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You Will Sacrifice and It Will Hurt
You Will Sacrifice and It Will Hurt
Many people have likened the battle against coronavirus to a war and invoked imagery of the US fighting World War II. President Trump has even deemed himself a “wartime president.”
The president told reporters at a White House briefing that fighting the virus would require a sacrificial national effort just like it took to defeat the Axis in the Second World War.
Every generation of Americans has been called to make shared sacrifices for the good of the nation. To this day, nobody has ever seen like it, what they were able to do during World War II. Now it’s our time. We must sacrifice together, because we are all in this together, and we will come through together. It’s the invisible enemy. That’s always the toughest enemy, the invisible enemy.”
But listening to all the rhetoric coming from politicians and pundits, one has to ask, where exactly is the sacrifice?
The government is promising bailouts for everybody. We’re just weeks into the crisis and there is already an expectation that the government will be sending everybody checks. Peter Schiff called it “bailout nation.”
Apparently, the government wants “sacrifice” with no pain.
Unfortunately, that’s not a thing.
Americans didn’t get checks from the government in World War II. They got higher taxes. Schiff summed it up in a tweet.
During WWII middle-class Americas sacrificed to support the US government’s war effort. They paid much higher taxes, substantially reduced their consumption, and loaned their savings to the government. The people support the government. The government can’t support the people.”
Therein lies the ugly truth. There is no sacrifice without pain. The government can bail out the airlines. It can bail out the hotels. It can helicopter money in and drop it on your head. You’re still going to pay, either through higher taxes in the future or through inflation.
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Peter Schiff: These Markets Are Rigged
Peter Schiff: These Markets Are Rigged
US stock markets enjoyed another Tuesday rebound with the announcement of even more monetary stimulus from the Fed and the hope of government fiscal stimulus and bailouts. In his podcast, Peter Schiff said this should make it crystal clear that the government and central bank are rigging the markets.
There is talk of “helicopter” cash and tax breaks, along with bailouts for the airline industry and small businesses. The proposed stimulus package reportedly totals over $1.2 trillion.
Meanwhile, the Federal Reserve announced additional monetary stimulus measures.
The Fed said it will begin to hold two daily repo operations instead of one. The New York Fed began running repo operations to stabilize overnight lending markets back in September, long before the coronavirus outbreak.
The central bank has also relaunched the so-called Commercial Paper Funding Facility (CPFF), a 2008 financial crisis program that allows companies to take out unsecured, short-term loans. In practice, the Federal Reserve will buy commercial paper directly from companies. The loans will have to be paid back within a year. The US Treasury will provide $10 billion of credit protection to the central bank’s commercial paper operation.
To go along with the CPFF, the Fed announced a Primary Dealer Credit Facility offering overnight and term funding with maturities up to 90 days.
In simplest terms, it will allow over-leveraged companies to go into even deeper debt and those loans will be backed by the federal government. Peter called it a bank bailout 2.0.
Loaning money to banks and accepting corporate and muni bonds, plus equities as collateral, so the banks don’t have to sell those assets at huge losses, is a bailout. In 2008, I warned the next bank bailout would be even more expensive.”
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Peter Schiff: Gold Is Your Only Alternative
Peter Schiff: Gold Is Your Only Alternative
Which will outperform in 2020? Gold? Or Equities?
Peter Schiff joined a moderated debate on the subject at the Orlando Money Show. Peter teamed up with Rick Rule to argue for gold, against Louis Navellier and Jeffrey Saut, who contend the stock market is still the place to be. Mark Skousen moderated the debate.
Interestingly, even Navellier admitted that the stock market is getting “a little bubbly.” He said it looks like ’99 all over again – the year before the dot-com bubble popped. But he still thinks there’s money to be made.
Skousen set up the gold argument by bringing up the fact Mark Mobius says buy gold at any price because interest rates are so low and gold is relatively cheap.
Rule said the gold vs. stocks debate is a little bit silly. It’s not necessarily one or the other. The stock market is a market place to buy and sell stocks. Why would you be against the market? Why would you be against every individual company? On the other hand, Rule said he thinks gold is very under-owned. He pointed out that even a reversion to the mean in gold investment would quadruple demand for the yellow metal.
