pin that could prick the bubble.
Larson called it the “uber-bubble,” and he said he already sees some of the background concerns that have been simmering for a long time are starting to “bubble over.” (Pun intended.) He said the last two bubbles were high in amplitude, but limited to certain parts of the economy (dot-coms and housing). The current bubble isn’t as high in amplitude, but it’s broader-based. We see bubbles in stocks, high-yield bonds, housing (again), and commercial real estate, along with a lot of other assets you don’t hear as much about – such as art and comic books.
I think the process of unwinding this is already beginning.”
Peter focused in on the cause of the bubbles.
When you see rampant, wide-scale bad decisions, generally a central banker is behind it, and they have made a bad decision to create too much money and to artificially manipulate interest rates down.”
This creates distortions in the economy because interest rates are really nothing more than price signals.
And like all prices, they need to be determined by the free market.”
Whenever the government – and central banks are really an extension of governments – price fixes something, it creates big distortions and malinvestments.
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