In an interview this week, outgoing Fed Chairman Ben Bernanke likened the QE program to the first stage in a multiple stage rocket that gets the spacecraft off the ground and accelerates it to the point where it is close to achieving permanent orbit. Like a first stage that has spent its fuel and has become dead weight, Bernanke seems to concede that QE is no longer capable of providing positive thrust, and as a result can now be jettisoned (like a first stage) so that the remainder of the spacecraft/economy can now move higher and faster. The Chairman’s nifty metaphor provides some inspiring visuals, but is completely flawed in just about every way imaginable.
In real rocketry, when the first stage separates, it falls back to earth and is no longer a burden to the remainder of the ship. Subsequent booster rockets (which in economic terms Bernanke imagines would be continuation of zero interest rate policies) build on the gains made by the first stage. But the almost $4 trillion in assets that the Fed has accumulated as a result of the QE program will not simply vaporize into the stratosphere like a discarded rocket engine. In fact it will remain tethered to the rest of the economy with chains of solid lead.
In the process of accumulating the world’s largest cache of Treasuries, the Fed has become the most important player in that market. I believe the Fed can’t stop accumulating and dispose of its inventory without creating major market disruptions that will drag the economy down. - in Value Walk
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. Visit the new website Schiff On The Markets for exclusive content.
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November 27, 2013
November 26, 2013
Herd Mentality
"Herd mentality can be as frustrating as it is inexplicable. Once a crowd starts moving, momentum can be all that matters and clear signs and warnings are often totally ignored. Financial markets are currently following this pattern with respect to the unshakable belief that the Federal Reserve is ready, willing, and most importantly, able, to immediately execute a wind down of its quantitative easing program. Although the release last week of the minutes of the Fed’s last policy meeting did not contain a shred of hard information about the certainty or timing of a “tapering” campaign, most observers read into it definitive proof that the Fed would jump into action by December or March at the latest. The herd is blissfully unaware that the Fed may not be able to reverse, or even slow, the course of QE without immediately sending the economy back into recession." - in Value Walk
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. Visit the new website Schiff On The Markets for exclusive content.
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. Visit the new website Schiff On The Markets for exclusive content.
November 25, 2013
Stock Market: The Economy & Monetary Policy
"The rise in the stock market, it's not because of a good economy, but because of bad monetary policy." - in Real Clear Politics
Related ETFs: Financial Select Sector SPDR (XLF), SPDR Dow Jones Industrials ETF (DIA), SPDR SP 500 Index ETF (SPY), SPDR Gold Trust ETF (GLD)
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. Visit the new website Schiff On The Markets for exclusive content.
Related ETFs: Financial Select Sector SPDR (XLF), SPDR Dow Jones Industrials ETF (DIA), SPDR SP 500 Index ETF (SPY), SPDR Gold Trust ETF (GLD)
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. Visit the new website Schiff On The Markets for exclusive content.
November 24, 2013
CNBC Video: Bitcoin Is A Bubble
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. Visit the new website Schiff On The Markets for exclusive content.
November 23, 2013
Video: The Dow Jones Will Crash Below 13,000
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. Visit the new website Schiff On The Markets for exclusive content.
November 22, 2013
Video: Bitcoin Versus Gold
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. Visit the new website Schiff On The Markets for exclusive content.
November 21, 2013
Video: The Simple Truth On The U.S. 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. Visit the new website Schiff On The Markets for exclusive content.
November 20, 2013
The Big Wake Up For The Price Of Gold
“Look how weak the economy is, look how weak the recovery was… Now we’re going back into recession again, and [with] interest rates already at zero, all they can do is dial up the size of the QE… When people realize that QE hasn’t helped… and [that] the US economy is going to continue to deteriorate and we’re going to try to paper it over with a flood of money – that’s going to be a big wake up for the price of gold. And I think the price is going to go straight up.” - in CNBC
Related ETFs: SPDR Gold Trust ETF (GLD), Newmont Mining (NEM), Goldcorp (GG), Barrick Gold (ABX), Novagold (NG), Market Vectors Gold Miners ETF (GDX)
Peter Schiff`s comments on the economy, stock markets, politics and gold.Visit the new website Schiff On The Markets for more exclusive content.
Related ETFs: SPDR Gold Trust ETF (GLD), Newmont Mining (NEM), Goldcorp (GG), Barrick Gold (ABX), Novagold (NG), Market Vectors Gold Miners ETF (GDX)
Peter Schiff`s comments on the economy, stock markets, politics and gold.Visit the new website Schiff On The Markets for more exclusive content.
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