Peter pointed out that gold is beating the S&P 500 this century. The key is to look at what is going on in the broader economy.
We’ve got quantitative easing. We’ve got negative real interest rates. We’ve got massive deficits as far as the eye can see. This is not the same dynamic that we had. You can’t earn. Twenty years ago, 30 years ago, you could put your money in the bank and you could earn 5 or 6%. There was a reason not to own gold becuase there was an opportunity cost. You could actually get interest on your savings. ”
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Rick Rule: Gold Is Insurance and You Want to Have Insurance
Rick Rule: Gold Is Insurance and You Want to Have Insurance
Rick Rule talked with David Lin of Kitco News at the Vancouver Resource Investment Conference. Rule is the senior managing director at Sprott Inc., and he’s bullish on gold. During this discussion, Rule explains why, touching on a range of subjects including the Federal Reserve, the trade war, the US dollar, the bond market and more.
To kick off the interview, Lin points out that gold has been rather range-bound since the price spiked in the wake of tensions in the Middle East. Rule said this is a sign of a healthy gold bull market.
Some speculators, of course, want to see rapid escalation. Rapid escalations are usually followed by rapid de-escalation. This gold bull market is what you want to see.”
Rule said the same thing Peter Schiff has been saying. Gold is climbing a “wall of worry.”
This is a very, very healthy market that you’re seeing.”
Rule noted that there is still widespread confidence in the economy. There’s widespread confidence in currency and debt as well.
The fact that gold is doing well concurrently with the US dollar doing well is something we haven’t really seen since the year 2000.”
Peter has pointed out the similarities between what was going in the gold market in the year 2000 – the cusp of the dot-com bust – and today as well.
So, why is sentiment turning toward gold?
For one thing, real negative interest rates. That means the holding cost of gold is zero. There is no yield on sovereign debt. But more significantly, the sovereign credits themselves are not good. Rule pointed out the rapidly skyrocketing US debt.
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Central Banks Continue “Remarkable” Gold-Buying Spree
Central Banks Continue “Remarkable” Gold-Buying Spree
Central banks continued their remarkable gold-buying spree in November and remain on pace to eclipse 2018’s near-record purchases.
According to the latest numbers from the World Gold Council, central banks added 27.9 tons on a net-basis to official gold reserves in November. That brings the yearly total for 2018 with one month left to calculate to 570.2 tons, 11% higher than the same period in the previous year.
In 2018, central banks purchased just over 650 tons. According to the WGC, that was the highest level of annual net central bank gold purchases since the suspension of dollar convertibility into gold in 1971, and the second-highest annual total on record
The World Gold Council bases its data on information submitted to the International Monetary Fund.
Turkey led the pack for the third straight month, adding another 17 tons of gold to its reserves in November. The Turks have leapfrogged the Russians as the number-one gold-buyer in 2019 with over 181 tons added to their hoard. Turkish consumers are also flocking to the yellow metal. According to Bloomberg, gold demand was up 3.7% in the first nine months of 2019. The country’s government has loosened rules governing gold imports to meet the growing demand.
Russia added another 9.7 tons of gold to its reserves in November. That brings its total gold purchases to nearly 149 tons so far in 2019. Russia’s quest for gold has paid off in a big way. The Russian Central Bank’s gold reserves topped $100 billion in September thanks to continued buying and surging prices.
The Russians have been buying gold for the last several years in an effort to diversify away from the US dollar. Russian gold reserves increased 274.3 tons in 2018, marking the fourth consecutive year of plus-200 ton growth. Meanwhile, the Russians sold off nearly all of its US Treasury holdings. According to Bank of America analysts, the amount of US dollars in Russian reserves fell from 46% to 22% in 2018.
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A Trend Worth Considering – The Price of Gold Since 1971
A Trend Worth Considering – The Price of Gold Since 1971
As we approach the end of 2019, gold is on track for a healthy yearly gain. To date, the yellow metal is up over 16% on the year.
It’s always interesting talking about gains in the price of gold because when you get down to it, it all depends on when you got into the market. If you bought an ounce of gold on Jan. 1 of this year and sold it this morning, you’d have pocketed around $208 (less any taxes and fees). But if you bought your gold at the peak price this year and sold it this morning, you’d be out about $68.
