Link to Scribd

Excerpt from the excerpt:
Government can slow the fall of housing prices, and so our politicians make sure that it does. For example, Obama has used TARP to keep people in their homes�often only delaying foreclosure and thus making homeowners even poorer. Fannie Mae and Freddie Mac ramped up their subsidies, thus keeping demand for homes higher than it would be. The Federal Housing Authority is subsidizing mortgages to the point that people are once again putting down zero percent�this applies upward pressure to home prices,slowing their fall.

But falling housing prices are part of the cure. Inflated prices are part of the disease. It�s as if a doctor saw a patient had an inflated count of white blood cells�the cells that respond to and fight infections�and so he decided to remove the white blood cells.

Along the same lines, government can keep interest rates low, and so it does. But low interest rates contributed to the disease. High interest rates are part of the cure that we need. Again, government makes sure that we never get the cure.

Falling prices and wages are another cure the government won�t let us swallow (more on this in chapter 3). Ask an economics writer today, and �deflationary death spiral� is the biggest threat facing our economy today. This is bogus. In the Depression, falling prices were a rare boon. They were a saving grace for anyone who lost his job and was spending down savings.

Today, Washington does everything it can to prevent falling prices. Mostly, this means (1) Keynesian stimulus to drive up demand for goods and services, and (2) inflating the money supply.

Falling prices would be a cure, and so government pumps up prices.

In other words, the market is trying to cure the economy, and the government won�t let it. The government�s �cure� for the market�s cure is more imaginary wealth.

I like this guy. He agrees with me. mike762 will like him too, and Penguin, I think, will like some of what he has to say about manufacturing. denton probably won't appreciate his failure to be terrified by the prospect of deflation.

Or so I think.

*** You are ignoring this user ***

I've been a Peter Schiff fan for years. I've read two of his books, and was planning on getting this one next. He's an Austrian School economics guy. He was one of the few regular TV guest economics commentators to predict the crash of the housing bubble while it was still booming, along with correctly explaining why it would crash. The hosts and other guests on these shows would regularly laugh him to scorn. When he was proven right (along with Ron Paul), they stopped inviting him on the shows or even acknowledging his existence.

Ya, I agree with Peter to. I've told my wife I would rather have $10,000 with a dollar worth a dollar rather than have a $100,000 with a dollar worth about .05 the price of printing.

Put another way, $10,000 dollars will purchase more goods and services when a dollar is worth a dollar than $100,000 will purchase when the dollar is worth .05 the price of printing.

Schiff's a bit of a hero of mine. He's absolutely resolute, fearless and takes on all comers like a bulldog.

You had me going there for a minute: I thought it meant I was ignoring you! Had to go check through my settings to make sure I wasn't--I make it a point never to ignore anybody. (Not automatically, anyway.)

Too bad his dad Irwin wasn't more successful.

Yep, they have him in prison. Being right when the government is wrong is very dangerous indeed.

How can a dollar be worth any number of dollars other than 1.0000? If it's collectible, maybe--say Elvis wiped his butt with it?

Even the dollar-denominated silver certificates were defaulted on in 1968 and no longer have anything to do with silver.

thanks for posting. I had not heard of him. I will look at his writings going forward.

Reading it now. Good book!

http://www.lewrockwell.com/schiff/schiff-arch.html

You've lost me. Somebody else will have to try this one.

Lemme ask it this way.

If I were to hand you a dollar, how would you tell whether it was worth a dollar or not?

Folks need to start thinking of the dollar priced in gold/silver, rather than gold/silver priced in dollars. Once one does that, all confusion is generally cleared up. Gold and silver are relatively constant in value, while the dollar constantly changes in value (i.e., how much gold and silver it can buy), almost invariably downward.

Okay, I get you now I think. Dollar is only worth a dollar because the government says it's worth a dollar. If the dollar was only legal tender to pay taxes that would give the dollar worth.

Look up the Isle of Mann or New York State before the state ratified the Constitution. Both use paper money as legal tender to pay taxes only. Both have or had in that of NY a viable paper currency that had value.

