March 31, 2010

Student Loans: Higher Tuition Fees, Increased Costs For The Taxpayer

"Loaning directly to students while reducing the amount a student is required to repay will actually encourage colleges and universities to increase tuitions even faster, as students will be more willing to assume larger debts which they are not legally required to repay.

Not only will this bill cause tuitions to rise faster, but contrary to Obama's claim, it will substantially increase the cost to taxpayers who will be forced to pick up a much larger share of inflated tuitions and absorb bigger losses on defaulted loans."

in Capitol Watch

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.

March 30, 2010

Borrowing, Interest Payments And Further Borrowing

"We borrow money and then when the interest payments are due we borrow money to pay the interest...It is one gigantic Ponzi scheme."

in Market Oracle

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.

I’m Running For Free Markets, For Capitalism, For Liberty, For The Constitution

Peter Schiff`s first television ad, for his US Senate campaign in the state of Connecticut:

AUDIO TRANSCRIPT

SCHIFF: Washington is full of one-trick ponies, and the only trick these guys know is how to spend our money.

NARRATOR: Put Peter Schiff in the U.S. Senate and Washington will never be the same.

SCHIFF: Washington has infected the country with excessive regulation, excessive taxes, excessive government spending. I’m running for free markets, for capitalism, for liberty, for the Constitution, for the values that helped build this country.

SCHIFF: I’m Peter Schiff, and I approve this message

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.

March 29, 2010

Washington Has Infected The Country With Excessive Regulation

“Washington has infected the country with excessive regulation, excessive taxes, excessive government spending. I'm running for free markets, for capitalism, for liberty, for the Constitution, for the values that helped build this country.”

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.

March 28, 2010

Very Good Reason To Believe Home Prices Will Collapse

The latest housing initiative announced today by the Obama Administration draws the U.S. government and, by proxy, all taxpaying Americans, further into the inescapable quagmire of a devastated real estate market.

By transferring more underwater mortgage balances onto the public books, the plan puts taxpayers on the hook for further losses if housing prices continue to fall. Given the massive support for real estate already afforded by record-low interest rates and massive federal tax and policy incentives, there are very good reasons to believe that home prices will indeed collapse when these crutches are removed. Recent spikes in long-term interest rates warn of this prospect.

If the Administration had allowed losses to fall where they rightfully belong, namely on those who foolishly loaded up on toxic mortgage bonds, then the housing market would have already found its true clearing level. Instead, every measure is working to prolong and delay the ultimate reckoning, while setting up taxpayers as the patsy. Given the horrendous government deficit projections for the next several years, any losses incurred by the government mortgage portfolio may add a critical stress on America's fiscal viability.

In addition, the moves add even more incentives detrimental to economic growth. By targeting benefits toward unemployed homeowners, or those who are delinquent in mortgage payments, the program will encourage some mortgage holders to defer job-hunting and miss payments. Also, in offering loan-balance reductions, the program makes no distinction between homeowners who naively overpaid during the speculative peak and those who willfully put themselves underwater by taking advantage of home equity loans on existing mortgages. In short, these policies reward profligacy and penalize prudence.

The longer the government continues to distort the underlying economics of the real estate market, the longer it will take for the sector to heal itself - and the longer the sickness will infect the broader economy.

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.

March 25, 2010

Video: More On Healthcare Reform


Topics: Constitutionality of this Healthcare Law; Healthcare Reform costs;

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.

March 24, 2010

Healthcare Reform Costs

“When Medicare was first proposed back in 1966, it cost 3 billion dollars per year, and the projection was for inflation-adjusted annual costs to rise to 12 billion dollars by 1990. The actual cost in 1990 was 107 billion dollars, and the 2009 estimate is a staggering 408 billion dollars!”

in The Trumpet.com

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.

March 23, 2010

Videoblog: Alan Greenspan And Ben Bernanke



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.

March 22, 2010

China, US Treasuries And The US Dollar

"When China buys our debt, it uses its own savings. In order to purchase a trillion dollars of US Treasuries, the Fed would have to expand our money supply by a corresponding amount which will cause the dollar to fall sharply"

in China.org.cn

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.

March 21, 2010

Is Our Secret Weapon Printing Dollars Endlessly?

According to Krugman, our secret weapon of economic invincibility is the Fed’s ability to print dollars endlessly. If China were to foolishly decide to attack us by selling our debt, the Fed could simply step in and buy the excess with newly printed greenbacks. (In other words, Krugman sees no difference between funding the debt and monetizing it. See my latest video blog on the subject.) For Krugman, China would gain little from such an attack, but would lose the ability to export to its best customer and suffer severe losses in the value of its dollar holdings. Krugman’s worldview is reassuring – but it has absolutely nothing to do with reality.

There is a huge difference between selling your debt to another and “selling” it to yourself. When China buys our debt, it uses its own savings. In order to purchase a trillion dollars of U.S. Treasuries, the Fed would have to expand our money supply by a corresponding amount. Even Krugman acknowledges that this would cause the dollar to lose value; however, he feels that a weaker dollar is good for America and bad for China.

in Wall Street Pit

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.

March 20, 2010

US - China Relationship

"Recent rhetoric from Washington has put the economic relationship between the U.S. and China squarely on the front burner, and Krugman is demanding that we crank up the flame"

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.

March 19, 2010

Schiff On Paul Krugman Nobel Prize


"One of the things that Krugman gets right in this piece is that he mentions the fact that the chinese currency is undervalued and as a result of that its causing problems for the global economy. About that he is right. But he doesn`t really understand what the problems are and how things are going to be resolved once the chinese currency is ultimately revalued"

(more on this topic in yesterday`s post)

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.

March 18, 2010

Why Paul Krugman Should Lose His Nobel Prize

In his latest weekly New York Times column, Nobel Prize-winning economist Paul Krugman put forward arguments that were so nonsensical that the award committee should ask for its medal back.

Recent rhetoric from Washington has put the economic relationship between the U.S. and China squarely on the front burner, and Krugman is demanding that we crank up the flame. This week 130 members of Congress sent a letter to Treasury Secretary Timothy Geithner demanding that the Obama administration designate China as a "currency manipulator". Following that, a bipartisan group of senators introduced a bill that looks to force the Obama administration's hand. For its own part, Beijing invites criticism by continuing to deny its utterly obvious currency agenda.

As these tensions escalate, most economists urge Washington to tread lightly because of the negative fallout for America if China were to begin selling its enormous cache of U.S. Treasury bonds. Krugman pushes back, asserting that the U.S. risks little by playing hardball, and that China has more to lose. He asserts that a Chinese decision to end its purchases of U.S. Treasury debt would make only a marginal impact on long-term interest rates. Did you hear that Stockholm?

According to Krugman, our secret weapon of economic invincibility is the Fed's ability to print dollars endlessly. If China were to foolishly decide to attack us by selling our debt, the Fed could simply step in and buy the excess with newly printed greenbacks. (In other words, Krugman sees no difference between funding the debt and monetizing it. See my latest video blog on the subject.). For Krugman, China would gain little from such an attack, but would lose the ability to export to its best customer and suffer severe losses in the value of its dollar holdings. Krugman's worldview is reassuring - but it has absolutely nothing to do with reality.

There is a huge difference between selling your debt to another and "selling" it to yourself. When China buys our debt, it uses its own savings. In order to purchase a trillion dollars of U.S. Treasuries, the Fed would have to expand our money supply by a corresponding amount. Even Krugman acknowledges that this would cause the dollar to lose value; however, he feels that a weaker dollar is good for America and bad for China.

Krugman does not believe that a tanking dollar will translate into higher interest rates or higher consumer prices at home. No matter how many dollars the Fed creates, or how much value those dollars lose relative to other currencies, he is confident that as long as unemployment remains high, rates will stay low and inflation will remain under control. This is absurd.

If the dollar were to nosedive, the Fed would normally look to protect the currency by raising interest rates, thereby increasing foreign demand for the currency. But with an economy currently on crutches, the Fed will ignore a weakening dollar and continue to try to boost employment with near-zero rates.

But keeping the Fed Funds rate low only holds rates down for U.S. government debt. If the dollar weakens substantially, other rates offered to other borrowers will rise as investors demand greater returns to compensate for inflation. To keep rates low for homeowners, credit card borrowers, corporations, municipalities, and state governments, the Fed would be forced to buy, or guarantee, all forms of dollar-denominated debt. The Fed would become the lender of only resort.

Once the Fed shows that its commitment to low rates is limitless (the value of the dollar be damned), private creditors will quit the game. Even average Americans would hit the Fed's bid. It would be a race for the exits, with no one wanting to be left holding a bag of worthless paper dollars.

Most economists, Krugman included, see cheap money as a panacea for all ills. And while it's true that a falling dollar, by lowering the real value of U.S. wages, would help make U.S. goods more competitive, it would also lead to skyrocketing consumer prices, rapidly rising interest rates, and a collapse in American living standards. Make no mistake: this is the end game of Krugman's "get tough on China" policy.

This apocalyptic scenario can only be avoided if Washington jealously guards the status quo, avoiding confrontation with China at all costs. Yet, even that is an outcome that no one can rationally expect. Given exploding U.S. government deficits and the inability of U.S. citizens and corporations to repair their balance sheets, the United States faces financing needs that even China's gargantuan savings stockpile will be unable to cover.

