Federal Reserve

Marc Faber, Peter Schiff Issue Another Bubble Warning

“I think we are in a gigantic financial asset bubble.”

-Marc Faber on Bloomberg Television’s Street Smart, January 14, 2014

“We have an entire economy that is supported on a foundation of bubbles.”

-Peter Schiff in a MoneyShow Las Vegas presentation, May 12, 2014

These days, the U.S. economic landscape feels a lot like 2007- if you ask me. There’s a tremendous amount of bullish sentiment out there from rising asset prices. Likewise, a number of threats are simmering in the economy and larger financial system- as was the situation seven years ago.

And just like in 2007, “crash prophets” Marc Faber and Peter Schiff are again sounding the alarm on asset bubbles.

Remember- while most other financial types were predicting clear sailing ahead back then for the U.S. economy and housing market, Faber and Schiff correctly-forecast the bursting of the U.S. housing bubble and the financial crisis that reared its ugly head by the autumn of 2008.

Peter Schiff, CEO and Chief Global Strategist of Euro Pacific Capital, wrote the following on his company’s website Wednesday:

The truth is the Fed knows the economy needs zero percent rates to stay afloat, which is why they have yet to pull the trigger. The last serious Fed campaign to raise interest rates led to the bursting of the housing bubble in 2006 and the financial crisis that followed in 2008. This occurred despite the slow and predictable manner in which the rates were raised, by 25 basis points every six weeks for two years (a kind of reverse tapering). At the time, Greenspan knew that the housing market and the economy had become dependent on low interest rates, and he did not want to deliver a shock to fragile markets with an abrupt normalization. But his measured and gradual approach only added more air to the real estate bubble, producing an even greater crisis than what might have occurred had he tightened more quickly.

The Fed is making an even graver mistake now if it thinks the economy can handle a measured reduction in QE. Similar to Greenspan, Bernanke understood that asset prices and the economy had become dependent on QE, and he hoped that by slowly tapering QE the economy and the markets could withstand the transition. But I believe these bets will lose just as big as Greenspan’s. The end of QE will prick the current bubbles in stocks, real estate, and bonds, just as higher rates pricked the housing bubble in 2006. And as was the case with the measured rate hikes, the tapering process will only add to the severity of the inevitable bust

According to “Doctor Doom” Marc Faber, the extent of the bubbles goes even further than what Schiff identified. Appearing on CNBC’s Squawk Box earlier today, the publisher of the monthly investment newsletter The Gloom Boom & Doom Report warned viewers:

Today, the good news is we have a bubble in everything, everywhere- with very few exceptions. And, eventually, there will be a problem when these asset markets begin to perform poorly. The question is- what will be the catalyst? It could be a rise in interest rates not engineered by the Fed, because I think they’ll keep interests rates at zero on the Fed funds rate for a very long time… We could have essentially a break in bond markets at some point. We also could have a strong dollar. A strong dollar has already happened in the last two months signifies that international liquidity is tightening. And when that happens, usually it’s not very good for asset markets.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

Source:

Schiff, Peter. “A New Fed Playbook for the New Normal.” Euro Pacific Capital. 17 Sep. 2014. (http://www.europac.net/commentaries/new_fed_playbook_new_normal). 19 Sep. 2014.

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Peter Schiff: ‘Economy Is Careening Towards Recession Right Now’

Yesterday, “crash prophet” Peter Schiff added a new entry to his YouTube video blog- The Schiff Report. The CEO/Chief Global Strategist of Euro Pacific Capital warned viewers that the U.S. economy is heading towards recession. Schiff- who correctly-called the bursting of the housing bubble in addition to the 2008 economic crisis- began his video blog entry by talking about Federal Reserve Chairman Janet Yellen saying Wednesday interest rates would be kept low for a “considerable time”:

Now, in my mind, what the Fed really means by “considerable” period is indefinitely, or forever. Because I don’t think the Fed can raise interest rates. In fact, I don’t even think they can end QE without precipitating a recession. And I think they’ve already set those balls in motion. And I think the economy is careening towards recession right now. The Fed just hasn’t figured that out yet. But the Fed certainly doesn’t want to help push it over the edge by raising rates. So it has to stall, so it comes up with this “considerable” period…