I realize Barak, under anarchy there would be no money other than gold/silver but the reality is that most people want a paper currency guaranteed by a government. I know that's stupid but its reality.

That's the way it should be but that's to confusing for most people. Economics is one of those arts/science that is way to confusing for 99% of the people. I've seen that up close and personal.

Theoretically a paper fiat currency can work if it's volume is maintained at a constant level, and assuming that government taxes and services must be paid in it, but like many things that are possible in theory, it's not possible in practice, since the folks who administer it will suffer from far too great a temptation to print and print, which is what invariably happens. This is also what happens when banks are permitted to engage in fractional reserve banking, and even reduces the value of real gold and silver when they engage in it. This is no different from counterfeiting. In a society where counterfeiting (including fractional reserve banking) is seriously punished (since it reduces the purchasing power even of everyone's real gold and silver while transferring that lost value into the possession of the counterfeiter), money cannot be printed into existence. Nothing stops banks, however, from issuing good notes backed 100% by real gold and silver in their vaults.

The sheeple have spoken, and what a shockingly articulate response it is .

Thanks for posting this, Barak. I think it's a thought provoking peice... And spot-on to boot!

Actually, in a free society there could be all sorts of different kinds of money. Time was, I would have said gold and silver would invariably wind up as the market leaders, same as they have for thousands of years; but I spent some time recently researching Bitcoin, and now I'm not so sure.

Bitcoin is pretty freakin' amazing. It sounds a little silly when you first hear about it, but the amount of thinking--good, clear, brilliant thinking--that has gone into it is monumental. There are still a few problems with Bitcoin, the way there were still a few problems with the Model A Ford, and I think Bitcoin is a step on the way to something more useful rather than being an ultimate in itself; but it's a big step.

If you haven't checked it out yet, you could do worse than to give it a shot. One of the problems with it, though, is that you really can't understand the genius of it unless you know a bit of cryptography, computer science, and mathematics. A popularized apologetic for it would go a long way.

But I digress.

Gold and silver are terrific at holding their value, but they're not particularly digital: you can't easily send them across a network. In the modern age, this is a severe handicap. Therefore, just as dollars have served as a commodity backing digital currencies such as PayPal, credit card transactions, Dwolla, and so on, I think in a free market gold and silver would be largely relegated to the role of backing commodity.

Different entrepreneurs would come up with different currencies backed by gold or silver (or palladium or platinum or rhodium or whatever) that aimed at different markets.

For example, one currency might be reliably accepted just about everywhere. Another might come with a heavy emphasis on individual privacy. Another might stress security. Another might be especially good at micropayments.

Of course, if you wanted to carry silver coins around in your pocket and pay for meals with them, you could undoubtedly find takers for them (heck, I've done that myself, even under a coercive legal-tender system); but the real volume, I think, will be done in digital currencies.

Yup, I was surprised to learn that New York was a strong Anti-federalist state because it had a viable tax and currency system. Under Federalism New York would lose that advantage. I'm in the ratification precess of New York right now.

I'm going to have read up on the New York monatary system before ratification.

Well I've got stuff to do so I'm out of here.

That's one of the things that's nice about the Austrian School. Austrian economics is much simpler and clearer than any other kind I've ever seen. Under the Austrian analysis, the very same things that are bad for individuals are bad for large groups, and the very same things that are good for individuals are good for large groups. You know from experience what's good and bad for you; therefore it's pretty easy to understand viscerally what's good and bad for the country as a whole and why.

Keynesians, on the other hand, have to explain why it is that for an individual, continuing to spend money when you're deep in debt is disastrous, but for a nation, continuing to spend money--preferably at an increasing rate--when deep in debt is the only hope for salvation.

You have to put together a pretty big pile of BS to be able to hide an explanation like that behind it.

i'm no where near being an economist, but i suspect massive deflation is occurring, what with interest rates being so low.

the fact that food and gas prices are rising is another subject altogether. makes one say hmmmm.

btw placing someone on igore on the internet is a massive waste of precious resources.

