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Best Quotes of February 2006
John Rubino
Texas Congressman Ron Paul
"Since printing paper money is nothing short of counterfeiting, the
issuer of the international currency must always be the country with
the military might to guarantee control over the system. This
magnificent scheme seems the perfect system for obtaining perpetual
wealth for the country that issues the de facto world currency. The
one problem, however, is that such a system destroys the character
of the counterfeiting nation's people--just as was the case when
gold was the currency and it was obtained by conquering other
nations. And this destroys the incentive to save and produce, while
encouraging debt and runaway welfare.
The
artificial demand for our dollar, along with our military might,
places us in the unique position to 'rule' the world without
productive work or savings, and without limits on consumer spending
or deficits. The problem is, it can't last.
Price
inflation is raising its ugly head, and the NASDAQ bubble--
generated by easy money-- has burst. The housing bubble likewise
created is deflating. Gold prices have doubled, and federal spending
is out of sight with zero political will to rein it in. The trade
deficit last year was over $728 billion. A $2 trillion war is
raging, and plans are being laid to expand the war into Iran and
possibly Syria. The only restraining force will be the world's
rejection of the dollar. It's bound to come and create conditions
worse than 1979-1980, which required 21% interest rates to correct."
Stephen
Roach, Morgan Stanley
"Suffering from the greatest domestic saving shortfall in modern
history, the US is increasingly dependent on surplus foreign saving
to fill the void. The net national saving rate -- the combined
saving of individuals, businesses, and the government sector after
adjusting for depreciation -- fell into negative territory to the
tune of -1.3% of national income in late 2005. That means America
doesn't save enough even to cover the replacement of its worn-out
capital stock. This is a first for the US in the modern post-World
War II era -- and I believe a first for any hegemonic power over a
much longer sweep of world history."
Richard
Daughty, the Mogambo Guru
But, for some perverse reason that future historians will make whole
careers arguing about, the moronic people of America think all of
these price inflations are good! Hahaha! A nation of morons! I sort
of remember a quote by Benjamin Franklin, who was asked, when they
finished work on the Constitution, 'And what kind of government do
we have?' and he replied 'A democracy, if you can keep it.'
What he
surely meant by that enigmatic phrase was if you let people decide
tax policy, the numerous have-not people will always vote to give
themselves somebody else's money. A democratic, majority-rule
government always elects to provide a 'free lunch' for everybody!
Whee! Thus, democracy will ultimately destroy the economy. That is
why the Founding Fathers wrote into the Constitution that money
shall only be of silver and gold, which is the only thing that would
possibly prevent it."
Ben
Bernanke, Federal Reserve Board Chairman
"In the past, when the inverted yield curve presaged a slowdown in
the economy, it was usually in a situation where both long-term and
short-term interest rates were actually quite high in real terms,
suggesting a good bit of drag on the economy. With the real interest
rate not creating a drag on economic activity, I don't anticipate
that the term structure signals an oncoming slowing of the economy."
Peter
Schiff, Euro Pacific Capital
"The only way for housing prices to stay high is for the Fed to keep
inflating. Conveniently, the captain currently at the helm of the
monetary ship of state just happens to be Ben Bernanke, who as a Fed
governor spoke about the Fed's ability to fend of deflation by using
the handy invention of the printing press. Though his words may have
may have spoken in reference to consumer prices, his actions will
certainly be concentrated on asset prices, especially housing. Like
a lounge club magician, the Feb distracts the audience with
short-term rate hikes, while behind its back it monetizes long-term
government bonds. It creates the illusion of its being an inflation
fighter, while in reality it is an inflation creator. No wonder it
wants to further cover its tracks by no longer reporting M3!"
James
Turk, GoldMoney
"We moving closer to that moment in time when silver breaks down
from its current pennant formation, which is the first step needed
for the precious metals to resume their uptrend in this ongoing bull
market. If this first step happens, then I expect everything to fall
into place. A breakout from the rising trend channel will not be far
behind, and by then, the precious metals will be near or at new high
prices - with silver leading the way."
Bill
Fleckenstein, Fleckenstein Capital
"But let me just ask you this: If you feared for the value of this
piece of paper called the dollar and you put it into a hard asset,
does that de facto constitute a bubble? Of course not. That
constitutes a bull market. To be a bubble, in my opinion, behavior
in and around the asset class under discussion has to spin so out of
control as to distort the underlying economy. I don't believe the
commodity markets are anywhere near that point. Maybe they'll reach
it somewhere down the road, though I kind of doubt that. In the
meantime, I anticipate a bullish chain of events for the metals:
When the 'right' data emerge to support the fact that the economy is
weaker than it appears, I believe the Fed will make clear that it's
closer to pausing than people think. (Bernanke himself told Congress
last Wednesday that whatever the Fed does will be 'dependent on the
data.') If that turns out to be the case, I think there will an
explosion in the precious metals and currencies, an outcome that I
intend to capture."
Ted
Butler, Investment Rarities
"This proposed silver ETF, as well as any ETF on any commodity, is
as dumb as a bag of rocks. Sure, it will make the price explode, and
precisely for that aspect virtually all silver investors, including
me, look upon it favorably. Suddenly take away a big chunk of any
commodity's supply and there will be a big impact on price. That's
elementary. But there is more to the story than that.
My main
objection with commodity ETFs is that, in addition to artificially
altering supply and demand, they turn legitimate commodity law and
regulation on its head. The main thrust of commodity law is to
prevent concentrated speculative buying and selling from
artificially influencing prices. This primary premise and intent of
commodity law is obliterated by the concentrated buying (and selling
someday) that a commodity ETF insures. It's as if someone sat down
and devised an idea that would upend all the safeguards and
regulations against manipulation that have taken many decades to
develop.
Over
twenty-five years ago, the weight of commodity law came to bear on
the Hunt Brothers in the most famous manipulation of them all, the
great silver manipulation. The basis of the manipulation was the
related and concentrated buying and resultant price pressure brought
on the price of silver. The proposed Barclays silver ETF promises to
legitimize the very acts which the US Government succeeded in
prosecuting. Talk about irony."
Doug
Noland, PrudentBear
"A solid case can be made that 14 rate increases have failed to
tighten monetary conditions. Despite the inverted yield curve,
Credit conditions are generally as loose as ever and, as one would
expect, imbalances balloon only larger. Of course, the bond bulls
will contend that we are merely waiting patiently for the
traditional monetary policy lag to run its course. I suggest there's
much more to it than that.
It is worth
noting that broad money supply has rapidly approached $10.3
Trillion. It is also worth pondering that M3 has inflated almost 40%
since Fed funds were last at 4.50% (May 2001). At a 5% rate, M3
savers will receive more than $500 billion of interest-income, a
huge increase from only a couple years back when rates were 1% and
M3 was significantly smaller. There is scant attention paid to this
source of augmented income, with analysts instead focusing on the
restraining effect of adjustable-rate mortgage resets. But with the
ongoing proliferation and easy-availability of mortgage products
with low initial payments (teaser-rate ARMs, negative amortization
and option-ARMs, and balloon structures), I would be surprised if
the household sector in aggregate experiences a significant increase
in monthly mortgage payments this year."
Steven
Saville, Speculative Investor
"We would be extremely surprised if the uninterrupted inflation of
the past 70 years were followed by a period of genuine deflation (a
prolonged decline in the total supply of money and credit). One of
the reasons this would surprise us is that there IS so much debt in
the system. The high debt levels actually make deflation LESS
likely, not more likely, because the current monetary system -- the
world's greatest-ever Ponzi scheme -- could not survive a bout of
genuine deflation. That is, deflation will never be a viable policy
option regardless of how bad things get. Instead, the central banks
of the world will likely risk destroying their currencies and
obliterating the values of their bonds before they will permit
deflation to occur."
Tom Au,
TheStreet.com
"Another commentator opined that the U.S. government is probably
underestimating inflation because it is focusing on the wrong type
of inflation. I would agree with that, having identified no less
than five different types of inflation: commodity inflation, wage
inflation, monetary inflation, fiscal inflation, and foreign
exchange inflation. Before discussing 'inflation,' it helps to
identify which form of inflation is being talked about."
March 1,
2006
John Rubino
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