So how much time is going to transpire between the end of QE, which is scheduled to end now in, I think, six weeks? How much time will transpire between the end of QE and the next crisis, the next recession? See, I don’t think there will be enough time for the Fed to even begin the next set of rate hikes…

So if the economy can barely grow, with all the QE, what’s going to happen when you take it away? And again, all this growth is phony- it’s not real growth. But in order to have the phony growth, you need the QE. You take the QE away, you take the phony economic growth away, and you are right back in recession…

And so, whatever Janet Yellen and the Fed, whatever they’re saying now about how confident they are that they might be able to raise interest rates after some considerable period of time- but we don’t know what that means- it’s all based on their rosy assessment of the economy that isn’t going to materialize. The economy is going to rollover back to recession before the first rate hike ever comes. And so it’s not going to come because now they’re going to have to ramp the QE back up. And maybe at that point the people will figure out the box that we’re in. If they figure out that it’s interest rates at zero forever, and the only question is how much QE can the Fed do but it can never raise rates, then the bottom drops out of the dollar.

Schiff concluded yesterday’s vlog entry by calling the Fed’s bluff:

So again, all this is talk. They’re not going to shrink the balance sheet. They can’t. They’re not going to raise interest rates. Because they can’t. And before it comes, before this considerable time period comes to an end, we’re going to be back in recession or we’re going to be close enough to recession that the Fed feels compelled to take action to stimulate the economy. And how is it going to stimulate the economy? Well, rates are going to still be at zero. The only way to stimulate it is to ramp up the QE that she just tapered back. And how much is she going to have to ramp it up to? I think it’s going to be more than the original $85 billion. Maybe $100 billion, $150 billion per month.


“Yellen Barks on Rates, But Will Not Rise”
YouTube Video

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s note: I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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Peter Schiff Bullish On Foreign Stocks, Gold, And Silver

Euro Pacific Capital CEO/Chief Global Strategist Peter Schiff appeared on the FOX Business show Countdown to the Closing Bell last Wednesday. Host Liz Claman asked Schiff, who correctly-predicted the housing market crash and 2008 economic crisis, about where he was investing these days. He replied:

Well, my strategy has been the same for quite some time because I understand the problems that underlie the U.S. economy, how the Federal Reserve is exacerbating them in the name of trying to solve them, and so I want to invest abroad. We still favor equities, but I look at international equities. I look at value. I look at good dividends. And I want to own companies that are not dependent on the consumer…

A map was subsequently displayed that showed “Peter’s Global Area Picks”- Australia, Chile, China, Denmark, Hong Kong, Mexico, New Zealand, Norway, Peru, Singapore, and Sweden.

Claman also brought up precious metals in the discussion. Particularly, silver. From their exchange:

CLAMAN: Let’s put up the miners, because you feel that the miners now have an opportunity to really rise. Silver below $20 an ounce these days. That seems to me like a good buy because it’s so cheap.
SCHIFF: Well, it did get as high as $50 a couple of years ago. But it started the rally from below $4. So, we’re in a big bull market. We’ve been pausing for the last couple of years. But I think it’s the pause that’s going to refresh. I think what drove the metals market lower in 2013 was the false belief in a U.S. recovery, and the idea the Fed was through with QE, and that we were on the verge of a tightening cycle. None of that is true. We are slipping back into recession. Janet Yellen is going to launch an even bigger round of QE than what Bernanke launched. And this is going to be very bullish for gold and silver. But it’s not going to be bullish for the U.S. economy.


“Safeguarding Your Portfolio By Investing Abroad”
YouTube Video

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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Related Reading: U.S. ‘Preparing A Proposal’ For Bail-Ins

From my other blog- Offshore Safe Deposit Boxes- this morning:

Federal Reserve: U.S. Is ‘Preparing A Proposal’ For Bail-Ins

It looks like the United States is putting together a “bail-in” program for its “systemically important banks.” Mark O’Byrne, Executive Director of international bullion dealers GoldCore, wrote on the company’s Gold Blog on August 12:

Speaking about the steps that have been taken internationally in order to “strengthen the financial system” and to reduce the “probability of future financial crisis,” [Federal Reserve Vice Chairman Stanley] Fischer said that the U.S. was preparing proposals for bank bail-ins for “systemically important banks.”