I'm would bet that Mike 762 is very knowledgeable with regard to Peter Schiff.

Since he's my broker, I hope that I do.

Interest rates are being set by the Fed's intervention and purchase of 61% of all Treasury issue, and 90% of everything on the long end.

They, meaning Treasury and the Fed, cannot afford any increase in the interest rate, as debt service would soon take up the majority of the budget if rates were to increase by two hundred basis points (2%). They will eventually, but the Fed will fight it every step of the way.

Understand that inflation is nothing more than the increase in the available amounts of currency and credit available. That has been occurring since 2008 on an exponential basis, and the ramp in commodity prices is in fact a corollary of this.

Deflation is the opposite, meaning a decrease in the amount of currency and credit, making the value of both increase.

Also keep in mind that supply and demand play a role in whether goods/services rise or fall in price. The glut of homes on the market has depressed the overall price, and this will not reverse until the over supply has been cleared.

Deflation is only a bad thing if you're in debt, as it makes the debt harder to service. Since our entire currency/credit system is debt based, deflation is feared by those in charge of it, and those who make money from it. This includes banksters and politicians.

My fear on Peter Schiff, is that the FEDs one day will not like all the sense he's talking and do to him, what they did to his dad...

That may happen to ALL of us. Wasn't it the DOJ who described a "domestic terrorist" as one who voted for Ron Paul, served in the military, and owned firearms? I seem to remember that, and I resemble that description.

Now, under the loosened definition of those "affiliated" with terror groups brought to us via the NDAA, it wouldn't surprise me if the two become somehow connected.

Thank God that Kathleen Forrest had ba!!s enough to place an injunction on the NDAA. Hopefully, our so called four "originalist" and one quasi conservative Justices on the SCOTUS will uphold the ruling when it gets there; but if I had to bet on it, given their most recent history IRT the 4th Amendment, I'd say that they will rescind the injunction and let the original wording stand.

But if the rates were to increase, Treasuries would become more attractive, right? They'd be able to just borrow more money to pay the increasing debt service.

I can see a problem with that once the rubes begin to understand that "the Full Faith & Credit of the Government of the United States of America" is not much different from "The Full Faith & Credit of the One-Eyed Homeless Guy in the Alley Behind Lefty's Bar," but folks who have been predicting for years that the rubes will open their eyes Any Day Now haven't been particularly successful so far.

Increase coupon means increased risk, or it's supposed to reflect that, and in a normal market it would. It also makes the bonds previously issued worth less.

Unfortunately, just conjuring up "money" to pay the increased coupon for that perceived risk at some point becomes a vicious upward spiral, and creditors start to demand higher and higher rates to reflect that, until you go Greek, or Spanish, or Italian-or America in the late 70's.

This time though, there's no way that a Paul Volcker can step in and raise rates to a couple of percent over the real rate of inflation and stop the cycle, as the debts are too large.

There comes a point, called the "bang point", when confidence is lost and you get Weimar. It isn't that far off.

So, Mike, your prediction when this will happen is what, this fall? The end of the summer? And, what are the markers we need to watch for just before the crash? When the Fed says it's going to raise the interest rates to "slow things down"?

When Greece goes into civil war? Or Israel attacks Iran? You have always showed you can read the markets and the economy. I tend to trust what you have to say. You fill an important niche at the campfire. kwg

Well, my crystal ball has been cloudy recently, and there are too many moving parts to put an exact "when" anything will occur. Back in '07/early '08 I was ridiculed for saying things were going to He!! in a hand basket, and soon, and lo and behold, in October of '08 we were two days from an implosion of the banking/financial system.

IMO, they should have let it fail and cleared the debts, but they instead threw on the order of $21 Trillion at the "problem", socialized the losses, and allowed the banks to double down on their bets with the sure knowledge that the taxpayer and the Fed will be there to bail them out. By doing so they have made the next downturn literally orders of magnitude worse than it otherwise would be.