So, when we say gold is up or down, you always have to ask a second question: since when? The price can be simultaneously up and down at the same moment depending on the answer to that question.
I occasionally get comments on articles posted on the SchiffGold Facebook page by people complaining that they’ve lost a lot of money in gold because they bought when the market was at its absolute peak in 2011 and the yellow metal nearly hit $1,900. I can certainly understand their frustration, but I don’t buy their argument that their experience proves gold is a bad investment. While eight years seems like a long time, it’s not in the big scheme of things.
As I said, where you begin when you talk about a trend is key. Plucking an arbitrary date out of thin air doesn’t necessarily tell us a whole lot. It’s important to begin at a key moment in history.
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Peter Schiff: The Fed Is Not Done Cutting Until It Gets to Zero
Peter Schiff: The Fed Is Not Done Cutting Until It Gets to Zero
Peter Schiff recently appeared on Kitco news with Daniela Cambone to talk politics, the economy and the Fed. He said that no matter what Jerome Powell is saying, the Fed central bank isn’t finished with rate cuts.
Lisa started out the interview asking Peter what he thought about the impeachment hearings and Trump’s prospects for reelection. Peter said it certainly looks like the House will impeach Trump. He doesn’t think it’s likely the Senate will remove him from office, but he also doesn’t think the president will be reelected in 2020 unless the economy can hold together.
I thought it was far more likely that he was elected originally, but I don’t think his prospects are as great now as they were then, although the conventional wisdom is the opposite. Most people thought he had no chance of winning last time and they think he can’t lose this time because they think we have this great economy, but we don’t. We just have another stock market bubble.”
Lisa pointed out that unemployment is supposedly at 50-year lows.
Well, sure. The unemployment rate was very low when Obama left office. I mean, the unemployment rate, at least the official rate, was declining for almost the entirety of the Obama presidency, and when Donald Trump ran against low unemployment, he said that the numbers were fake. That they were phony. That it was a fraud. That it was a hoax, and if you look at the real unemployment rate, where you look at all the people that were working part-time that wanted to work full-time, all the discouraged workers who had dropped out of the workforce, that the real unemployment rate was much higher. And that’s still the case today.
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Peter Schiff: When Is the Market Going to Wake Up to this Con?
Peter Schiff: When Is the Market Going to Wake Up to this Con?
As expected, the Federal Reserve cut interest rates another 25 basis points on Wednesday.
The mainstream read the post FOMC meeting comments to be relatively hawkish, saying Powell and Company seemed to indicate that future rate cutting is on pause.
Peter Schiff opened up his podcast reminding us that just one year ago, the Fed was raising rates and telling us it would continue to do so through 2019. It also claimed that quantitative tightening was on “autopilot.”
And they said this with a straight face. And everybody believed them.”
At the time, Peter was saying it wasn’t going to happen. He said the central bank would start cutting rates and relaunch QE. And here we are.
The central bank removed the phrase saying it was committed to “act as appropriate to sustain the expansion” from its forward guidance. This was widely viewed as a more hawkish stance. The Fed replaced that language, instead saying, “The Committee will continue to monitor the implications of incoming information for the economic outlook as it assesses the appropriate path of the target range for the federal funds rate.” Powell was more emphatic during his press conference, saying bank officials “see the current stance of monetary policy as likely to remain appropriate.”
Of course, Powell again claimed that the Fed is not engaged in quantitative easing despite the repo operations and bond-buying program. He tried to draw a distinction between QE and today’s operations by pointing out that the central bank is buying short-term bonds today while it bought longer-term debt during QE.
This is really a distinction without a difference. I mean, who cares what the maturity of the bonds are?”
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Peter Schiff: Trump and the Fed Are Reading Off the Same Script
Peter Schiff: Trump and the Fed Are Reading Off the Same Script
Stocks took off on Friday on several big news items – most significantly President Trump’s announcement that the US and China have worked out phase one of a trade deal. In his podcast, Peter broke down the news. He also made an interesting observation: Trump and the Federal Reserve seem to be reading off the same script.