“Additional steps have been taken in some countries. For example, in the United States, capital ratios and liquidity buffers at the largest banks are up considerably, and their reliance on short-term wholesale funding has declined considerably. Work on the use of the resolution mechanisms set out in the Dodd-Frank Act, based on the principle of a single point of entry–though less advanced than the work on capital and liquidity ratios–holds the promise of making it possible to resolve banks in difficulty at no direct cost to the taxpayer.

As part of this approach, the United States is preparing a proposal to require systemically important banks to issue bail-inable long-term debt that will enable insolvent banks to recapitalize themselves in resolution without calling on government funding–this cushion is known as a “gone concern” buffer.

(Editor’s note: Bold added for emphasis)

At least someone at the Fed now recognizes the “probability of future financial crisis.”

You can read the entire post on that other blog here.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Thursday, August 14th, 2014 Banking, Essential Reading, Federal Reserve No Comments

Jim Rickards Suspects China Behind Gold Price Manipulation As It Buys Metal To Hedge Against Dollar Devaluation

Euro Pacific Capital CEO and Global Strategist Peter Schiff just got done interviewing Jim Rickards, an American lawyer, economist, investment banker, and best-selling author. Rickards, who released The Death of Money: The Coming Collapse of the International Monetary System, this spring, spoke with Schiff about the global gold markets. What he had to say about China and its steady accumulation of physical gold (reserves now totaling close to 4,000 tons, Rickards speculates) was extremely interesting. Some might say shocking. From the exchange:

Now there’s been a lot of speculation the reason they’re doing this is they want to launch a gold-backed yuan currency to defeat the dollar. That’s not going to happen. That’s not even close. The reason is that the yuan’s not ready to be a reserve currency because they don’t have investable assets. There’s no rule of law. There’s no mature bond market in China. But what they are doing, is creating a very simple hedge position… So you’ve got $4 trillion of paper reserves, most of them U.S. dollars. You can’t dump them. If you’re going to try and sell a fraction… the Treasury market’s big- it’s not that big. If they try and do something more aggressive, the President of the United States can actually stop them just by freezing their accounts. So what you do is buy up a pile of gold. So now, the Chinese want a stable dollar. They would love a stable dollar. But if the U.S. tries to devalue the dollar, tries to cheapen the dollar through inflation- remember, every 10 percent of dollar inflation is a $300 billion wealth transfer from China to the United States. So if you cheapen the dollar with inflation, they lose money on the paper, but they make money on the gold. So they’re building a hedge position. They’re not done yet.

I’ve heard it claimed before that China is accumulating gold to back the renminbi. But Rickards says this isn’t the case. Even more eye-opening than the dollar hedge theory was something he said later on in the interview:

The gold manipulation, by the way, is so blatant at this point, if I were the manipulator I’d be embarrassed… The question is, who’s doing it? And people like to point a finger at the Fed and maybe through the BIS- they have a hand in it. But my number one suspect is China for the reason you mentioned, Peter. If you’re out to buy 3,000 tons, you don’t want the price to be high yet. Maybe later you do. But for now you want the price to be low.


“Interview: Jim Rickards & Peter Schiff Discuss Global Gold Markets [Full Discussion]”
YouTube Video

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Peter Schiff On Direction Of Interest Rates, Housing, And Gold

Last Friday, “crash prophet” Peter Schiff added a new entry to his YouTube video blog- The Schiff Report. The CEO/Chief Global Strategist of Euro Pacific Capital warned viewers that the Federal Reserve is bluffing about raising interest rates. Schiff- who correctly-called the bursting of the housing bubble in addition to the 2008 economic crisis- also touched on the direction of the residential real estate market and gold. On interest rates and housing, he pointed out:

The risk is that the Fed doesn’t tighten at all, which is exactly what’s going to happen, because they can’t tighten. If the Fed actually tightens, the recovery is over. The recovery that is supposedly giving them the confidence to raise rates- it can’t exist if they raise rates. In fact, if the Fed could raise rates, they would have already raised them. I mean, it’s been over five years. They’re still at zero. And they’re saying rate hikes are a year way maybe. Why? If the economy is recovering, why can’t the Fed raise rates? Because if the Fed raised rates, we’d be right back in recession. Because it’s a phony recovery. That’s what people have to understand. It’s not real. It’s only here as long as the Fed can artificially sustain it, which she might. The minute they raise interest rates, that party’s over. The stock market’s going down. The real estate market’s going down.

