This article was submitted by Alasdair Macleod, Head of Research at Goldmoney.
We are all too aware of monetary policy and its objectives of targeting both moderate inflation and full employment at the same time. We are of course talking about price inflation, monetary inflation being the means of achieving the objective.
Central bankers don’t seem to understand that these objectives are incompatible, and here’s why. When you expand the quantity of money or credit, you debase the savings and wages of everyone, with two general exceptions. If the Fed expands the quantity of cash, or narrow money, the banks benefit, and in all likelihood they pass this benefit on to the government by spending it on new government debt. If the banks expand the quantity of bank credit, they benefit their favorite customers, who are usually big business. To believe otherwise is to subscribe to a law of financial perpetual motion, which is simply impossible.
Last week, James Rickards explained to CNBC why he is a long-term holder of gold bullion. He pointed to the pattern of financial collapses that threatened the global economy over the past two decades.
In the late ‘90s, Wall Street bailed out a hedge fund. In 2008, the Federal Reserve bailed out Wall Street. But in 2018, it’s the central banks that will need a bailout. And what will happen to the dollar when the Fed loses international credibility?
Scott Nations jumped in to interrogate Rickards and took the opportunity to remind Rickards of his long-running debate with Peter Schiff, who shares Rickards’ long-term prediction of gold reaching $5,000 an ounce or more. Rickards patiently gave Nations a lesson in history, and reminded him that he’s not buying gold as a trading commodity for growing his wealth – he owns gold as one of the best means of wealth preservation.
Don’t think of gold as a commodity. I don’t think of gold as a commodity. I don’t think of gold as an investment. It’s money. But it’ll be a kind of money that people have confidence in. You say you can’t eat gold. Well, take a dollar bill out of your wallet, Scott. Are you going to eat it? You’re not going to eat the dollar. It’s a medium of exchange; it’s a store of value…”
Last week, we reported that billionaire investor Stanley Druckenmiller is publicly advising investors to sell United States stocks and buy gold. Druckenmiller is now joined in his gold recommendation by an equally legendary hedge fund manager – Paul Singer.
In a client letter at the end of April, Singer wrote:
It makes a great deal of sense to own gold. Other investors may be finally starting to agree. Investors have increasingly started processing the fact that the world’s central bankers are completely focused on debasing their currencies… We believe the March quarter’s price action could represent something closer to the beginning of such a move than to the end.”
ReasonTV asked Californians what they thought the “right” minimum wage is. Unsurprisingly, most of the people in the “trendy, hipster enclave” of Silver Lake in Los Angeles just assumed a higher minimum wage is simply a no-brainer, win-win for society and workers. They didn’t hesitate to insist a $15-20 minimum wage was a necessity for the common decency of low-wage workers, even when presented with the prospect of major job losses if the minimum wage were raised. The video reminds us of when Peter Schiff asked Walmart shoppers if they would be willing to pay 15% more for their groceries if Walmart employees got a 15% raise.
This article was written by Nelson Gilliat, a millennial supporter of sound money and Austrian economics. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold.
During March 16th’s FOMC meeting, the Fed announced that it would leave interest rates unchanged and scaled back its December projections for higher rates in 2016, 2017, and 2018. The Fed’s backtracking comes just three months after raising interest rates 25 basis points, its first hike since June 2006.
While the Fed’s backtracking on higher interest rate projections was the big news of the meeting, another emerging trend also deserves attention – – the Fed’s backtracking from being US data dependent and toward being global data dependent.
Global factors are playing an increasingly larger role in the Fed’s decision to raise interest rates.
According to last week’s FOMC statement, “economic activity has been expanding at a moderate pace despite the global economic and financial developments of recent months” and warned that “global economic and financial developments continue to pose risks.”
This article was written by Justin Spittler and originally published by Casey Research. Any views expressed do not necessarily reflect the views of Peter Schiff or SchiffGold.
Have you heard of “negative interest rates?”
It’s become a phenomenon with economists and the media. There’s a good chance you’ve read an article about it. But I’m writing to tell you something about negative interest rates you haven’t heard. You certainly won’t hear about it in the mainstream press.
What’s coming at you is a historic event. It’s something our grandchildren will hear stories about…much like the Great Depression or the Cold War.
What’s coming could send the price of gold much higher in the coming years. If you know what’s coming, it could mean the difference between having lots of free cash in retirement or barely getting by. To understand the gravity of this moment, let’s cover one of the most bizarre ideas in the world…
In a recent interview published at the Daily Bell, Anthony Wile engaged in a wide-ranging discussion with economist and investment expert Marc Faber.
Wile and Faber hit on a wide range of subjects from oil markets, to agricultural lands, to the future price of gold.
Faber said we shouldn’t follow the media lead and blame China for all of the current problems, echoing what Peter Schiff has said. Ultimately it all comes down to central bank and government actions – policies Faber views as unsustainable.
But what exactly does the future hold? Faber said there is no way to precisely tell, but it isn’t good:
It’s difficult to make predictions but it’s impossible to make any accurate prediction when you have interventions. We have a lot of interventions, and in the whole history of mankind, which is documented say starting 5,000 years ago up to today, interest rates have never, ever been this low. Never. And this is an experiment the professors and academics who never worked a day in their lives in a real job have undertaken. Nobody knows the precise outcome. I can only say the outcome will be negative.”
On Wednesday, the founder of the world’s largest hedge fund appeared on CNBC and made exactly the same prediction Peter Schiff has been making for months – the Federal Reserve’s next moves will be taking rates back to zero and launching another round of quantitative easing.
It’s important to remember that Ray Dalio doesn’t share Peter’s economic point of view. He is a classic Keynesian who believes the Fed has done an excellent job. He even claimed that “QE saved the economy.” He and Peter probably agree on very little. But Dalio’s remarks bear consideration because he represents the conventional wisdom of today. He believes in central bank intervention and he recognizes that the current state of the US economy demands more of it. To use Peter’s analogy, Dalio wants the drug addict to get more of his favorite drug, and he believes the Fed will deliver.
In his most recent Liberty Report, Ron Paul declared that the economic calamity anticipated by many free market advocates is now at hand.
Paul focused in on the obsession people like Paul Krugman have with deflation, pointing out that it isn’t the problem; it is merely the symptom of an economy trying to correct itself. Unfortunately, the Federal Reserve and government central planners seem intent on continuing the very policies that created the underlying problems in the first place:
Concentrating only on deflation and ignoring the unlawful, dangerous powers of the Fed to inflate and regulate will always result in a steady weakening of the economy – the economy which today is facing total collapse. Deflationary pressures do exist. Some debt and malinvestements are being liquidated. But the correction is constantly impeded by the Federal Reserve’s monetary policy and congressional spending.”
Jim Grant agrees with Peter Schiff that the Federal Reserve cannot continue to raise interest rates in 2016. On CNBC today, Grant explained his reasoning for why the Fed will regret raising rates in December and reverse its course of action:
It seems to me that the Fed is more likely to go to zero than to go to one-half of one percent from here. [I think that as the Fed] read the data, it felt it had to move. It had been saying for so long it would, [therefore] it had to, [and] it did. That doesn’t mean it was right to do so in the Fed’s own scheme of things. I think the Fed will regret the move it did in December. I think it will backtrack.”