The consumer sentiment number for September came out Friday higher than expected. As Peter noted, this index is regarded as very important.
It measures whether or not the consumer is confident enough to go deeper into debt and keep buying stuff that he can’t afford. And assuming the consumer is so confident then everything is great because the spending continues and the GDP continues. But of course, if you look back historically, the consumer is never smart enough to be pessimistic when he should. He’s always very optimistic just before a major economic decline.”
Also on Friday, the Federal Reserve Bank of New York came out with its non-quantitative easing quantitative easing plan. The bank said it would buy $60 billion in short-term Treasuries each month.
Of course, don’t confuse this with quantitative easing when the Fed was buying $85 billion a month of Treasuries, because this is no way quantitative easing except, of course, that’s exactly what it is.”
The Fed also reiterated that it plans to use all of the interest it earns off its portfolio to buy more Treasuries. And as the bonds mature, it will take that money and buy more Treasuries, thus pumping up the balance sheet. Peter says this proves that Ben Bernanke was either lying or incompetent when he told Congress back in 2009 that the central bank was not monetizing the debt.
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Peter Schiff: The Party Is Over
Peter Schiff: The Party Is Over
As Peter Schiff put it in his podcast, if the first trading day of the fourth quarter was a sign of things to come, bulls on Wall Street are in for a rough end to the year. In fact, Peter said the party is over and you don’t want to be the last one to leave.
The Dow was down 343.7 points and the Nasdaq shed 90 on a day that started out all sunshine and roses.
For a couple of days, the economic news wasn’t quite as bad as it could have been, or maybe some of the numbers actually were a little better or beat the numbers, and I think there was some idea that, hey, maybe the economy is not as bad as some people had feared, but then reality reared its ugly head at 10 a.m. when we got the ISM Manufacturing numbers.”
US manufacturing dove to a 10-year low. The ISM index of national factory activity dropped 1.3 points to 47.8 in September. That was the lowest number since June 2009 – as the US economy was emerging from the Great Recession. A reading below 50 signals manufacturing is contracting. The weak September number follows on the heels of a 49.1 print in August. Analysts had expected a bounce-back to 50.
Yet Donald Trump wants us to believe we have the greatest economy ever. How do we have the greatest economy ever when we have one of the worst manufacturing economies ever? Especially when it was manufacturing that was supposed to ‘Make America Great Again.’”
Instead, we’re back where we were during the Great Recession. Peter said the only thing this economy really has going for it is massive deficit spending.
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Greenspan: Rising Gold Price Shows Investors Want Hard Assets That Will Increase in Value
Greenspan: Rising Gold Price Shows Investors Want Hard Assets That Will Increase in Value
During a CNBC interview, former Federal Reserve Chairman Alan Greenspan said gold prices are surging because investors are looking for hard assets that they know will have value in 20 or 30 years.
Gold is up more than 21% on the year and is trading at levels not seen since 2013.
During the interview, Greenspan focused on an interesting fundamental he thinks is driving both the bond and gold markets — the aging population. He said there has been a shift in time preferences as people recognize they will likely live longer and they will need to finance those longer lives. This, he says, is increasing the demand for hard assets like gold.
One of the reasons that the gold price is rising as fast as it is … that’s telling us essentially that people are hard resources which they know are going to have a value 20 years from now, or 30 years from now as they age, and they want to make sure they have the resources to keep themselves in place. That is a clearly fundamental force that is driving this.”
Historically, gold has served as an inflation hedge and a wealth preserver. It makes sense that investors concerned about maintaining their savings well into the future would turn to gold. This is especially true given the likelihood of increasing inflation as the Federal Reserve continues to try to prop up the economy with low interest rates and quantitative easing.
Peter Schiff has said that eventually, the world will drown in an ocean of inflation.
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Peter Schiff: This Is the Beginning of a Much Bigger Crisis (Video)
Peter Schiff: This Is the Beginning of a Much Bigger Crisis (Video)
Wall Street has been on a roller coaster ride over the last few months. If you listen to the pundits on the financial networks, you’ll hear the word “volatile” used over and over again. That word certainly seems to describe the current state of US stock markets and in a broader sense the economy. But during a recent interview on RT News with Rick Sanchez, Peter Schiff said it’s not that the economy is volatile. It’s actually a bubble. And we are on the verge of a bigger crisis than the one we went through in 2008.