And by the way, we had a plethora of negative numbers all week for the housing market. You could put a fork in this phony housing recovery, because it’s done. The market is going down. Housing prices are heading back down. Housing activity is slowing. I think a lot of layoffs are coming in construction because this market’s grinding to a halt…

The Fed is bluffing. This is all bark and no bite. It is impossible for the Fed to raise interest rates. If they could do it, they would have already done it. If they raise interest rates now, they destroy the very recovery that the low interest rates created. The problem is, if it isn’t a real recovery, it’s phony. If it was real, it wouldn’t need the Fed to support it. The only reason it does need the Fed’s support is because it’s imaginary. It’s phony. Because the actual economy is getting worse.

What the Fed is doing to goose the stock market, and the real estate market, to create this phony wealth effect, is undermining legitimate wealth creation. All the money we’re borrowing to spend is interfering with legitimate, genuine economic growth. And we’re just digging ourselves into a bigger and bigger hole…

The problem is, we’re going to have the next recession, and the Fed’s still going to be at zero. They’re still going to have this bloated balance sheet. And again, it’s not that the Fed is never going to raise rates. They’re just not going to do it voluntarily. They’re not going to do it as a decision. They’re not going to do it until they have to. And it’s not going to be a strong economy that’s going to force them to raise rates. Because I don’t care how strong the economic data is- they ain’t going to raise rates. And it doesn’t matter how bad the inflation data is- they’re still not going to raise rates. They’re not going to raise rates until the dollar collapses. Until foreigners no longer want to hold the dollar, because they understand the predicament that the Fed is in. They understand that it is QE forever. That it is all just talk. There is no exit strategy. There never was. Because exit is too painful. This is the end game of QE. This is the all in. This is the overdose.

On gold, Schiff predicted:

Janet Yellen is not going to wage war against inflation. She has already surrendered to inflation. It’s just that a lot of people haven’t figured that out yet. So, because people think that Janet Yellen might raise interest rates sooner rather than later because of inflation, they sold gold. If they knew the truth, that Janet Yellen isn’t going to care about the inflation, that’s she’s just going to let it get worse because she is too afraid to challenge inflation for fear of what it will do to the economy, to the stock market, to the housing market, the job market. So she is going to allow inflation to not only continue, but accelerate. And that is what’s good for gold.


“Ending QE is Bad, Not Ending it is Worse”
YouTube Video

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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Jim Rogers On Coming Fed Moves, Investing Opportunities

I just got finished reading an interview of well-known investor, author, and financial commentator Jim Rogers by The Economic Times (India) a short time ago. Published yesterday, the former investing partner of George Soros shares his thoughts on a number of topics, including:

• Investing opportunities during wartime (commodities, including crude oil, gold)
• Federal Reserve coming moves (continued tightening, then full-reverse)
• Crude oil price movement (higher and in a holding pattern)
• Gold price movement (suspected buying opportunity in next year or two)
• Other investment opportunities (industrial metals, natural gas)

Lots of good insights dragged out of Mr. Rogers by the Times crew, which you can read all about on their website here.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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Jeremy Grantham: ‘Severe Market Decline Is Not Imminent’

I just got finished reading the latest quarterly letter from British-born investment strategist Jeremy Grantham. As usual, the founder and former chairman of Grantham, Mayo, Van Otterloo & Co. (GMO)- which oversees $118 billion in client assets- penned a good one. Note what Grantham- who individual clients have included current Secretary of State John Kerry and former Vice President Dick Cheney- had to say about claims that stocks are in a bubble and/or on the verge of a major correction. From “Summer Essays”:

My recent forecast of a fully-fledged bubble, our definition of which requires at least 2250 on the S&P, remains in effect.

