Jim Grant told Fox Business that the Federal Reserve has kept itself in emergency mode for too long, with interest rates near zero for almost 7 years. In fact, remaining in emergency mode has only made the next emergency more likely. Grant fears that central banks (the Fed in particular) have become far too powerful in their ability to bail out irresponsible bankers by destroying the wealth of savers.
The Fed, the government… are instituting a de facto nationalization of essential banking activities… It can’t be that the single purpose of banking is to prevent banks from going bankrupt. Yet this has become in effect the policy of our minders at the Federal Reserve. They are becoming quite all-powerful…”
Jim Rickards spoke to ABC News Australia about the long-term costs of devaluing currency. Sustained economic growth cannot come from devaluation when the entire world is cheapening currencies at once. Instead, people just lose their purchasing power and global inflation is the long-term result. Like Peter Schiff, he warned that the Federal Reserve won’t be raising rates any time soon and that the world faces a fiscal crisis bigger than the crash in 2008.
John Tamny, Political Economy Editor at Forbes, spoke to the Austrian Economics Research Conference about the roots of the Great Depression, the financial crisis, and the Great Recession. He explained how most modern economists ignore important economic fundamentals, or simply misunderstand them. For example, contrary to popular belief, governments cannot stimulate demand by simply spending more. He also focused on the beauty of recessions, which allow an economy to cleanse itself of bad business practices. Like Peter Schiff, Tamny argues that the US needs to experience a painful, but necessary recession sooner than later to truly heal its economy.
Alasdair Macleod, head of research for GoldMoney, explained to USAWatchdog that America is losing influence in international banking. China is steadily gaining more support for a new bank that would finance major infrastructure projects in developing countries.
The Asia Infrastructure Investment Bank (AIIB) represents enormous investment potential by creating an Asian market enveloping more than half the world’s population. China already has support for the AIIB from countries throughout Asia, the Middle East, and the eurozone. However, it is doubtful that China will ever invite the United States to be a member. In fact, it would probably prefer the US dollar to play no part in the what would be the largest market the world has ever seen.
The US is being left in the dust in other ways as well. While China continues to buy up gold, Macleod warned that almost all Western traders fail to understand the value of the commodity. To compete with the growing economic powerhouses in Asia, the US should adopt a similar strategy of gold accumulation and simultaneously stop flooding the world with dollars that will have to return home one day.
Peter Schiff isn’t the only one warning that the economic data of the United States is much worse than the media portrays. Michael Snyder has shared 10 charts pulled straights from the Federal Reserve’s own records that show how things have gotten worse since last crisis, not better. Some of these are points Peter has raised time and again, such as the low labor force participation rate. You can see it has been ticking steadily lower since the turn of the millennium.
However, Snyder goes on at length about a number of other important data points. Whether he is looking at the ballooning national debt or the velocity of money, he draws attention to the most important key fact:
An article from the New York Post pointed out that many analysts are joining Peter Schiff in saying that the global debt explosion is unsustainable. In fact, it’s pushing countries around the world towards yet another precipice of financial collapse. The Post cites some grim statistics of American and global debt:
- Global debt has expanded $57 trillion since 2007, reaching a total of $199 trillion last year.
- Total US debt was $40 trillion last year, or 233% of US gross domestic product.
- Even the Atlanta Fed has cut its estimate for first-quarter GDP growth to 0.3%.
- Central banks in the eurozone adopted a $60 billion per month QE program, pushing bonds to an all-time low.
David Stockman told Fox Business that the United States’ biggest economic priority should be getting the Federal Reserve under control. With a balance sheet that has quadrupled in just a few years, the Fed is incapable of sustaining its fiscal policy. Raising the Fed funds rate will add billions more to the already ballooning debt. The only way out of this perilous scenario, according to Stockman, is to get out of blind currency printing and back to sound money.
Deflation is a terrible thing, according to central bankers and politicians. Even mainstream economists decry deflation as an economic disaster, ignoring the basic supply and demand principles of Economics 101. Peter Schiff is one of the few advisors on mainstream media who will debate the point.
An article by Edin Mujagic, published at the Mises Institute, takes a look at some modern-day examples of deflation and the associated economic data.. Japan, Greece, Spain, and the Netherlands have all been experiencing deflation, while simultaneously experiencing a stronger GDP and consumer confidence. Mujagic focuses on the effects of deflation on “Joe Average,” which are roundly positive. However, there’s one economic player for whom deflation is an enemy — governments overburdened with debt.
Recent Economic Data Shows the Good Side of Deflation
By Edin Mujagic
The Fed, the ECB, and the Bank of England repeatedly tell us that deflation is extremely dangerous for an economy. Central bankers, most economists, and the media speak of deflation as one of the greatest disasters that can strike an economy.
It is stunning then, given the apparent importance of the subject — and the possible collateral damage of pro-inflation policies — that few seem to bother to ask the deeper, fundamental question: does the historical data show that deflation is actually a terrible thing? The data suggests that it is not. In fact, looking at recent GDP, inflation, and employment data, one could even say that a shot of deflation is what many economies need. Let us take a look at the recent real-life examples.
Laurence Kotlikoff, Professor of Economics at Boston University, appeared before Congress last month and called them out on phony accounting. He told Greg Hunter of USAWatchdog that despite his best attempts, he could not make senators see how the fiscal situation of the country is not as rosy as official numbers would have us believe. In his interview with Hunter, Kotlikoff talked a lot about social security, but he ultimately underscores what Peter Schiff has been saying for a long time: another financial collapse is coming.
Some of Kotlikoff’s key points include:
- The current deficit is actually $5 trillion, not the $500 million Congress claims.
- The entire government is in terrible fiscal shape, with a true debt load of over $200 trillion.
- The US is risking the same path as Argentina with its out-of-control money creation, which dropped it from the 5th largest GDP in the world to the status of a developing country.
- Real wages and the savings rate are extremely low. In the 1950s, Americans saved about 15% of their income, compared to just 4% today.
- Long-term Treasury bonds are extremely risky, because the Federal Reserve won’t be able to keep interest rates suppressed forever. Eventually, true inflation will ruin banks that relied too heavily on bonds.
Peter Schiff is one of the only voices warning that the Federal Reserve is going to start a new round of quantitative easing instead of raising rates. You can add well-known investor and analyst Jim Grant to the list of contrarian economists. Yesterday, Grant told CNBC that the Federal Reserve will revert to its worn-out policy of quantitative easing instead of a rate hike.
Grant went on to paint a sobering picture of the American economy. He argues that the Fed’s policy of heavy-handed intervention has, unfortunately, entered the bloodstream of mainline politics. Washington might try to manipulate the economy by decree, but at the end of the day, it can’t change the economic reality that free exchange doesn’t depend on government oversight.
