The market has certainly lost any hope of price stability in dollar terms. Since the Fed statement was released, gold prices have hit new all-time nominal highs, silver is the highest since the Hunt brothers tried to corner the market in 1980, and the Aussie dollar (a commodity currency) is nearing its own record highs. Even housing is headed back up. Meanwhile, the dollar index has hit a new 7-month low. In short, holders of US dollars are trading for any real assets they can acquire.
A confounding factor is the strong performance of US dollar-denominated bonds. When the Fed creates inflation, that erodes the value of fixed-asset investments like bonds, which can’t adjust their returns to the new price level. So many commentators are pointing to the record low bond yields as evidence that inflation is not a threat. But this is a misreading of the situation.
What is overlooked is that when the Fed prints more dollars, it typically uses them to buy bonds. Traders know this, so they are stocking up on bonds at ridiculous prices just to flip them to the Fed. They don’t care that, in the long run, the Fed’s policies will destroy the bonds’ value because in the short run, the weak dollar policy serves as a tremendous subsidy to bond sellers.
All the salient indicators tell me that the global dollar crisis has entered a new phase. The Fed is getting more aggressive about money printing because it really doesn’t have any other politically viable options. I’ve always said the Fed uses inflation to give appearance of prosperity, but I never expected them to come out and say it! You don’t give warning when you’re about to rob somebody, because then the victim might take precautions — in this case, buying gold and foreign equities.
We should be angry at what the Fed has pledged to do to us, and frankly I’m surprised there hasn’t been more of an uproar. But more important is to figure out how you are going to protect yourself.
Related ETFs: SPDR S&P 500 ETF (NYSE:SPY) , ProShares UltraShort S&P500 (ETF) (NYSE:SDS), iShares Russell 2000 Index (ETF) (NYSE:IWM), ProShares UltraShort QQQ (ETF) (NYSE:QID), PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQQ), ProShares UltraShort 20+ Year Trea (ETF) (NYSE:TBT), iShares Barclays 20+ Yr Treas.Bond (ETF) (NYSE:TLT), SPDR Gold Trust (ETF) (NYSE:GLD), Market Vectors Gold Miners ETF (NYSE:GDX)
Peter Schiff`s comments on the economy, stock markets, politics and gold. Schiff is the renowned writer of the bestseller Crash Proof: How to Profit from the Coming Economic Collapse.
- Gold: The Rally Will Gather Momentum As The Year Progresses
- U.S. Dollar: The World Has A Lot More Confidence Than They Should
- Video: Confiscating Excess Wealth
- Dow Jones Industrials & Gold Parity
- Video: The Federal Reserve Will Not End QE
- What Is Full Employment To Janet Yellen?
- Momentum Stocks Are Having Trouble
- Quantitative Easing (QE) Is An Euphemism For Inflation
- China: No Evidence That Demand For Gold Will Slow
- Video: The Bullish Case For Gold
- ► 2013 (395)
- ► 2012 (438)
- ► 2011 (308)
- G20: We Are The "F" Students Giving Advice To Hono...
- When You Buy A Foreign Stock, You Buy A Foreign Cu...
- As Long As The World Will Lend Us Money, Our Polit...
- CNBC Video Interview: US Dollar Will Fall Into Unc...
- The Real Employment Situation. The Unemployment Ra...
- Video Market Update, October 25.
- America Needs To Save More. Not To Go Deeper Into ...
- I Don’t Know How The G20 Can Take Geithner Serious...
- US No.1 Offender To Blame For Global Imbalances
- The US Consumer Is A Drag On The World Economy, No...
- The Currency War (Max Keiser Video Interview)
- Gold Shaking Out The Weak Players.
- Market Update: Chinese Rate Hike Impacts The US Do...
- Video: Its Scary How Clueless Bernanke Is.
- The Average American Is Going To Have To Suffer Be...
- Our Economy Is Not A Free Market Economy
- The Bond Bubble
- US Dollar: 7 Consecutive Weekly Declines
- The US Dollar Weakness, Currency Wars
- Gold Will Continue To Rise
- Agricultural, China And Energy Stocks.
- About 50 Percent Of My Portfolio Is In Gold And Si...
- Expect A One-To-One Ratio Between Gold And The Dow...
- The Market Has Certainly Lost Any Hope Of Price St...
- Videoblog: US Dollar Weakness, Agricultural Commod...
- Calamity Was Not Averted But Merely Delayed
- The Final Push Toward Dollar Collapse
- The Fed Now Faces The Hardest Choices In Its Histo...
- There Is More Fear Then Greed In The Gold Market.
- Video Market Update: The Dollar Is Losing Value
- Competitive Devaluations And Gold
- I Will Be Speaking At One Of The World's Most Resp...
- Market Update: Gold And Currency Wars
- Without Better Understanding Of Where These Parame...
- The Bond Market Is The Mother Of All Bubbles
- Governments Simply Look To Pump Up Nominal Levels ...
- The Big Guns Of Dollar Destruction Are Being Locke...
- Market Update: Gold, Silver, Gold Stocks And The D...
- The Race To The Bottom
- ▼ October (39)
- ► 2009 (280)