At the end of the trading day Monday, the S&P 500 stood at 1,939- 311 points below “bubble level.”

Grantham argued:

The economy, despite its being in year six of an economic recovery, still looks in many ways like quite a young economy…

Perhaps the single best reason to suspect that a severe market decline is not imminent is the early-cycle look that the economy has.

Still, Grantham- who became widely known for his April 2007 declaration about the first worldwide bubble in history occurring which covered all asset classes- doesn’t discount another bubble being formed. From his section entitled “Post Script”:

In early July, Janet Yellen made an admirably clear statement that she is sticking faithfully to the Greenspan- Bernanke policy of extreme moral hazard. She will not use interest rates to head off or curtail any asset bubbles encouraged by the extremely low rates that might appear. And history is clear: very low rates absolutely will encourage extreme speculation. But Yellen will, as Greenspan and Bernanke before her, attempt to limit only the damage any breaking bubbles might cause. Well, it is a clear policy and in my opinion clearly wrong. I had thought that central bankers by now, after so much unnecessary pain, might have begun to compromise on this matter, but no such luck, at least in the case of the Fed. The evidence against this policy after two of the handful of the most painful burst bubbles in history is impressive. But not nearly as impressive as the unwillingness of academics to back off from closely held theories in the face of mere evidence. This affirmation of moral hazard – we will not move to stop bubbles, dear investors, but will help you out when things go badly wrong – should be of great encouragement to speculators and improve the odds of having a fully-fledged equity bubble before this current episode ends.

(Editor’s note: Bold added for emphasis)

You can read the entire quarterly letter (.pdf file) on the GMO website here.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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Peter Schiff: ‘We Have An Entire Economy That Is Supported On A Foundation Of Bubbles’

Tonight I watched Peter Schiff’s presentation at the MoneyShow Las Vegas back on May 12, 2014. The CEO and Chief Global Strategist of Euro Pacific Capital shared his current assessment of the U.S. financial landscape in “Too Big to Bail: Why the Next Financial Crisis Will Be Worse Than the Last”- as well as where he thinks we’re heading. Schiff warned attendees:

There is no economic recovery in the United States at all. There is no evidence of an economic recovery. The U.S. economy is in far worse shape than it was on the eve of the 2008 financial crisis. We have never been in as worse shape as we are right now. But they say, “Whoa! But the stock market went up.” Yeah, of course the stock market went up. You print enough money, you can make the stock market go up. Yes, the Federal Reserve succeeded in reflating the stock market bubble. But that’s all that it did. That isn’t evidence of a strong economy. Stock prices went up from 2002 to 2007. Does that mean we had a sound economy? No. We were on the verge of a complete implosion. The main difference though between the stock market bubble that we have today and the one that blew up, let’s say, in 2000, is that fewer individuals are participating. This is the bubble for the 1 percent. This is for the hedge funds, the private equity guys… The overwhelming concentration of buyers are very wealthy people. The average American is not participating in the stock market to the extent that he was in the 1990s. And so the Fed is not getting the boost to consumption that you would normally have from the wealth effect because a lot of people aren’t feeling the effects of the wealth because they don’t own stocks.

The same thing is happening in the real estate bubble, which the Fed has managed to reflate. The difference again between the real estate bubble we have now and the real estate bubble that popped in 2007 is again- the average American isn’t participating. Home ownership rates are at 19-year lows. You have hedge funds and private equity companies that are buying up real estate. Last month, I think 43 percent of all the properties purchased in America were purchased for cash. These are not typical Americans buying houses to live in. These are investors buying houses to flip, buying houses to rent out. This is not a healthy market. It is an extremely speculative real estate market thanks to the Federal Reserve.

So the Federal Reserve has managed to reflate two bubbles simultaneously.

And of course, the biggest bubble of them all is the bubble in the bond market.

