Right after the last Federal Reserve Open Market Committee meeting, Peter Schiff said the “Powell Pause” won’t be enough to save the stock market and head off a recession. He said ultimately, the central bank would have to cut interest rates and launch another round of quantitative easing.
Well, it seems the mainstream is starting to catch up with Peter’s thinking. Yesterday, Bloomberg ran an article asserting that “instead of pausing, the central bank may need to start cutting interest rates to avoid a recession.”
Politicians promise lots of stuff. Delivering on those promises – that’s a different matter. But when it comes to pledging to do this or that, politicians are masters.
Now, most of the time they keep things pretty vague. After all, you don’t want to commit to anything quantifiable. If you did that, voters could actually hold you accountable. So they promise things like, “I’ll create jobs,” or “I’ll improve our infrastructure.” At the end of the day, you have no idea whether they actually did that or not. (Odds are, they didn’t.)
But one political party in India decided that when it comes to campaign promises, it’s “go big or go home.” So, it’s going big!
Peter Schiff has said it’s not that we have a “volatile” economy right now. We have a bubble economy, and we are at the beginning of a much bigger crisis than we went through in 2008. Peter continued with this theme on a recent appearance on Kitco News with Daniela Cambone noting that things are setting up for gold to shine in 2019. As far as the yo-yoing stock market?
It’s just the air coming out of the bubble. That’s the volatility,” Peter said.
Paul Krugman said gold is dead. In fact, “Bitcoin has more utility than gold,” according to the popular lefty economist.
Krugman made the comments at ChainXChange, a blockchain artificial intelligence and innovation conference in Las Vegas.
This article was written by Joel Bauman, SchiffGold Senior Precious Metals Specialist. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold. The article focuses on the gold market through the lens of technical analysis. Technical analysis is a subjective form of study based on historical price patterns. The analysis offered is for educational purposes and is not a recommendation to buy or sell.
This article was written by Joel Bauman, SchiffGold Senior Precious Metals Specialist. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold.
The current debt-based fiat monetary system creates an illusion of wealth expansion.
For example look at this 100-year price chart of the Dow Jones Industrial Average.
When the Fed launched its aggressive monetary policy in the wake of the 2008 financial crisis, many free-market economists predicted it would result in massive price inflation. That never materialized. As a result, Keynesian economists like Paul Krugman love to finger-point and mock those who criticize easy money policies designed to “stimulate aggregate demand.” They claim the lack of price inflation proves they were right all along. You can massively increase the money supply during a downturn to stimulate the economy without sparking inflation. Free-market people are wrong.
But just because we don’t see price inflation doesn’t mean there isn’t any inflation at all. After all, the new money has to go someplace. If we don’t see it manifested in rising prices, it’s because we’re looking in the wrong place.
Recently, Jamie Diamond of Citibank made headlines by labeling Bitcoin a fraud. Whether those comments played any part in Bitcoin’s recent sell off is hard to say, but the true believers reacted with predictable outrage given that the comments came from the ultimate Wall Street insider whose financial supremacy is supposedly threatened by crypto currencies like Bitcoin.
Although my critical comments on Bitcoin over the years have not received nearly as much attention, they have been just as summarily dismissed by the crypto currency crowd. But I am a well know libertarian and follower of the Austrian School of economics. I am not a member of the banking establishment, nor am I a fan of fiat money. I should be one of the good guys. But since I happen to own a company that sells gold, a metal that supposedly Bitcoin will soon make obsolete, the crypto crowd looks at me like a stubborn old buggy whip salesmen who refuses to acknowledge that the future resides in horseless transportation.
Well Bitcoin is not the automobile and gold is not a buggy whip. While Diamond’s comments were not 100% on the money, he is right about Bitcoin’s ultimate demise, just wrong about how it will meet its fate and why. While most fear that government will simply look to make Bitcoin illegal (which could be a possibility if Bitcoin could actually deliver on its promises), it is much more likely to die of natural causes.
Earlier this month, US Treasury Secretary Steven Mnuchin threatened China, saying the US would “put additional sanctions on them and prevent them from accessing the US and international dollar system” if they don’t go along with the most recent round of sanctions slapped on North Korea. We argued that the threat may be meaningful, but it also might be empty.
In a recent article published on the Mises Wire, Ryan McMaken added another layer of analysis, arguing that if the US were to follow through on the threat, it would imperil the US dollar. McMaken’s reasoning dovetails with a point we’ve made more generally about Trump’s penchant for tariffs – that they will undermine the dollar. Of course, that’s good for gold.