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The Fix Is In (Peter Schiff Explains why it will fail again)
Safe haven /Europacific Capital ^ | By: Peter Schiff | Fri, Aug 12, 2011 | Peter Schiff

Posted on 08/12/2011 9:33:33 PM PDT by sickoflibs

This week's wild actions on Wall Street should serve as a stark reminder that few investors have any clue as to what is really going on beneath the surface of America's troubled economy. But this week did bring startling clarity on at least one front. In its August policy statement the Federal Reserve took the highly unusual step of putting a specific time frame for the continuation of its near zero interest rate policy.

Moving past the previously uncertain pronouncements that they would "keep interest rates low for an extended period," the Fed now tells us that rates will not budge from rock bottom for at least two years. Although the markets rallied on the news (at least for a few minutes) in reality the policy will inflict untold harm on the U.S. economy. The move was so dangerous and misguided that three members of the Fed's Open Market Committee actually voted against it. This level of dissent within the Fed hasn't been seen for years.

Many economists have short-sightedly concluded that ultra low interest rates are a sure fire way to spur economic growth. The easier and cheaper it is to borrow, they argue, the more likely business and consumers are to spend. And because spending spurs growth, in their calculation, low rates are always good. But, as is typical, they have it backwards.

I believe that ultra-low interest rates are among the biggest impediments currently preventing genuine economic growth in the US economy. By committing to keep them near zero for the next two years, the Fed has actually lengthened the time Americans will now have to wait before a real recovery begins. Low rates are the root cause of the misallocation of resources that define the modern American economy. As a direct result, Americans borrow, consume, and speculate too much, while we save, produce, and invest too little.

It may come as a shock to some, but just like everything else in a free market, interest rate levels are best determined by the freely interacting forces of supply and demand. In the case of interest rates, the determinative factors should be the supply of savings available to lend and the demand for money by people and business who want to borrow. Many of the beneficial elements of market determined rates are explained in my book How an Economy Grows and Why it Crashes. But allowing the government to determine interest rates as a matter of policy creates a number of distortions.

It was bad enough that the Fed held rates far too low, but at least a fig leaf of uncertainty kept the most brazen speculators in partial paralysis. But by specifically telegraphing policy, the Fed has now given cover to the most parasitic elements of the financial sector to undertake transactions that offer no economic benefit to the nation. Specifically, it will simply encourage banks to borrow money at zero percent from the Fed, and then use significant leverage to buy low yielding treasuries at 2 to 4 percent. The result is a banker's dream: guaranteed low risk profit. In other words it will encourage banks to lend to the government, which already borrows too much, and not lend to private borrowers, whose activity could actually benefit the economy.

This reckless policy, designed to facilitate government spending and appease Wall Street financiers, will continue to starve Main Street of the capital it needs to make real productivity-enhancing investments. American investment capital will continue to flow abroad, denying local business the means to expand and hire. It also destroys interest rates paid to holders of bank savings deposits which traditionally had been a financial pillar of retirees. In addition, such an inflationary policy drives real wages lower, robbing Americans of their purchasing power. The consequence is a dollar in free-fall, dragging down with it the standard of living of average Americans.

Until interest rates are allowed to rise to appropriate levels, more resources will be misallocated, additional jobs will be lost, government spending and deficits will continue to grow, the dollar will keep falling, consumer prices will keep rising, and the government will keep blaming our problems on external factors beyond its control. As the old adage goes, "insanity is doing the same thing over and over again and expecting different results."


TOPICS: Business/Economy; Editorial; Government; News/Current Events
KEYWORDS: bernanke; economy; inflation; peterschiff; schifflist
Navigation: use the links below to view more comments.
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The Peter Schiff/Austrian Economics ping. (Washington Bankrupting our Nation by Spending your past, present and future money!)

If you realize both parties in Washington think that our money is theirs and you trust them to do the wrong thing, this list is for you.

If you think there is a Santa Claus that has some magic easy cure for the economy; someone who is going to get elected in Washington and fix everything just by cutting your taxes, investing (more government spending) a few trillion more we don't have and will never have, and who will just command some countries to lower their prices and others to raise their prices all to suit your best interests, then this list is not for you.

You can read past posts by clicking on : schifflist , I try to tag all relevant threads with the keyword : schifflist.

Ping list pinged by sickoflibs.

To join the ping list: FReepmail sickoflibs with the subject line 'add Schifflist'.

(Stop getting pings by sending the subject line 'drop Schifflist'.)

The Austrian Economics School’s Commandments plus :From : link

1) You cannot spend your way out of a recession
2) You cannot regulate the economy into oblivion and expect it to function
3) You cannot tax people and businesses to the point of near slavery and expect them to keep producing
4) You cannot create an abundance of money out of thin air without making all that paper worthless
5) The government cannot make up for rising unemployment by just hiring all the out of work people to be bureaucrats or send them unemployment checks forever
6) You cannot live beyond your means indefinitely
7) The economy must actually produce something others are willing to buy
8) Every government bureaucrat should keep the following motto in mind when attempting to influence the economy: “First, do no harm!”
9) Central bank-supported fractional reserve banking is an economically distorting, ethically questionable activity. In particular, no government should ever do anything to save any bank from the full consequences of a bank run, no matter what the short-term consequences.
10) Gold is God’s money.

Add mine:

1) Businesses don't hire workers just because of demand for products or services, they hire because it makes them money. Sorry to have to state the obvious.
2) Government spending without taxing is still redistribution
3) Taking one man's money and giving it to another is not a job.
4) Paul Krugman and Bernake have been wrong about everything, as well as the other best and brightest Keynesian's who have been fixing our economy for over a decade.
5) Republicans in the minority (esp out of the White House) act like Republicans, in the majority they act like Democrats .

Equity bubble rules:

1)If something goes up too fast, it is going down faster,
2) By the time it looks like everybody is getting rich, it’s too late, stay out!
3) To get rich you have to get in early start of recovery and get out at the first really 'bad' news, and ignore the experts that claim that they will stop the next crash(our buddy Bernake.).
4) Don't invest money you will probably need, or worse money you don't really have.

1 posted on 08/12/2011 9:33:43 PM PDT by sickoflibs
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To: LMAO; DeaconBenjamin; April Lexington; murphE; RipSawyer; Tunehead54; preacher; 1234; coloradan; ...
The Peter Schiff/Austrian Economics ping. (Washington Bankrupting our Nation by Spending your past, present and future money!)
2 posted on 08/12/2011 9:39:59 PM PDT by sickoflibs (If you pay zero Federal income taxes, don't say you are paying your 'fair share')
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To: sickoflibs; All

Recent reports are that banks, businesses and private individuals are sitting on mountains of cash that is not being spent. What’s with this?


3 posted on 08/12/2011 9:40:32 PM PDT by gleeaikin
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To: sickoflibs

ping


4 posted on 08/12/2011 9:41:06 PM PDT by unkus (Silence Is Consent)
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To: texas_mrs

ping


5 posted on 08/12/2011 9:41:59 PM PDT by texas_mrs
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To: gleeaikin

It’s called SAVINGS....


6 posted on 08/12/2011 9:43:38 PM PDT by basil (It's time to rid the country of "gun free zones" aka "Killing Fields")
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BEYOND DISGUSTED WITH IT ALL?

If you haven’t yet, please donate whatever you can to help Free Republic continue to fight for America and end this FReepathon. No amount is too small.

**please click the pic to donate .. thank you very much!!**
(PS: A generous FReeper will add $10 for every *new monthly donor*-- no matter the amount-- multiplying your donation!)

7 posted on 08/12/2011 9:43:38 PM PDT by STARWISE (The overlords are in place .. we are a nation under siege .. pray, go Galt & hunker down)
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To: sickoflibs

The low interest rates are bad in other ways too. Who wants to take risk and make a loan for almost nothing? It might be better to just sit on cash and collect from the IOR program and wait until rates rise enough to make loaning money more worth while.


8 posted on 08/12/2011 9:48:10 PM PDT by dajeeps
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To: gleeaikin; basil
RE :"Recent reports are that banks, businesses and private individuals are sitting on mountains of cash that is not being spent. What’s with this?"

Are you kidding with this question??? Where have you been?

9 posted on 08/12/2011 9:50:56 PM PDT by sickoflibs (If you pay zero Federal income taxes, don't say you are paying your 'fair share')
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To: gleeaikin
Recent reports are that banks, businesses and private individuals are sitting on mountains of cash that is not being spent. What’s with this?

Too much government and no confidence in our leaders.

Oh, and corporate profits are at record levels, but that's being done by eliminating jobs.

10 posted on 08/12/2011 9:51:44 PM PDT by Moonman62 (The US has become a government with a country, rather than a country with a government.)
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To: gleeaikin
The reason is that the Obama administration is laying all kinds of regulations on businesses in addition to threatening them with tax hikes.

No one is going to move not knowing what might lurk around the next corner.

As soon as business senses that the Gov't is on their side...that not only will they will Gov't not throw up some heinous new rule but will move to LOOSEN regs on their behalf money and jobs will flow.

It's really that simple.

11 posted on 08/12/2011 9:53:50 PM PDT by Siena Dreaming
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To: dajeeps

Consumer spending accounts for 2/3 of GDP- By keeping the rates low this will hopefully continue. Retail sales were up last month that accounted for the 400+ Dow Jones climb on Thursday.


12 posted on 08/12/2011 9:55:10 PM PDT by Steelfish (ui)
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To: dajeeps

Consumer spending accounts for 2/3 of GDP- By keeping the rates low this will hopefully continue. Retail sales were up last month that accounted for the 400+ Dow Jones climb on Thursday.


13 posted on 08/12/2011 9:55:17 PM PDT by Steelfish (ui)
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To: Steelfish

I’m talking capital formation, not consumption.


14 posted on 08/12/2011 9:56:42 PM PDT by dajeeps
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To: Steelfish
I wonder, do retail gasoline sales count in these numbers?

&/or are there other skewing factors?

15 posted on 08/12/2011 10:03:50 PM PDT by de.rm ('Most people never believe anything you tell them unless it isn't true."-Groucho Marx)
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To: sickoflibs

Funny. Your equity bubble rules apply to all bubbles... including gold.


16 posted on 08/12/2011 10:11:17 PM PDT by pgyanke (Republicans get in trouble when not living up to their principles. Democrats... when they do.)
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To: sickoflibs

Please add me to this ping list.


17 posted on 08/12/2011 10:20:27 PM PDT by comebacknewt (Sheesh. Go away and stay away Newt.)
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To: dajeeps

Currently, corporations are sitting atop mountains of capital. An LA Times article recently reported that they are investing and spending it in countries where consumers have the cash to buy. By lowering interest rates US consumers are able to make the household purchases, buy homes etc. This is a point that Schiff doesn’t appear to take into account.


18 posted on 08/12/2011 10:20:59 PM PDT by Steelfish (ui)
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To: gleeaikin
It's because "Whack a Mole" Obama is waiting for one to stick their head up and try to make a profit and hire people so he can swat them down. If you dare to use your own money for something you desire to do, you can get swatted down with regulations or taxes and you can just get back in your hole.

He portrays these people as anti patriotic and greedy if they don't volunteer to give their money to him to be thrown down the nearest sewer.

By asking this question, it sounds as if you might agree. This is basic American capitalism and you should know this already. Do we smell a troll?

19 posted on 08/12/2011 10:21:17 PM PDT by chuckles
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To: gleeaikin

They know that the deflationary forces aren’t done yet.

In a deflation, cash is King. The movement of money flow, called velocity, slows, and people sit on cash because there doesn’t appear to be a better place to keep it. Low interest rates also encourage this. And low yields on UST.

Just like in 2008, staying is cash is wise IF another market crash is on the horizon. Without the next QR3 being certain, people are staying OUT of the market and IN cash, to be safe.

Once the next QE is in swing, the inflationary forces will be let lose once again, grinding up the little people with less and less room to be able to support themselves.

Until the next deflationary scare.

Unless the US dollar collapses, then all bets are off.


20 posted on 08/12/2011 10:22:10 PM PDT by TruthConquers (Delendae sunt publicae scholae)
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To: sickoflibs

Ultra low rates remove the Fed’s ability to play with the market much.

To me, as a business major, that’s bad because they can no longer act like a regulator between depression and boom.

That’s essentially what Japan has done forever and it’s failed there and it’ll put us on a similar path.


21 posted on 08/12/2011 10:24:29 PM PDT by Tolsti2
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To: Steelfish
Retail sales were up last month

Back to school purchases. Next month, not so much.

22 posted on 08/12/2011 10:25:40 PM PDT by jrushing (Anti-American-ProTerrorist-Coward-Fascist-Communist-Socialist-Democratic Party)
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To: Steelfish

“By lowering interest rates US consumers are able to make the household purchases, buy homes etc.”

Not if they have a huge debt overhang and/or no job. We need tons of new investments here, right now, and we also need to ditch the additiction to consumption as a solution to all problems. That is what has gotten into this huge mess to were we cannot pay our bills.


23 posted on 08/12/2011 10:30:13 PM PDT by dajeeps
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To: Steelfish
Forget consuming! You sound like a Keynesian. Money can be used for more than buying a new Mercedes. If you open a Restaurant and hire 5 people instead of buying a new Mercedes, the money has a different effect than paying a dealer and a couple of salesmen for a car. You have formed a new stream of wealth and you can get your Mercedes later.

Keynesian's don't get that. They can draw dividends and interest, or spend it on new plant. Obama doesn't want either one. He would rather hold it hostage with threats of taxation and regulation and brow beat them as non patriots because they don't want to fund another boondoggle shovel ready project.

If we feel we can make better returns by investing in new plant and employees, the money will flow out of accounts like honey. Otherwise we will make the prudent economic decision to remain miserly skinflints with our money in a mattress. Happy unemployment!

Keynesian = Epic Fail.

24 posted on 08/12/2011 10:34:41 PM PDT by chuckles
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To: dajeeps

The present problem is Obama’s record spending- the $1T shovel-ready job that went nowhere and the public sector’s bloated costs caused primarily by unions to say nothing of the entitlement programs. If people don’t spend (invest) on goods and services, the economy will go into yet another recession. I think the Feds were smart- just this time, although global forces may alter the best laid plans.


25 posted on 08/12/2011 10:38:13 PM PDT by Steelfish (ui)
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To: Steelfish

“The present problem is Obama’s record spending- the $1T shovel-ready job that went nowhere and the public sector’s bloated costs caused primarily by unions to say nothing of the entitlement programs”

But that IS consumption. It makes no difference to the bottom line if we spend it or if Obama spends it for us. And the fiscal stimulus didn’t work, did it? That kind of tells me that it isn’t a AD problem, but an AS problem and ultra low interest rates don’t help that.


26 posted on 08/12/2011 10:41:59 PM PDT by dajeeps
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To: sickoflibs

Peter Schiff is NO ECONOMIC GENIUS as he claims, and many of his predictions are totally bogus!

http://globaleconomicanalysis.blogspot.com/2009/01/peter-schiff-was-wrong.html ,
“ For one, Mike Shedlock of Mish’s Global Economic Trend Analysis gave an incredibly detailed review of Schiff’s track record in an article titled, “Peter Schiff was Wrong.” To get a little flavor of the piece, here is an excerpt:

12 Ways Schiff Was Wrong in 2008

•Wrong about hyperinflation
•Wrong about the dollar
•Wrong about commodities except for gold
•Wrong about foreign currencies except for the Yen
•Wrong about foreign equities
•Wrong in timing
•Wrong in risk management
•Wrong in buy and hold thesis
•Wrong on decoupling
•Wrong on China
•Wrong on US treasuries
•Wrong on interest rates, both foreign and domestic”


http://investingcaffeine.com/2009/09/07/the-emperor-schiff-has-no-clothes/


http://seekingalpha.com/article/106824-being-wrong-for-five-years-makes-peter-schiff-right-now

” Now, had you listened to Peter in 2002, 2003, 2004, 2005, 2006 or even 3/4 of 2007, you lost your shirt. Had you placed bets based on Schiff’s market calls, you lost everything you wagered.

The S&P (.INX) went from 1054 in May of 2002 (the date of the interview) to 1561 in Oct. 2007, a 48% gain and the Dow (.DJI) rose 40%.

Banking stocks, the primary victim of the housing bust, went up (JP Morgan (JPM) 36%, Bank of America (BAC) 41%, Wells Fargo (WFC) 39% , Wachovia (WB) 31% and American Express (AXP) 51%) during that time frame (dividends excluded which would dramatically add to results). “”


SCHIFF invests in America’s economic competitors ONLY
NOT A DIME in the USA
how is that smart??

ECON 101
When you invest in the firm that is the economic competitor to your own family, and your family does poorly, and their competitor does well, and you KEEP investing in your family’s competitor, YOU ARE PUTTING YOUR FAMILY OUT OF WORK!

Schiff doesn’t invest a SINGLE PENNY in AMERICA!!!

pro-immigration and said that there are too many jobs in the US we NEED to let in immigrants???

Peter Schiff admits on camera that he has ZERO money investigated in American corporations or industry. If Peter Schiff refuses to invest in American companies, how can Peter Schiff say he is helping Americans keep their jobs?

http://ameriborn.com/shifty/

This is SCHIFF in his own words!

PETER SCHIFF IS ACTIVELY INVESTING IN FOREIGN COMPETITOR NATIONS THAT ARE PUTTING AMERICANS OUT OF WORK!!!

Here is a link to his investment company and their business dealings from Google
http://www.google.com/search?sourceid=navclient&ie=UTF-8&rlz=1T4RNTN_enUS381US381&q=Schiff+%2b+pacific


Schiff is pro-gay marriage, pro-drug legalization and against the war in Afghanistan

http://blogs.courant.com/rick_green/2009/10/peter-schiff-arrives-give-me-m.html


Why do the Ron Paul guys support gay marriage?
http://www.queerty.com/ron-paul-on-gay-marriage-20071210/


http://www.schiffforsenate.com/index.php?q=news/constitutional-candidates-congress

Schiff’s own website endorses Adam Kokesh


All the Schiff bots are supporting a PRO-CHOICE candidate, too

http://www.youtube.com/watch?v=nDttx64zk4I


SCHIFF himself admits he believes the Iraq War is a QUAGMIRE in 2009!!
http://www.freespeechmonster.com/?p=103

Schiff has said this many times
http://peterschiffsays.com/defense.htm

Aug 7, 2009, Iraq is a quagmire
http://www.youtube.com/watch?v=P9t741ewbGA

Schiff blamed Iraq on bankers? Not on Saddam?
http://www.youtube.com/watch?v=zo81QDSuixk


What the Tea Parties are not telling you about Peter Schiff:

Libertarians need to infiltrate the GOP

VIDEO of Schiff saying just that!
http://www.youtube.com/watch?v=3ncLTFoTFa8

http://belowthebeltway.com/2009/06/02/peter-schiff-libertarians-need-to-infliltrate-the-gop/
http://www.facebook.com/note.php?note_id=110955225375
http://www.campaignforliberty.com/blog.php?view=19285
http://www.godlikeproductions.com/forum1/message808505/pg1
http://answers.yahoo.com/question/index?qid=20090707200009AAzSQfB


Peter Schiff admits on camera that he has ZERO money investigated in American corporations or industry. If Peter Schiff refuses to invest in American companies, how can Peter Schiff say he is helping Americans keep their jobs?

http://ameriborn.com/shifty/


Peter Schiff repeating talking points of the lunatic left, listen yourself. He says in 2009 that Iraq is a QUAGMIRE when we already won!! He blames the war on bankers and whoever, and not a word about blaming it on terrorists! listen yourself, Schiff repeats left wing talking points to his radio audience about the Iraq war!

http://www.youtube.com/watch?v=zo81QDSuixk


Peter Schiff has made open statements that are quite like the statements of the anti-war leftists, to include the OTHER Ron Paul endorsed candidates Rand Paul and Adam Kokesh

http://www.google.com/search?hl=en&source=hp&q=schiff+%2B+isolationist&aq=f&aqi=g10&aql=&oq=&gs_rfai=

http://www.google.com/search?sourceid=navclient&ie=UTF-8&rlz=1T4GGIC_enUS220US220&q=peter+schiff+isolationist


Peter Schiff is pro-choice on abortion

http://www.google.com/search?num=20&hl=en&newwindow=1&rlz=1T4GGIC_enUS220US220&q=Peter+schiff+%2B+abortion&aq=f&aqi=g-c1&aql=&oq=&gs_rfai=


SCHIFF’S OWN WEBSITE CONTAINS AN ENDORSEMENT FOR KOKESH WHERE KOKESH IS NAMED AS AN ANTI-WAR PROTESTER
http://schiffforsenate.com/index.php?q=news/constitutional-candidates-congress
Adam Kokesh
Adam Kokesh is best known as an Iraq War veteran who returned opposed to the war and was a keynote speaker at Ron Paul’s “Rally for the Republic” that competed with the Republican National Convention in the summer of 2008.


Peter Schiff is pro-choice on abortion

http://www.youtube.com/watch?v=nDttx64zk4I

with respect to his personal feelings, he would not make it illegal, women have a right to abort, he is against 3rd trimester,

BUT FIRST TRIMESTR OR SECOND ONE ITS OKAY

Hear it in his own words


http://www.google.com/search?num=20&hl=en&newwindow=1&rlz=1T4GGIC_enUS220US220&q=Peter+schiff+%2B+abortion&aq=f&aqi=g-c1&aql=&oq=&gs_rfai=

pro-immigration and said that there are too many jobs in the US we NEED to let in immigrants???

Peter Schiff admits on camera that he has ZERO money investigated in American corporations or industry. If Peter Schiff refuses to invest in American companies, how can Peter Schiff say he is helping Americans keep their jobs?

http://ameriborn.com/shifty/

This is SCHIFF in his own words!


video of Peter Schiff saying that LIBERTARIANS must infiltrate the Republican Party
http://www.youtube.com/watch?v=3ncLTFoTFa8&playnext_from=TL&videos=gKm7t4j9Wgc

http://www.youtube.com/watch?v=3ncLTFoTFa8

http://www.ustream.tv/recorded/1583738

This second link is the full 2 hours. You cant download it directly, I tried, but hey, you can record it! :)


Peter Schiff appears at a Rand Paul/Adam Kokesh/Peter Schiff fundraiser

http://www.youtube.com/watch?v=AYwb_P-ssK0

Rand Paul, Adam Kokesh, Peter Schiff, and others holding a fundraiser at Webster Hall in New York.

http://www.randpaul2010.com/2009/08/rand-paul-at-webster-hall/

http://www.wallstreetstocks.net/rand-paul-adam-kokesh-peter-schiff-fundraiser

http://www.youtube.com/watch?v=AYwb_P-ssK0&feature=player_embedded

http://www.randpaul2010.com
http://www.schiffforsenate.com
http://www.kokeshforcongress.com


Read it for yourself, folks, all three of these candidates are the type of people that this organization supports and even wants to send money to!

http://www.google.com/search?q=schiff+kokesh+site:http://www.stormfront.org&hl=en&lr=&filter=0

The RAND Paul Money Bomb! Help Elect Rand Paul to U.S.

http://www.stormfront.org/forum/showthread.php?t=624677

Stormfront!!!!


Peter Schiff for Senate Video Blog July 14 2009
http://www.youtube.com/watch?v=nlXqlz31SXk


Ron Paul, Adam Kokesh at Freedom Fest in Las Vegas July 2009
http://www.youtube.com/watch?v=D9oiTQD7Cms
Schiff attended this same conference hosted by Ron Paul and is in this video in the early part


Rand Paul amp Adam Kokesh Take Over The Interwebs
http://www.youtube.com/watch?v=PE9gVeykPAU


GOE Site for Adam Kokesh
http://americanpatriotsagainstkokesh.ning.com/


Adam Kokesh for Congress
http://www.kokeshforcongress.com/posts/whisper-campaigns


Ron Paul Supports Adam Kokesh
http://www.campaignforliberty.com/blog.php?view=20098


This Aint Hell..re Oathkeepers..Adam Kokesh.
Note the connection between Oathkeepers & Ron Paul.
http://thisainthell.us/blog/?p=14586


27 posted on 08/12/2011 10:46:26 PM PDT by RaceBannon (Ron Paul is to the Constitution what Fred Phelps is to the Bible.)
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To: Tolsti2
Ultra low rates remove the Fed’s ability to play with the market much.

I guess they don't teach the Plunge Protection Team in College.

28 posted on 08/12/2011 10:53:34 PM PDT by Orange1998 (Obama also inherited AAA credit rating.)
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To: gleeaikin
Too much uncertainly.
29 posted on 08/12/2011 10:55:24 PM PDT by fortheDeclaration (When the wicked beareth rule, the people mourn (Pr.29:2))
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To: Tolsti2

Ask the Professor if he knows anything about the ESF.

http://www.youtube.com/watch?v=2ssrcD5GdPQ&feature=related


30 posted on 08/12/2011 11:04:23 PM PDT by Orange1998 (Obama also inherited AAA credit rating.)
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To: Steelfish

You have it backwards, it isn’t consumer spending that matters in a healthy economy, it is investment.


31 posted on 08/12/2011 11:10:38 PM PDT by fortheDeclaration (When the wicked beareth rule, the people mourn (Pr.29:2))
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To: Steelfish
They are being mislead by the artifical low rates.

When the rates do go up, they will be left having made purchases they cannot afford.

32 posted on 08/12/2011 11:12:02 PM PDT by fortheDeclaration (When the wicked beareth rule, the people mourn (Pr.29:2))
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To: de.rm
&/or are there other skewing factors?

I don't have paid access but John Williams of ShadowStats.com is is supposed to have said the "Retail Sales Gain Was Statistically Meaningless and Largely Reflected Inflation."

Jim Sinclair's Mineset

33 posted on 08/12/2011 11:12:26 PM PDT by Stentor ( "All cults of personality begin as high drama and end as low comedy.")
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To: RaceBannon
Economics cannot make quantitative predictions, it can only tell what the economic laws are and the consequences of certain actions.
34 posted on 08/12/2011 11:17:33 PM PDT by fortheDeclaration (When the wicked beareth rule, the people mourn (Pr.29:2))
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To: gleeaikin
Recent reports are that banks, businesses and private individuals are sitting on mountains of cash that is not being spent. What’s with this?

So businesses are sitting on cash. So what. What do you expect them to do? Give it to you?

Suppose their customers are bankrupt or out of business, what then?

Should they buy more raw materials, make stuff, and sit on finished goods when no one is buying?

Try this: open a bakery in the desert, 100 miles off the road and try to sell apple pies before they rot.

Individuals are paying down debt and now saving and maybe sitting on cash because they may need to survive.

It boggles the mind how many people lack critical thinking skills and common sense.

35 posted on 08/12/2011 11:19:03 PM PDT by Cobra64 (Common sense isn't common anymore.)
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To: fortheDeclaration

Why would firms invest in building homes etc, if prospective buyers cannot get a loan? or in boat construction or light aircraft or autos........? By holding rates at a guaranteed low both firms and consumers have access to cash and this is what makes the private economy grow. Again, all this is subject to external forces that may impact the international economy. Bernanke got this one right. It’s the last ace in the deck of cards.


36 posted on 08/12/2011 11:19:56 PM PDT by Steelfish (ui)
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To: RaceBannon
RE :”SCHIFF himself admits he believes the Iraq War is a QUAGMIRE

NO! Tell me it aint so LOL, Next thing he will be critical of Afghanistan and Libya.

37 posted on 08/12/2011 11:38:13 PM PDT by sickoflibs (If you pay zero Federal income taxes, don't say you are paying your 'fair share')
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To: dajeeps

I think we’re just talking past each other because I am saying almost the same thing Schiff is saying, but in a different way. His basic premise, and that of the Austrian School, is that when the Fed doesn’t let the markets set interest rates, the natural and more efficient allocation of resources cannnot occur.

What I am saying is that we are at least 10 years behind the eight-ball in aggregate supply not only because of Greenspan, but also because of the jacking of the capital reserve ratios in 2001 that lowered the reserve requirements for securities from the GSEs and governments of all levels with a rating of AA or higher to zero. ZERO! And that dramtically lowered the cost of these “investments” compared to those that would have been made in the broader private sector so we can make things and make real money off productive investments, and expand the economic base.

Therefore, in the housing bubble, the final, sought after product was NOT houses, it was the securities behind mortgages that flowed through the GSE clearing houses and gov’t bonds. They were all gravy for the lenders because they needed no reserve for them. What that did was funnel money from pension funds and 401(k)s, etc, and convert it from productive capital into government consumption. And instead of expanding the economic base all those years, all we have is tons of securities and munis that are not worth the paper they are written on. And the opportunity cost to the economy from this is lost supply.

We have been way over stimulated and over consumed. And the traditional view that it’s just “the consumer is out to lunch” is completely wrong. We have huge supply-side issues and the current Fed policy of ultra-low interest rates AND paying interest on reserves is not going to do anything to get us to where we need to be.


38 posted on 08/12/2011 11:43:28 PM PDT by dajeeps
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To: sickoflibs

Yeah?

Wadduh yuh mean?

/S


39 posted on 08/13/2011 12:30:06 AM PDT by Vendome (Don't take life so seriously, you won't live through it anyway)
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To: sickoflibs

Perhaps they are recognizing that the inflationary forces of higher energy/gas and food has decreased margins in many a household budget. With a personal credit bubble of those near or exceeding zero margins, a climbing interest rate would quickly push many into bankruptcy.


40 posted on 08/13/2011 1:49:41 AM PDT by marsh2
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To: Orange1998

I guess they don’t teach the Plunge Protection Team in College.


Ah! The wonderful PPT. We call it the “late afternoon miracle.”

Dumb people and smart people alike can actually watch this “miracle” occur during the final hours of trading on any bad day. It’s a true miracle!


41 posted on 08/13/2011 4:01:29 AM PDT by DH
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To: RaceBannon

I get it. You’re not a Peter Schiff fan.


42 posted on 08/13/2011 5:15:01 AM PDT by VA Voter
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To: gleeaikin

They are not. Much of that “cash” is actually credit they do not want to spend.

And they are wise.

This is a debt-based depression, not an inventory recession.

Too much debt is the core of the problem.

For the cash that businesses are holding on to, they are very wise to do so. The lack of income from high unemployment, low consumer spending, and insane governmental fiscal policy will provide business with a cash buffer that they can use to stay in business and pay workers when income drops.

Costs for businesses are already on the rise. They have absorbed this extra cost (margin compression) to a great degree until now. But now they have no choice but to pass it on to the consumer (inflation), as WalMart has stated recently. Having some savings enables them to do this, and that has helped the economy.


43 posted on 08/13/2011 5:28:07 AM PDT by Ghost of Philip Marlowe (Prepare for survival.)
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To: Stentor
I became interested in Williams when I found out his alternate stats more closely reflected reality than the governments. There is a lot of free information available on his site. In short, the CPI has over time morphed from a cost of living index to a cost of declining standard of living index. Since this is used as a deflator of GDP, the GDP has been overstated, as will any other statistic using the CPI as a deflator. If you would like more specifics I will forward.




44 posted on 08/13/2011 5:30:05 AM PDT by algernonpj (He who pays the piper . . .)
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To: chuckles
Producing something someone wants is the basis for an economy. When one does produce a valued commodity, the person/people that want that commodity will in turn produce (product or service) something for trade. That is an economy!

An entity that produces without consuming, ie saves or hordes the vehicle of trade, is a net plus to an economy (if there is a non manipulated market).

45 posted on 08/13/2011 5:33:03 AM PDT by BillGunn (Bill Gunn for Congress district one rep. Massachusetts)
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To: Steelfish

Those numbers are bogus. And the 400-point surge was no more due to retail sales than the 500-point decline was due to the revision of the unemployment claims ticking last month back over the 400K handle.

“Retail spending” was up because cost was up, not because people are buying more stuff. Also, that increase was covered by increased use of credit cards, which has occurred because increase in pay has not risen to keep pace with rising costs.

This is a very bad sign, because up to this point, people were actually lowering personal debt, which indicates that they are aware of the debt problem. That they are aware of the debt problem and yet have reverted to taking on credit-card debt is an alarming trend, as it indicates that those who were just getting by after having made budgetary adjustments are no longer getting by.

This trend will continue as producers are forced to pass their increased cost along to the consumer, which they had been absorbing (margin compression) for as long as they could.

Also, if you see increased consumer spending (which I suspect we will) be very careful and, before you get too happy, check the rate of mortgage defaults. The recent trend in certain parts of the country where defaults are ahead of the curve, is that consumer spending is increasing. That is because people simply stop paying their mortgages and then find themselves with a couple of extra thousand dollars a month. This is what they’ve been spending. Hardly a good sign of the economy.

And if you want to use the GDP figure, government spending represents 1/3 of GDP. With all the increases in government spending over the past three years, 10-12% of GDP has been completely artificial based upon government spending. Remove that, and you are in depression territory. But it is worse than that, because that money used for spending was borrowed, so we are going to have to pay interest on that spending, and that money will come from the private sector.


46 posted on 08/13/2011 5:49:14 AM PDT by Ghost of Philip Marlowe (Prepare for survival.)
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To: sickoflibs

Thanks for the ping!

Money quote:

Americans borrow, consume, and speculate too much, while we save, produce, and invest too little.


47 posted on 08/13/2011 5:53:01 AM PDT by CPT Clay (Pick up your weapon and follow me.)
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To: sickoflibs

Isn’t it just absurd that they think that lowering the interest rates boosts lending and thereby boosts the economy, when all the lending is going back to the government and not the private sector? Are they that short-sighted and naive?


48 posted on 08/13/2011 5:53:40 AM PDT by WashingtonSource
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To: Steelfish
Consumer spending accounts for 2/3 of GDP

The GDP equation was designed specifically to illustrate Keynesian theory. You'll notice that there is no mention of business-to-business spending; the Keynesians consider production to be secondary to consumption.

In reality, consumer spending is about 1/3 of the economy. Business spending makes up the other third. Now, when business spending declines, GDP can't show it. The GDP merely shows an incomprehensible decline in consumer spending (which is understandable given job losses) which the Keynesians insist must be made up for by government.

But where does this spending come from? It either is drawn out of saved capital or is a result of money-printing. Both are bad for the economy.

Just remember that you can't consume until you've produced something to trade or sell. This is why we're in such a mess. The government continues to try and spur consumption when it should be encouraging production.

Of course, when you're anti-business to begin with, it all makes perfect sense.

49 posted on 08/13/2011 6:10:19 AM PDT by BfloGuy (Inheritance taxes are not taxes; they are expropriation. -- L. Von Mises)
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To: Siena Dreaming
"As soon as business senses that the Gov't is on their side..."

Good luck with that. I think the best we can hope for is gov't staying mostly out of the way and not changing the rules on a seemingly daily basis.

50 posted on 08/13/2011 6:11:26 AM PDT by HangThemHigh (Entropy's not what it used to be.)
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