Archive for inflation

Schiff, Gold, and the Dow

Peter Schiff appears on the Laura Ingraham show this morning.

One of the more interesting points he makes is evaluating the value of the Dow in light of ounces of gold. When Bush took office, the Dow was roughly 42 ounces of gold. Now it’s about 9. He expects that by the time Obama leaves office, it’s likely to be around one ounce of gold in value.

He compares the attempts to “fix” the economy to attempting to recreate the debt-based house of cards.

His advice is the same that it’s been for a while, which is refreshing considering that he’s taken some heat for it recently: gold, silver, foreign currency (he calls the dollar’s recent surge a false rally), and foreign stocks and bonds.

Comments off

February 12, 2009 · Filed under euro, gold, inflation, predictions

Stimulus Makes It Worse

Peter Schiff has a great interview with Yahoo’s techticker.

The fiscal stimulus bill being debated in Congress not only won’t help the economy, it will make the recession much worse, says Peter Schiff, president of Euro Pacific Capital.

He argues that the “stimulus” package will make this worse. And, if you listen carefully, he says near the end that because the currency is not anchored in gold that this will be an inflationary depression, if we don’t back off and take the hard medicine now.
…the difference is that the economy is in a much worse state going into this depression than it was in the 1930s… and without the discipline of gold, we have a central bank that could create massive inflation. So we could have an inflationary depression.
During the Great Depression, prices fell. But Schiff suggests that what could happen this time is that “prices could be spiraling out of control.”
Interesting points. I wonder to what extent the foreign debt holders will force our hand to prevent that (otherwise their dollar-denominated bonds will be effectively devalued to a fraction of their value). And, if they can’t, won’t they be a little upset when their billions are now relatively worthless?

Comments off

February 6, 2009 · Filed under Economy, depression, dollar, inflation, meddling, predictions

Bad Medicine

There’s a great article on the Fed, the history of easy money, and the likely consequences in the Saturday WSJ.

Highlights:

Barely nudging Mr. Madoff out of the top of the news was the Federal Reserve’s announcement last Tuesday that it intends to debase its own paper money. The year just ending has been a time of confusion as much as it has been of loss. But here, at least, was the bright beam of clarity. Specifically, the Fed pledged to print dollars in unlimited volume and to trim its funds rate, if necessary, all the way to zero. Nor would it rest on its laurels even at an interest rate low enough to drive the creditor class back to work. It would, on the contrary, “continue to consider ways of using its balance sheet to further support credit markets and economic activity.”

and

One market, only, registered a protest. The Fed’s declaration of inflationary intent knocked the dollar for a loop against gold and foreign currencies. In many different languages and from many time zones came the question, “Tell me, again, now that the dollar yields so little, why do we own it?”

Great question. Maybe we can help Ben out with a few potential answers for our friends who are (barely) propping up the US economy:

  • We’re #1!
  • “If you don’t, the terrorists win”?
  • USA! USA! USA!
  • It’s good for you. Like spinach.
  • You might be losing money, but you’ll make it up in volume.

In our American reader’s case… “Because you have to”? No, we don’t have to. We may be paid in dollars, but a variety of non-dollar or contra-dollar alternatives exist. We’ll look into them over the coming weeks.

Comments off

December 20, 2008 · Filed under Politics, dollar, inflation, meddling

Dollar Continues to Slide

While commentators seem to try to hedge their bets by obfuscating, the Euro continues its surge relative to the dollar. It strikes me that this is a fundamental rebound. Then again, I’m a neophyte.

Here’s a DailyFX chart that illustrates the dramatic “V” rebound.

Have we seen the end of dollar-buying to liquidate positions in the US prior to the end of the year and prior to the Obama administration’s debut?

Also note that a significant portion of the surge in oil prices is actually tied to the exchange rate. This should begin to re-introduce inflationary pressures on the economy and counter the deflation — both real and predicted — of the past several months.

This may not be a final blow to the dollar, but it should serve as a wake-up-call that we should not expect deflation to win out in the long term, especially for imported or energy-sensitive commodities.

The question is: when will inflationary pressures of dollar printing and borrowing begin to outweigh the downward pressures introduced in real estate and retail from bankruptcies and liquidations? And what impact will negative real interest rates in the U.S. have on the dollar and the economy? Is there a window of opportunity in the next weeks or months for individuals to improve their positions before the storm actually hits in full force?

Comments (1)

December 15, 2008 · Filed under dollar, euro, inflation

Interest in Farming Goes To Seed

Sharon at Casaubon’s Book blogged about how increased interest in personal gardening and farming is impacting the seed market:

Yesterday afternoon, my Fedco Seed Catalog arrived – always my personal favorite.  And on page 6, what should I see but this, in founder CR Lawn’s description of their situation:

And now seed prices.  I’ve ben 30 years in this business and these are the highest increases to us I’ve ever seen.  The ethanol boom diverting land to corn production has ahd a tremendous impocat on farm commodity prices, including vegetable seeds.  Wholesale prices for pea and bean seed are up 30-50%, for corn and squash, 20% or more.  Even so, wholesalers could not find growers for all crops so several varieties are missing from our catalog.  Horrible growing weather this summer has exacerbated the shortage.

Comments off

December 11, 2008 · Filed under farming, food, inflation