When will the next downturn take place, and can the keep the balls in the air until November? I don't know. I do know that every day when I wake up I expect to see a cataclysm in the markets, and am amazed that they have managed to kick the can so far.

There are quite a few triggers out there. Europe is a major one. China is another. They are in a major contraction right now and who knows how that will turn out since their major export market, the Eurozone, is essentially moribund. Then there is the next debt ceiling kabuki show, due in late September or early October just prior to the election, which could result in further downgrades of our debt. You can also add in the recent JPM "trading" loss. That's where I'm placing my money (bet that is). The loss has been reported as $2 Billion initially. Now it's between $4 and 7 Billion, with some estimates that it could be closer to $31 Billion, because of the suspension of their stock buy back program. In the latest round of stress tests, the Fed ruled that if certain loss limits were exceeded that the banks would have to suspend any stock purchases until they had resolved the losses by increasing their reserves. There are rumors that JPM has done this precisely because the loss is so large.

Keep in mind that JPM has THE largest derivative book in the US, on the order of $70 Trillion with a book of 2.8 Trillion. That means that a very small loss can result in insolvency. If that happens, well, let's just say that the fat will be in the fire due to chained counterparty risk. Think 2008 on steroids.

Please Mike...you predicted a far worse outcome than that which actually transpired. The metals have been quite shaky as of late and their downward spiral could very well occur before a stock crash,especially if the Euro continues to slide,further strenghtening the dollar and it's consequent long term stay as the definitive reserve currency.

I can think of no event which will reverse the US dollars course as the dominant world currency.

Think harder.

if all economic power doesn't flow from out of the end of gun barrels, then from whence does it flow??

y'all are talking about economics. since when did economic power and political power diverge from each other for more than a minute??

instead of destroying trees for the land to be converted to other crops, why can't we gather to plant more trees?

Back on the bong again Gus? WTF?

Good read,...although I'll admit,..some of it is over my pay grade.

The basics are easy enough to figure out, however.

http://www.marketoracle.co.uk/Article34819.html

An excerpt:

Back to the ultimate problem. The USTreasury Bond market cannot defy the natural forces from enormous new supply coming to the USTBond market in the form of $1.5 trillion deficits, and keep the bond yield at 0% for the FedFunds and under 2.0% on the TNX. To add strain to the tower, the foreign buyers have removed themselves due to the grand debasement of the USDollar from the program. Too much hidden USDollar output comes behind the curtains. They are disgusted that the US bankers make unilateral decisions on central bank monetary policy, like setting the 0% rate, like monetizing another $1 trillion in USTBonds or USAgency Mortgage Bonds, like consenting to lavish executive bonuses to those responsible for fracturing the global financial ramparts, all done without consulting foreign creditors. Their significant US$-based bond holdings are eroding in value, not earning a yield in compensation for risk. The 0% payout is an insult to creditors, especially during constant QE initiatives. The published CPI measure of 2% to 3% is another insult, when 8% to 10% is the reality.

My translation of that,..

There's no international market for bonds which are based on U.S. dollars when the dollar is being debased and the bonds based on those dollars are paying extremely low interest.

I've learned never to toggle his posts.

I don't have him on ignore, so I see them. Gus may be...strange, at times, but he has yet to devolve into name calling for lack of an argument, like many I do have on ignore are prone to do.

I predicted a far worse outcome because I never expected that the Fed and the Congress would throw $21 Trillion to maintain an obviously failed system. My mistake. They have only made the inevitable collapse worse by orders of magnitude.

Metals shaky? Maybe in your universe, but not in mine. Metals cannot default, and are highly resistant to debasement, both of which are of paramount importance in this day and age of fraud, violation of contract law and crony capitalism. No prosecutions for Lehman? How about Corzine and MF Global? I suppose theft is OK as long as those doing it wear a suit and have political connections.

As to the FRN$ remaining the world's reserve, here are a couple of "think" pieces for your reading pleasure. It's hubris to believe that just because something has been one way for a long time that it always will be. It's also called normalcy bias, and is endemic in today's world. People and countries are moving away from the FRN$ because they can do math, something that our politicians and state economists seemingly cannot fathom. The math doesn't add up when you look at debt and liabilities and our productive capabilities and assets. There will be a reckoning, and it will be harsh. Telling yourself that it will never happen is to live in denial of reality.

http://www.zerohedge.com/news/guest-post-chinese-chaos-immediate-threat-dollar

http://www.zerohedge.com/news/china...cross-rate-system-will-transact-directly

I believe in base metals like brass and lead - my crystal ball is pitiful, but my garden is tended, and for the first time I will be doing a winter crop.

The biggest condemnation of Keynesian School of thoughtlessness is the endorsement of it by Richard Nixon, you know the guy who worked in the wage and price control department during WWII - I believe the reason only Nixon could go to China was because he was a commie - American contemporary thought on the matter nonetheless.

Pretty much. The most leftist Republican president in our history prior to Dubya.

I also have plenty of base metals in finished form , and a large garden. The PM's are for insurance, and for after a monetary system "event" shall we say.

Sure, but the "bang point" is irrelevant as long as the rubes stay on the hook, which they appear to have been doing lately.

I guess one thing that figures into this is whether the Treasury and the Fed really believe that they can get a handle on this thing and turn it around, or whether they realize that there's no saving it and they're just interested in getting out of office before it hits the wall.

If they're honestly but incompetently trying to save it, there's no telling what they might do; but if they're just sucking it dry before leaping off, they'll be pretty predictable.

Trends can be pretty hard to pick out of the data underneath all the deception and noise that governments throw in; but trends are much easier to see than deadlines.

You're looking for a cusp point, and nobody can really know when that might happen, because it's a psychological event, not an economic event. Wile E Coyote has been running in midair between the two cliffs for years now, and as long as he doesn't look down, he could theoretically continue to do so for years more. What will make him look down? It's unknowable. A tick one way or another in a key stock or commodity; a news story on 60 Minutes; a major political scandal; an interview on a talk show.

Just before I went for my first night solo flight, my instructor briefed me about night engine failures outside gliding distance from an airport. He said, "First turn off everything electrical except for the instrument lights, to save your battery for the landing lights. Then look out the window and find the blackest patch of terrain you can see, and set up an approach to it. When you're low enough for the landing lights to be effective, switch them on. If you like what you see, go ahead and land. If you don't like what you see, just turn 'em back off."

The US--and world--economy at this point is low enough to turn on the landing lights. If you're prepared for what's coming, it makes sense to keep tabs on what's happening in the world. If you're not, it's a little silly at this point to start rushing around and trying to prepare. I mean, how much gold are you really going to buy at >$1500/oz? Just relax and enjoy the time you've got left, sez I.

There's no political will for "turning it around". There's only political will for temporary palliatives that will kick the can (debt) down the road for another term of office. Unfortunately for them, and us, the can is getting too large to be kicked anymore. He!!, you couldn't move it with a forklift.

The only way to "turn it around" is to cut .gov spending by 40% right now, and the ensuing economic pain, and by extension, political pain is too great to be contemplated by our so called leaders. It will happen one way or another, it's just a matter of when and how. It would be nice to think that those in power would like to have some modicum of control over the when and how, but after the debt ceiling theatre last year, I have little hope.

IRT the "bang point"; it IS relevant to everyone, as that is the point where the currency/credit becomes rapidly worthless. I hate to imagine what happens in the cities when "the check" won't buy anything, but it won't be pretty.

Here's an interesting article that covers some aspects of the debt, specifically on rollovers and how much different countries have to roll this year alone. It also covers how gold is possibly being readied for official re-monetization.


http://www.safehaven.com/article/25577/sprout-less-gold-tier-1-capital

If by re-monetization is meant simply lifting the legal penalties connected to the use of gold and silver as money, that would be wonderful, but I'm assuming it's merely referring to some sort of gold backed paper currency. The latter will suffer from the same defect that led to the run on the dollar that caused Nixon to close the gold exchange window in 1971, since there's no way, even with gold backing, that they'd stop spending, printing, and borrowing. As you've observed many times, they really cannot stop at this point, or the whole system crashes.