Krugman is right about one thing - China's currency peg is destabilizing the global economy and must end. But he fails utterly to understand the implications for the U.S. and China. If China were to reverse its role in the U.S. Treasury market, both economies would be destabilized in the short-term. But in the medium- and long-term, China would clearly emerge as the winner.

Absent Treasury-bond purchases, the value of the Chinese currency would rise sharply, causing goods prices to tumble in China. This long-delayed increase in purchasing power for everyday Chinese will unleash pent-up demand in what is already the largest middle class in the world. Chinese factories would retool in order to produce goods for their own citizens to consume. In RMB terms, commodity prices would plunge, making it easier for China to produce all kinds of stuff, such as automobiles, while also making it cheaper for the Chinese to buy gas. Millions will trade in bikes for cars, and Chinese oil imports will swell.

The opposite would occur in America, where an artificial, consumer-based economy, supported by Chinese lending, will come tumbling down. Without the ability to import cheap goods from overseas, Americans will pay more and get less. While gas and food become cheaper for the Chinese, they will simultaneously become much more expensive for Americans - so too will automobiles, consumer electronics, furniture, and just about every other product we want or need (even those few we still make ourselves).

Washington's best option is to recognize that the current relationship is unsustainable and to plan, as best as possible, for a more viable future. We Americans also must be honest with ourselves and recognize that we have been living beyond our means and that our lifestyle has been largely financed by austerity in China. We must conceive of a plan that weans us from this dependence without provoking China to pull the rug out from under us before we have a firm footing. To construct a policy around Krugman's ridiculous assumption that we benefit China more than they benefit us is to invite catastrophe on an unimaginable scale.

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.

Real Money, Gold and Silver

"At some point, they are going to look at the U.S. and decide we can't pay it back. You have to have real money, gold and silver"

in Conntact.com

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.

March 17, 2010

The Distortive Effect Of Stimuli And Bailouts

“Based on the distortive effect of stimuli and bailouts, our economy has adapted to a climate where cheap credit is plentiful. Our economy is less able than ever to survive in a world in which stimulus is removed.”

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.

Yellen Views The Fed As An Extension Of The Labor Department

"Yellen has consistently downplayed the dangers of inflation and has made statements that indicate she views the Fed as an extension of the Labor Department, rather than a guardian of our currency"

in Channel News Asia, Mar 12 2010

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.

March 16, 2010

There Is No Way We Can Pay This Money Back

"Who cares what Moody`s says, I mean they got it wrong before in the past and they are wrong now. If you are thinking US Treasuries, think junk bonds, think subprime mortgages. There is no way we can possibly pay this money back.

There are only things that we can do. We can default legitimally, or we can do it through inflation. But one way or another the creditors are going to lose a lot of money."

in CNBC

Related Etf`s: iShares Lehman 20+ Year Treas.Bond (ETF) (Public, NYSE:TLT) and ProShares UltraShort 20+ Year Trea (ETF) (Public, NYSE:TBT)

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.

Potential Moody`s Downgrade On US Debt


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.

March 15, 2010

Canadian Dollar Hits 52 Week High

"The canadian dollar hit a new 52 week high, showing that what we really have seen recently is not US Dollar strength but Euro weakness."

In Video Blog, March 12

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.

Latest Market Update

"Yellen is one of the most dovish members of the FED and is obviously a bad choice"

Topics: US Dollar, Canadian Dollar, China`s Inflation, Chinese Yuan appreciation, Yellen`s nomination;

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.

March 10, 2010

Regular Apperances On CNBC Fast Money.

Latest Peter Schiff video interview.

Schiff talks about his participation on CNBC Fast Money, 2 days a week on Tuesdays and Thursdays.

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.

Schiff Will Be A Regular On CNBC Fast Money

Peter Schiff announced on Monday that he will be a regular guest twice weekly for the CNBC financial program “Fast Money.”

Between 5 p.m. and 6 p.m. on Tuesdays and Thursdays, if time permits him, he will appear as a guest on the show to provide his input and in-depth analysis of the current economic state of affairs not only in the United States but across the globe as well.

Schiff added, “This is a huge boost to friends of the free market everywhere, and a demonstration of our increasing influence. While we believe in the principles of economic liberty, television networks must respond to ratings first”.

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.

March 8, 2010

Our Government’s Plan For Economic Recovery

"That, in a nutshell, is our government’s plan for economic recovery. Print a bunch of money and give it to consumers to spend. This is not a plan for recovery but a recipe for disaster. Those betting that this program can succeed in putting together a healthy and sustainable economy simply do not understand the nature of their wager. The smart money is going the other way."

in Europac.net

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.