So we have an entire economy that is supported on a foundation of bubbles…


“Peter Schiff at Las Vegas Moneyshow 2014”
YouTube Video

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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Peter Schiff Warns Of Coming Inflation, Accompanying Propaganda

“Crash prophet” Peter Schiff sees inflation getting worse in America. And with it, Washington, the Fed, and the mainstream media spinning rising prices as something that’s beneficial for the general public. The Euro Pacific Capital CEO and Chief Global Strategist added a new entry Tuesday on his YouTube video blog The Schiff Report, and warned viewers of the following:

It’s going to get worse. And, what is the Fed going to do about it? Because the problem is, no matter how high that inflation number gets, they can never admit it’s a problem. Because if they admit that it’s a problem, they’ve got to do something about it. But they can’t do anything about it. Because if they want to fight inflation, what tools do they have? Just one. They’ve got to raise interest rates, which means they’ve got to end quantitative easing. And in order to raise interest rates, they’ve got to start selling their bonds and their mortgages back into the market. That will collapse the real estate market, collapse the stock market, send the economy into a sharp recession, and bring about a financial crisis worse than 2008. So because they can’t do that, they can’t do anything. So they’re going to have to tolerate inflation, no matter how high it gets. They’re going to have to convince us that it’s good for us, no matter how high it gets. They’re going to say, “Oh, well, maybe it’s transitory,” “It’s because of the weather,” “Oh, you know, we had such low inflation for so long, we need a few years of higher inflation to even it all out.” Who knows what kind of excuses Janet Yellen is going to come up with to rationalize why whatever the inflation number is- no matter how high it is- it’s always going to be a good thing?

But I wonder if the media- if the guys at Bloomberg or the guys at The New York Times or the AP or the Financial Times- will ever see through this charade. Will they ever see through this smokescreen and come out and call the Fed out on this? Will they ever say, “You know what, we’ve got too much inflation- this is not good. Do something about it.” And when the Fed doesn’t do something about it, that’s going to be a big problem for the dollar. Because that’s when people realize that this is QE Infinity, that inflation is never going to stop, that the dollar’s value is going to erode away in perpetuity. That’s when the bottom drops out of the market. That’s when the real crisis comes in. Because now the dollar really starts to cave, and puts more pressure on the bond market. That means the Fed has to print a lot more money. A lot more dollars that nobody wants to buy the Treasuries that nobody wants to keep the market from collapsing. That accelerates the inflationary spiral, and puts the Fed in a real box. Because then, it just can’t print the dollar into oblivion. It can’t turn it into monopoly money. Then it has to slam on the breaks. Then it has to really jack up interest rates. Not just a few hundred basis points- ten percent, fifteen percent, twenty percent. Paul Volcker style. Of course, the medicine won’t go down nearly as smoothly as it did back then. Not that it was so great tasting- we had a pretty bad recession in 1980. But that’s nothing compared to what we’re going to go through, because we have a lot more debt now than we had then- it’s not even close. We don’t have the viable economy. We don’t have the trade surpluses or the current accounts surpluses. And we don’t have a federal government that has a long-term financing on the national debt. It’s all financed with T-bills. And we have all these adjustable rate mortgages. We have all these corporations, individuals that are so levered-up. We’ve got all these student loans and credit card debt. We have all this stuff that we didn’t have back in the 1980s that we’re going to have to deal with- thanks to the Fed.


“Media Reports Rising Food Prices as Positive News”
YouTube Video

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Marc Faber: ‘Next Step’ Is For Stocks, Bonds To ‘Go Down At The Same Time’

Swiss-born investment advisor/fund manager Marc Faber, who became famous for advising clients to get out of the U.S. stock market one week before the October 1987 crash and for predicting the 2008 global financial crisis, was on the phone with CNBC’s Squawk Box yesterday morning. Dr. Faber warned viewers:

I don’t think that the economy is recovering at all. We have in emerging economies a slowdown, export growth is non-existent, and now- and I have been writing about this now for the last two years- we have geopolitical problems A, in Ukraine and B, in East China Sea…

(Editor’s note: Bold added for emphasis)

The publisher of the monthly investment newsletter The Gloom Boom & Doom Report added this about stocks and bonds:

Since the beginning of the year, the stock market has basically done nothing… but long-term bonds are up 12 percent in terms of total return. Now I believe the next step will be that both stocks and bonds will go down at the same time

(Editor’s note: Bold added for emphasis)


“Dr. Doom’s big bear parade”
CNBC Video

So what does “Doctor Doom” recommend then?:

I don’t see any assets that are terribly attractive. Now, the most under-appreciated asset is cash. Nobody likes cash. Now, on cash, for the next 10 years you will earn precisely zero. In fact, you will lose money, because Mrs. Yellen- she’s a money printer like all the others- and she will make sure that the dollar continues to depreciate in real terms. For the next 6 months, maybe cash is the most attractive… For the next 6 months, opportunities will come along all the time

(Editor’s note: Bold added for emphasis)


“Faber: Cash most underappreciated asset”
CNBC Video

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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31 Percent Of Chicago-Area Homeowners With Mortgages ‘Seriously Underwater’

Memorial Day Weekend 2007. I had just launched my first blog, Boom2Bust.com, “The Most Hated Blog On Wall Street,” from my apartment on Chicago’s Northwest Side. I remember thinking to myself, “Well, I don’t want to just focus on turmoil in the financial markets as part of a coming financial crash. I also need to talk about the housing bubble and when that monstrosity bursts as well.”

All of it happened (except Washington and the Fed managed to postpone the crash I was- and have been- warning about, leaving us with the “Panic of ’08” and the Great Recession instead), providing me tons of material to blog about over the last seven years.

Now, my girlfriend and I were lucky enought to spot and sit out the housing bubble, eventually picking up a place last year for $117,000 less than it was at the height of the madness (according to one valuation). Regrettably, a number of friends and acquaintances in the Chicagoland area bought homes during the market’s craziest years, when price levels were incredibly high (in my neighborhood, some barely inhabitable “shacks” were on the market for half-a-million dollars back then). I really hope they aren’t “underwater”- owing more on their mortgages than their properties are worth- but I suspect a number of them are. Mary Ellen Podmolik reported on the Chicago Tribune website this morning:

Despite improving home prices, 31 percent of Chicago-area homeowners with a mortgage were seriously underwater in March, owing at least 25 percent more on their home loans than the property’s value, a new report shows…

(Editor’s note: Bold added for emphasis)

31 percent? That’s bad news for the Chicagoland residential real estate market. The last time I talked about the “underwater people” on this blog was last fall, when I blogged:

This past Sunday, I spotted the following about underwater mortgages in my Chicago Tribune. Mary Ellen Podmolik wrote:

A lack of inventory is frustrating potential Chicago-area homebuyers, and a report last week from Zillow explains why some homeowners might like to sell their properties but can’t. Despite improving home values, 35.4 percent of Chicago-area homeowners with a mortgage were underwater at the end of June, meaning they owed more on their loan than the home was worth, Zillow said. That means those homeowners would have to sell their properties through a bank-approved short sale.

(Editor’s note: Bold added for emphasis)

So will that 31 percent “seriously underwater” rate improve anytime soon? Here’s hoping. But considering the economic headwinds still working against housing- I’m not going to hold my breath (no pun intended).

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Podmolik, Mary Ellen. “Almost 1/3 of Chicago-area homeowners still significantly underwater.” Chicago Tribune. 18 Apr. 2014. (http://www.chicagotribune.com/business/breaking/chi-homeowners-underwater-20140417,0,7135589.story). 18 Apr. 2014.

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Peter Schiff Predicts Gold Going Higher Than $5,000 An Ounce

Peter Schiff, the CEO and Chief Strategist over at Euro Pacific Capital, appeared on the CNBC TV show Futures Now on April 15. Schiff, who correctly-called the U.S. housing bust and Great Recession, told viewers:

I’ve been buying gold for the same reason for the last decade, and it’s because central banks are creating too much money, there’s too much inflation, interest rates are too low, and so I want to store my purchasing power in something that central banks can’t print. Meanwhile, during that time period, gold has gone from under $300 an ounce to a high of $1,900. We’ve pulled back. I think we are headed much, much higher, because they are not going to stop these presses. They are going to run them in overdrive…

I don’t know the time period. They’re just going to trend higher. They’re going to go a lot higher. I’ve said $5,000. They’ll go higher than that.


