Tag Archives: inflation

The Fed’s Nightmare Scenario

Peter Schiff

Operating under the mistaken belief that a modest dose of inflation is either a prerequisite for, or a by-product of, economic growth, the nation’s top economists have been assuring us for quite some time that inflation will stay very low until the currently mediocre economy finally catches fire. As a result, they believe that the low inflation of the past few months has frustrated Federal Reserve policy makers, who have been supposedly chomping at the bit to keep hiking rates in order to restore confidence in the present and to build the ability to cut rates in the future if the nation were to ever, god forbid, enter another recession.
In the weeks leading up to the Fed’s December 16 decision to raise rates by 25 basis points (their first increase in nearly a decade) the consensus expectations on Wall Street was that the Fed would deliver three or four additional interest rate hikes in 2016. But with the global markets now in turmoil, GDP slowing, and the stock market off to one of its worst starts in memory, a consensus began to emerge that the Fed is reluctantly out of the rate hiking business for the rest of the year.
With such thoughts firmly entrenched, many were largely caught off guard by the arrival last Friday (February 19th) of new inflation data from the Labor Department that showed that the core consumer price index (CPI) rose in January at a 2.2 % annualized rate, the highest in more than 4 years, well past the 2.0% benchmark that the Fed has supposedly been so desperately trying to reach. It was received as welcome news.
A Reuter’s story that provided immediate reaction to the inflation data summed up the good feeling with a quote by Chris Rupkey, chief economist at MUFG Union Bank in New York, “It is a policymaker’s dream come true. They wanted more inflation and they got it.” The widely respected Jim Paulsen of Wells Capital Management said that the stronger inflation, combined with upticks in consumer spending and jobs data would force the Fed to get on with more rate hikes.
But higher inflation is not “a dream come true”. In reality it is the Fed’s worst possible nightmare. It will expose the error of their eight-year stimulus experiment and the Fed’s impotence in restoring health to an economy that it has turned into a walking zombie addicted to cheap money.

PAPER MONEY VERSUS THE GOLD STANDARD: AN EXPLANATION

Gold vs. Paper Money
NEWS

PAPER MONEY VERSUS THE GOLD STANDARD: AN EXPLANATION

We are living in a time that can only be considered monetary chaos. The U.S. Federal Reserve has manipulated key interest rates down to practically zero for the last six years, and expanded the money supply in the banking system by $4 trillion dollars over that time. And with the true mentality of the monetary central planner, the Fed Board of Governors are now planning to manipulate key interest rates in an upward direction that they deem desirable.

The European Central Bank (ECB) has instituted a conscious policy of “negative” interest rates and planned an additional monetary expansion of well over a trillion Euros over the next year. Plus, the head of the ECB has assured the public and financial markets that there is “no limit” to the amount of paper money that will be produced to push the European economies in the direct that those monetary central planners consider best.

We also should not forget that it was the Federal Reserve that earlier in the twenty-first century undertook a monetary expansion and policy of interest rate manipulation that set the stage for the severe and prolonged “great recession” that began in 2008-2009, in conjunction with a Federal government distorting subsidization of the American housing market.

The media and the policy pundits may focus on the day-to-day zigs and zags of central bank monetary and interest rate policy, but what really needs to be asked is whether or not we should continue to leave monetary and banking policy in the discretionary hands of central banks and the monetary central planners who manage them.

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WAR, BIG GOVERNMENT, AND LOST FREEDOM

First world war: British troops go over the top in the trenches during the battle of the Somme

All the leading countries of Europe were drawn into the war. It began when the archduke of Austria- Hungary, Franz Ferdinand, and his wife, Sophia, were assassinated in Bosnia in June 1914. The Austro-Hungarian government claimed that the Bosnian-Serb assassin had the clandestine support of the Serbian government, which the government in Belgrade denied.

How a Terrible War Began and Played Out

Ultimatums and counter-ultimatums soon set in motion a series of European military alliances among the Great Powers. In late July and early August, the now-warring parties issued formal declarations of war. Imperial Germany, the Turkish Empire, and Bulgaria supported Austria-Hungary. Imperial Russia supported Serbia, which soon brought in France and Great Britain because these countries were aligned with the czarist government in St. Petersburg. Italy entered the war in 1915 on the side of the British and the French.

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