by Peter Schiff, Euro Pacific Capital The intense scrutiny recently paid to my investment strategy in the immediate wake of the financial crisis of the last six months has unfortunately obscured the central element of my larger economic forecast. The standard line has been that although I was able to predict the crash, in the form of the housing collapse and the credit crunch, my expected fallout of a weaker dollar and global decoupling has been proven false. However, this assumes that the crash has fully played out. In reality, all we have heard thus far is the overture. In 2008, the bubble economy that I had meticulously described years ago finally hit the pin that I knew was out there. The corporate losses, frozen credit markets and plunging home prices were the opening salvo in the unfolding economic crisis. However, the vast majority of air has yet to leak out of the bubble. As it does, the U.S. economic crisis will kick into a much higher gear. I have positioned my clients to withstand the full fury of the gale, and when it finally comes, the question "was Peter Schiff right?" will finally be answered. Thus far, our economy has actually ...

by John Browne, Senior Market Strategist, Euro Pacific Capital | February 25, 2009 Everyone has been guilty, at one time or another, of ignoring a cold. Though you knew you were sick, you may have kept working hard, playing hard, and staying out late. Not until you were bed-ridden did you start drinking orange juice and taking your health seriously. The U.S. economy appears to be following a similar trajectory. We have consistently ignored serious symptoms to the point where our economy is nearly a terminal case. After ignoring and downplaying the inflating credit bubble for much of his first two years in office, this week Fed Chairman Ben Bernanke emphasized, in testimony before the Senate Banking Committee, that no economic recovery would occur unless the financial system was restored. He was quite correct in his belated diagnosis. His prescriptions, on the other hand, are much more dubious. As the evidence gathers, it looks as if Bernanke and his new colleagues in the Obama Administration are becoming increasingly desperate. The current recession is deepening at an alarming rate. In fact, it now appears to be diving fast towards the depression that we have ...

by Peter Schiff There is an old adage on Wall Street that no one rings a bell at major market tops or bottoms. That may be true in normal times, but as many have noticed, we are now completely through the looking glass. In this parallel reality, Ben Bernanke has just rung the loudest bell ever heard in the foreign exchange and government debt markets. Investors who ignore the clanging do so at their own peril. The bell’s reverberations will be felt by everyday Americans, whose lives are about to change in ways few can imagine. While nearly every facet of America’s economy has been devastated over the past six months, our national currency has thus far skipped through the carnage with nary a scratch. Ironically, the U.S dollar has been the beneficiary of the global economic crises which the United States set in motion. As a result, our economy has thus far been spared the full force of the storm. This week the Federal Reserve finally made clear what should have been obvious for some time – the only weapon that the Fed is willing to use to fight the economic downturn is a continuing torrent of pure, undiluted, inflation. The ...

By Chris Oliver, MarketWatch HONG KONG (MarketWatch) -- China's calls for a new international reserve currency to replace the U.S. dollar are more than mere bluster and could likely lead the debate over the future of the global foreign-exchange system, analysts say. "By proposing such a sweeping reform, China is demonstrating its growing influence in reshaping the global monetary system, and is now on offensive in the debate of who is responsible for the global imbalances," Deutsche Bank's chief economist for Greater China Jun Ma said in a note to clients Wednesday. The comments by People's Bank of China Gov. Zhou Xiaochuan are setting a framework for talks on how to resolve the huge trade imbalances between China and the U.S., analysts said. In the past, China has been blamed for its large trade surplus by officials in the U.S. and elsewhere, who see the yuan as undervalued. "China has effectively set the agenda for the G20 leaders' summit," wrote SocGen economists in a note Tuesday, referring to next week's meeting of finance chiefs from the Group of 20 leading economies in London. In an essay published on the central bank's Web site Monday, Zhou proposed the creation a new international reserve currency, a call rejected ...

By Sam Kirtley We first posted this article on 13th August 2007 when it appeared to us that the US Dollar along with the economy was heading into such dangerous waters that gold would be the beneficiary. At the time gold was trading at around $670/oz and it closed yesterday at $960 for a gain of $290 or 43.2%. Yesterday was the first time that we have seen the ‘C‘ word used as the Federal Reserve announced that it would be buying back $300 billion in longer-term Treasuries in order to assist the economic recovery. This move to buy these Treasuries is regarded by many as a last resort or a sign of panic as the turmoil in the financial markets reaches a crisis  point. [caption id="attachment_97" align="alignnone" width="460" caption="US Dollar Index"][/caption] Gold was languishing at the $890/oz level just prior to the announcement and then within the hour it rocketed to the $950/oz level as the news of the Feds action spread. Whether it be an article on Market Watch or a mention on the BBC World Service, news travels fast these days to every corner of the planet and investors react accordingly with startling results. A new government and a New ...

"We've averted" the risk of a depression, Federal Reserve Chairman Ben Bernanke said this week. "Now the problem is to get the thing working properly again." Appearing on CBS network's 60 Minutes, Bernanke told correspondent Scott Pelley that concerted efforts by the government likely averted a depression similar to the 1930s. He also stated the nation's largest banks are solvent and that he doesn't expect any of them to fail; and that the U.S. recession will come to an end "probably this year." Is this finally the light at the end of the tunnel for the U.S. economy? We don't want to appear as perpetual gloom-and-doomers, but fact is, when Bernanke tries to predict the future, he's usually wrong. Prediction: The subprime mess is grave but largely contained, Bernanke reassured the Federal Reserve Bank of Chicago in a speech on March 15, 2007. While rising delinquencies and foreclosures will continue to weigh heavily on the housing market, it will not cripple the U.S. economy, he said. "Given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited." Reality: The median price of a home ...

By Li Yanping March 24 (Bloomberg) -- China’s leaders may press at the Group of 20 summit for specific steps to protect its more than $1 trillion of dollar assets as U.S. fiscal policies risk sparking a “currency war,” a senior Chinese researcher said. The dollar weakened after the Federal Reserve said March 18 it would buy as much as $300 billion of Treasuries and the U.S. this week outlined plans to buy as much as $1 trillion of illiquid bank assets. U.S. purchases of Treasuries are “irresponsible” because they may weaken the dollar, Li Xiangyang, of the government- backed Chinese Academy of Social Sciences, told a forum in Beijing today. “Chinese leaders are likely to articulate their concern to their U.S. counterparts strongly and ask for specific measures.” President Barack Obama is relying on China to continue its purchases of Treasuries as the government seeks to fund a $787 billion stimulus package and a deficit this year forecast to reach $1.5 trillion. China’s President Hu Jintao is due to meet with his U.S. counterpart at the G-20 summit in London next week. “China is a hostage,” said Andy Xie, an independent Shanghai-based analyst who was formerly Morgan Stanley’s chief Asia economist. “China is America’s ...