“I’m Off Base, You’re Not Even in the Ballpark!”
YouTube Video

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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Peter Schiff Predicts Future Fed Moves

Peter Schiff of Euro Pacific Capital released a new entry Monday on The Schiff Report YouTube vlog. The “crash prophet” talked about a number of financial topics, including future activity by the U.S. central bank. Schiff predicted:

I think that with the weakening in the stock market, the softness we’re seeing now in the real estate market- with the fact that we’re going to be getting weaker jobs numbers in the spring that cannot be rationalized away based on the weather- the Fed is going to have come forward at some point and acknowledge which should have already been obvious. That they were mistaken. They were overly-optimistic on their assessment of the economy. That for whatever reason they’ll come up with an excuse to save face- they can blame it on some external factor- but the Fed is going to have to come out and they’re going to have to halt the tapering process, and ultimately reverse it.

How much time there will be between the pause and the reversal?

I don’t know. I don’t think it will be more than a couple of meetings, at best. But that’s what’s coming….

Schiff, who correctly-called the U.S. housing bubble and subsequent burst along with the 2008 global economic crisis, went on to speculate what all this might mean for gold and stocks.


“Warmer Weather’s Failure to Stoke Jobs Chills Stocks”
YouTube Video

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

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Peter Schiff: No Recovery, Just An Illusion Of Prosperity

I first started paying attention to Euro Pacific Capital’s Peter Schiff just prior to picking up his book Crash Proof: How to Profit From the Coming Economic Collapse (now Crash Proof 2.0, second edition) shortly after its early 2007 release. While some of the calls he made in that controversial text are still playing out, others have already come to fruition.

Subsequently, Schiff has been given credit for correctly-calling the U.S. housing bubble and its burst, and the 2008 global economic crisis.

Being one of Survival And Prosperity’s “crash prophets,” his latest investment recommendations are chronicled on this blog. As are his economic analyses and forecasts as well.

Here’s a recent breakdown of what Schiff sees going on with the U.S. economy and larger financial system, courtesy of a March 21 commentary entitled “Debt and Taxes” that’s posted on his Euro Pacific Capital website:

The last few years have proven that there is no line Washington will not cross in order to keep bubbles from popping. Just 10 years ago many of the analysts now crowing about the perfect conditions would have been appalled by policies that have been implemented to create them. The Fed has held interest rates at zero for five consecutive years, it has purchased trillions of dollars of Treasury and mortgage-backed securities, and the Federal government has stimulated the economy through four consecutive trillion-dollar annual deficits. While these moves may once have been looked on as something shocking…now anything goes.

But the new monetary morality has nothing to do with virtue, and everything to do with necessity. It is no accident that the concept of “inflation” has experienced a dramatic makeover during the past few years. Traditionally, mainstream discussion treated inflation as a pestilence best vanquished by a strong economy and prudent bankers. Now it is widely seen as a pre-condition to economic health. Economists are making this bizarre argument not because it makes any sense, but because they have no other choice.

America is trying to borrow its way out of recession. We are creating debt now in order to push up prices and create the illusion of prosperity. To do this you must convince people that inflation is a good thing…even while they instinctively prefer low prices to high. But rising asset prices do little to help the underlying economy. That is why we have been stuck in what some economists are calling a “jobless recovery.” The real reason it’s jobless is because it’s not a real recovery! So while the current booms in stocks and condominiums have been gifts to financial speculators and the corporate elite, average Americans can only watch from the sidewalks as the parade passes them by. That’s why sales of Mercedes and Maseratis are setting record highs while Fords and Chevrolets sit on showroom floors. Rising prices to do not create jobs, increase savings or expand production. Instead all we get is debt, which at some point in the future must be repaid

(Editor’s note: Bold added for emphasis)

“Which at some point in the future must be repaid”

Good luck trying to get your average American in 2014 to wrap their head around that crucial concept.

Once again, I agree with Schiff’s observation of what is going on all around us.

“Illusion of prosperity” is a fine choice of words here, and makes sense that I find a fine economic blog by the same name good reading.

As certain as the “Big One” will eventually hit California, so must our nation’s “financial reckoning day” arrive for all this debt we’ve accrued for some short-term “prosperity.”

You can read Schiff’s entire commentary on the Euro Pacific Capital website here.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Christopher E. Hill, Editor
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