Inflation is just as easy with a gold backed currency as with a pure fiat currency, as Nixon proved. The limit on it with gold backing, however, is that as soon as folks lose confidence, they start cashing in for the real thing (gold), and the Treasury's stockpiles become depleted, so in that sense there is a natural limit on how much printing they can do with a truly gold backed currency before they either have to rein in the printing/spending/borrowing, or abandon it and start up again a pure, debt based, fiat system, as in 1971.

That being the case, any effort to start again, at this point, with a truly gold backed currency would only end in failure as sure as the FRN is failing. That only leaves a true gold standard, i.e., simply lifting the penalties on gold and silver as money (as is, to this day, required by the US Constitution), without backing the FRN, and let the chips fall where they may. But I'm not holding my breath.

I wouldn't call that a gold standard; I'd call it currency freedom. A gold standard is when a government coercively decrees how gold must and must not be used.

I can.
When the "elites" decide. No sooner, no later.

They've made a lot of mistakes and worked thorugh many learning processes but even the slowest on the uptake eventually learns when an apple is ripe to be picked.

folks, all we have available to us is a consensus answer, imho.

once technology gets to the point of mining asteroids, the moon, and other extraterrestrial bodies, we're be to the point of one of two things happening. we've be flooded, and therefore overrun with gold, and/or another more "rare" mineral will be discovered, and the fight will be on.

you goldbugs need to hold on to the gold, for better or worse. the rest of us will work to distribute the annual productivity of the Earth amongst the general citizenry, so that only a minimum starve on an annual basis.

Yes, that's the sense in which I meant it, i.e., not a government imposed standard, but one chosen by the market by merely lifting legal barriers to using gold and silver as money. Essentially, a return to the system of "free coinage." An improvement to that system, however, would be the elimination of the practice of assigning a value to the coins, but rather only a weight and purity.

omg, in due respect, do any of you people really understand what is being proposed?

we've already been there, and done that. you want the masses to go back to what has already failed? i understand your serious position. what i don't and can't understand is how gold, silver, etc.etc. would work in a day to day basis, as we mover futher into the post-modern era.

something is happening for sure. but i doubt gold is the solution.

Here Gus, read this, it might make things more clear. BTW, it doesn't matter if it's post modern or pre modern, money is money and is necessary to facilitate trade. Until we get to mining asteroids for gold making it as common as dirt, it will be held in esteem as a preserver of wealth, simply because it is rare and difficult to come by.

www.zerohedge.com/news/it's-capital-we-guarantee-it

Well, the dadgum link won't work, so just type it in.

I know you don't like a negative comment to be directed at Gus, so long as he refrains from bad language, but what you might not realize is that I've been through this with him several times. In the end, after you've presented him with the facts and arguments, he will pretend that he cannot grasp the concepts and that he was never provided with the facts that refute his arguments, thus nullifying your efforts. But I guess this is one of those things you will have to learn on your own through bitter experience. He's not the sincere seeker of information and understanding that he pretends to be, is my point. He has his own very bizarre agenda. But carry on, because it's good to get you commenting on this stuff for the rest of the folks to potentially learn from.

Roger that.

OK. Now you have me worried. I don't have gold or silver and if the collapse occurs in short order:
As Mike said:
"Then there is the next debt ceiling kabuki show, due in late September or early October just prior to the election, which could result in further downgrades of our debte"

At least I have my house paid for and some seniority at the local Walmart so I should have a job. How do you all think this will affect those of us getting a retirement check. Our retirement program is tied in with the stock market and government securities. Both of which appear to be on shaky ground.

I do have trading fodder to include firearms and ammuntion. Hopefully we will not need them but having them may add comfort to the owners, or future owners.

I agree the way America has been doing business cannot go on. I'm sure some of Europe has similar issues. Maybe it's time to take out that bank loan and buy primers and powder. It's not gold but as close as I can come.
kwg

Buy gold and silver in the dips. Currently, they're both on sale.