It’s not a volatile economy, it’s a bubble economy. Thanks to the Federal Reserve, they inflated an even bigger bubble, on purpose, than the one they inflated by accident that popped in 2008. And so the economy is in much worse shape structurally today then it was before it fell apart the last time. So, this is the beginning of a much greater crisis, of a much greater recession than the one that we experienced back in 2008.”
Sanchez asked Peter what exactly the Federal Reserve did wrong. Peter said, basically, everything.
But the biggest things they did wrong were lowering interest rates down to zero, practically, and leaving them there for pretty much the entirety of the Obama presidency. And then they’ve barely raised them. They’re still at 2%, which is very low. They also did all the quantitative easing where they printed a bunch of money and bought US government bonds and mortgage bonds. That enabled the housing bubble to reflate, and that enabled the US government to go much deeper into debt. So, the government didn’t cut spending, which is what we needed. They increased spending. But it also enabled corporations to lever up and buy stocks.
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The Federal Reserve: Public Enemy Number One
The Federal Reserve: Public Enemy Number One
When currency was backed by gold, a central bank’s main function was to maintain the value of the issued currency in terms of gold. For example, if a central bank created too much money against the gold reserves in the banking system, an increasing number of people would begin to exchange their currency for gold. To combat this, a central bank would be forced to raise interest rates and decrease the money supply. The higher interest rates would incentivize people to exchange gold for larger savings on deposit that earn interest. Banking reserves – gold – would return to the banking system and the economy would return to balance. The prime reason for insisting on defining currency in terms of a precious metal was to provide a self-correcting braking mechanism to the creation of money. As expressed by the great Wilhelm Röpke:
If in the production of goods the most important pedal is the accelerator, in the production of money it is the brake. To insure that this brake works automatically and independently of the whims of government and the pressure of parties and groups seeking “easy money” has been one of the main functions of the gold standard. That the liberal should prefer the automatic brake of gold to the whims of government in its role of trustee of a managed currency is understandable.”[1]
The US dollar was backed by gold as recently as 1971. Any central bank in the world could present the Federal Reserve $35 and receive 1-ounce of gold in exchange. However, on August 15, 1971 – blaming it on the “gnomes of Zurich” – President Nixon “temporarily” broke the dollar’s last link with gold. Nixon closed the “gold window” and reneged on the promise to exchange an ounce of gold for $35. Since then, the system of credit in the US has been under the Fed’s complete control.
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Peter Schiff: We’re Ripe for a 1987-Style Crash (Video)
Peter Schiff: We’re Ripe for a 1987-Style Crash (Video)
Stock markets have settled down after an awful couple of weeks earlier this month. On Feb. 5, the Dow Jones suffered its largest-ever drop in terms of points. It was down 1,600 at one point and ultimately lost 1,175.21 points, a 4.6% drop that day. At one point during that week, the Dow was off 10% in correction territory. But everything is calm now and most of the mainstream is once again feeling bullish and optimistic.
Peter Schiff spoke at the Vancouver Resource Investment Conference 2018 last month before the market tanked. But his message remains relevant in the aftermath of the plunge and the subsequent recovery because the dynamics in the market remain pretty much the same. Conditions are still ripe for a 1987-style market crash.
Investors have not been this optimistic…since 1987. They are even more optimistic than they were at the height of the technology bubble, the dot-com bubble, the new era. Of course, 1987 didn’t end well, right? We had a stock market crash, and there’s a lot about what’s happening today that reminds me about what was happening in ’87.”
Highlights from the Speech
“The economy has not improved under Trump. We don’t have a booming economy. I mean, Trump keeps telling us we have a booming economy, but nothing is booming.”
“When Donald Trump was a candidate for president, he said that the unemployment numbers were phony. They were fake. They were a fraud. They were a con. He said the real unemployment rate is 30%, 40%. Now, every time there is an unemployment number that comes out, he’s tweeting about how great it is we have this record low unemployment and we should all give him credit for it.”
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