March 5, 2010

What We Have To Understand As A Nation Is That We Cannot Spend Our Way Out Of This Current Mess

“What we have to understand as a nation is that we cannot spend our way out of this current mess and not expect there to be dismal consequences. The next Senator from Connecticut needs to lead Washington away from the failed ideas that have caused the economic crisis and continue to undermine our economic recovery”

in Digital Journal

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.

March 4, 2010

There Will Be No Consumer Led Recovery

"I would challenge those who fantasize about a consumer-led recovery to describe where the spending money will come from. Most consumers are tapped out, millions are unemployed, and home equity has been wiped out. The only reasonable thing for them to do is to pay down debt and sock away as much money as possible to rebuild their savings."

in Europac.net

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.

March 3, 2010

Don`t Bet On A Recovery

It is astounding how many economists, government officials, and Wall Street strategists construe the current economic conditions as evidence of a bona fide recovery. It is a testament to the power of the rose colored glasses handed out by our nation’s leading universities that such a feeling could be widely held despite the clear and present danger that compounds daily. The myopia leads us to enact policies that actually exacerbate our problems. The “remedies” are postponing, perhaps indefinitely, a true recovery.

The oracles who have described the nature of this imminent recovery do so based on their conviction that consumer spending is slowly returning to levels that existed prior to the recession. New data released today seems to support this view, with consumer spending up 0.5% in January.

However, missing from their analysis is any plausible explanation as to why consumers will be able to sustain such spending given the plunge in income and credit, and the lack of available savings. In fact, the same January spending report showed that personal income increased by only 0.1%, while the savings rate slowed to the smallest since 2008.

I would challenge those who fantasize about a consumer-led recovery to describe where the spending money will come from. Most consumers are tapped out, millions are unemployed, and home equity has been wiped out. The only reasonable thing for them to do is to pay down debt and sock away as much money as possible to rebuild their savings.

Beyond the question of “how” the spending could be achieved, is the deeper question of “why” such activity should be sought at all. Excessive spending, fueled by an insane housing bubble and catalyzed by reckless monetary and fiscal policy, was the reason that our current recession became unavoidable. Why would we want to go down that road again?

During the run up to the crash, excess spending had created economic distortions that have yet to be resolved. Too many resources, including land, labor, and capital, were devoted to servicing an unsustainable economic model in which Americans borrowed money to buy homes, products and services they really could not afford. In many cases consumer behavior was influenced by overly optimistic assumptions regarding real estate related riches.

However, now that the real estate bubble has burst, Americans are coming to terms with a more sober reality. Many have cut up their credit cards, dramatically reduced their spending, and have squirreled away as much money as they can. This change in behavior should necessitate a dramatic shift in the labor market as workers move away from jobs associated with consumer spending and toward jobs associated with real production, primarily for exportable goods.

The real problem is that monetary and fiscal policy designed to re-inflate the burst spending bubble is preventing this transition from taking place. As a result we are not creating the jobs we need to replace – the ones we have lost in mortgage servicing, home improvement, and real estate sales (which we never really needed to begin with). As these jobless remain unable to find alternative employment, our economy will continue to languish.

Some will argue that the new jobs created by government stimulus spending will provide the additional purchasing power necessary to revitalize consumer spending. There are two problems with this expectation. First, those jobs being “created” by the government are outnumbered by those being destroyed by government domination of resources. Second, even if it were possible for job growth to return, having hopefully learned from their mistakes, workers will be far more frugal with their paychecks than they were in the past.

Others hope that rising real estate prices will give consumers more confidence to spend. The reality is that housing prices are still too high and will likely fall further. But even if they did rise, consumers will still be reluctant to resume their shopping spree. Home equity extraction loans, which just a few years ago turned houses into ATMs, are now much harder to come by. When it comes to spending, it’s not just about confidence; it’s about cash.

The only possible way consumers can spend is if the government gives them the money. However, since the government cannot legitimately give money to one American without first taking it from another, the most likely means of doling out cash will be to run it off the printing presses.

That, in a nutshell, is our government’s plan for economic recovery. Print a bunch of money and give it to consumers to spend. This is not a plan for recovery but a recipe for disaster. Those betting that this program can succeed in putting together a healthy and sustainable economy simply do not understand the nature of their wager. The smart money is going the other way.

in www.europac.net

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.

March 1, 2010

"The Gold Chart Really Looks Strong To Me"

"Looking at the action in gold, it really seems like its leading the markets, the gold chart really looks strong to me"

in Videoblog, "Markets, AIG, Housing, health care"

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.