Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

Inflation Follows the Economic Stimulus Boom

Economics / Inflation Aug 25, 2010 - 06:16 AM GMT

By: Richard_Daughty

Economics

Peter Schiff of Euro Pacific Capital notes that the Federal Reserve, and the idiots like Paul Krugman who genuflect at the altar of Keynes, is not done with destroying the economy, but that “Bernanke and his supporters have said that their stimulus will be withdrawn as soon as the recovery takes hold in earnest.” Hahaha!


I laugh because this makes me think of my dad saying, in answer to my constant whining, “Shut up! I’ll buy you a motorcycle when your Uncle Raymond pays me back the money I loaned him,’ which finally got to be a family joke because Uncle Ray never came across with a dime because he was a penniless mooch all his life! Hahaha!

Mr. Schiff is apparently not interested in my family-joke anecdotes or the fact that I had to finally buy my own stupid motorcycle, which was too small and crappy because I didn’t have much money because I did not like to work, which is another whole issue.

Instead, Mr. Schiff says, “This misses the point that any ‘growth’ created by stimulus is totally dependent on stimulus to continue. The ‘recovery’ will end as soon as the stimulus prop is removed.”

I naturally leap up and say, “Just like my Uncle Ray! Didn’t I tell you about my Uncle Ray and the money he borrowed from my dad? He spent it all and was broke again the Next Freaking Day (NFD)!”

I could see that Mr. Schiff was not in the mood to discuss my Uncle Ray or that stupid motorcycle that I ended up with, but I notice there is also a parallel to the notion of my dad giving Uncle Ray MORE money, so that Uncle Ray would pay my dad back the original loan with part of the proceeds, and thereby financing that big, bad Harley to start me off on that wild, irresponsible, drug and alcohol-crazed lifestyle of dissolute debauchery that every kid dreams of. “What do you want for Christmas, little Mogambo?” What indeed! Hahaha!

Well, the analogy seemed apt when he went on, “the Fed will step in with ‘quantitative easing’ as soon as it becomes obvious that the Administration’s stimulus-fueled ‘recovery’ of the past three quarters is fading. The problem is that each round of stimulus, as with each hit of an addictive drug, requires ever larger doses to produce the same result.”

Having missed out on that whole “drug addiction” thing because of my Uncle Ray, not to mention missing the feel of wind blowing through my hair while riding down the highway astride 74 cubic inches of Bad Boy Bike (BBB), I am not sure what he means. So he rephrases it in terms I, and Aristotle, can understand by saying, “the more leveraged an economy becomes, the bigger the lever required to move it.”

And just when it seemed that things could not get worse, it gets worse, as he figures that the reality is that “The 2008 recession never ended. It was merely interrupted by trillions of dollars of stimulus that purchased GDP ‘growth’ with borrowed money.”

Exactly! Let me stop whining about that stupid motorcycle for just a minute so that I can say that, as far as I, too, am concerned, the whole boom of the last 30 years was the result of “trillions of dollars of stimulus,” as the despicable Alan Greenspan had the Federal Reserve keep creating more and more money the whole time, and now the absurd Ben Bernanke, erstwhile head of the obviously-worthless economics department at Princeton, is exponentially worse as the new chairman of the Federal Reserve! We’re freaking doomed!

If I was but a normal man, perhaps like you or someone you know, I would be Completely Freaked Out (CFO) when he says, “I expect the coming doses of quantitative easing will finally spark adverse reactions, first in the dollar and later in the bond market. When a falling dollar forces consumer prices and long-term interest rates to rise, the Fed’s actions will be rendered impotent. The Open Markets Committee will have to make a horrific choice: fight inflation by tightening policy into a weakening economy, or fight recession by allowing inflation to burn out of control. I think it’s obvious that they will choose inflation, all the while pretending that it doesn’t exist.”

I am, however, not a “normal man,” perhaps like you or someone you know, but a man who knows that inflation is the worst of the economic demons, and who also knows that all one has to do is to buy gold, silver and oil to both protect oneself, and make a lot of money when confronted with a degenerate spendthrift Congress and an insane Federal Reserve.

And that makes all the difference between a man, perhaps like you or someone you know, puking up blood from horror and fear and a man who chortles, “Whee! This investing stuff is easy!”

Richard Daughty (Mogambo Guru) is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise to better heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron’s, The Daily Reckoning, and other fine publications.

Copyright © 2010 Daily Reckoning

© 2010 Copyright The Daily Reckoning - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules