by Peter Schiff, SchiffGold:
When the housing bubble popped in 2007, the Federal Reserve went to work to reinflate the bubble. It quickly pushed interest rates to zero, and in December 2008, the Fed launched the first of three rounds of quantitative easing. The virtual money printing lasted for five years.
So, what did we ultimately get for the billions of dollars created by these Federal Reserve programs? As Ron Paul explains in a special episode of the Liberty Report, more numerous and bigger bubbles, and another crisis waiting to happen.
The housing bubble is back along with subprime loans. There’s an auto financing bubble encouraged by subprime loans for many customers. The stock market is in a bubble waiting to be pricked. The bond market is in a huge bubble as a result low or negative interest rates.”
The Fed wasn’t alone in its interventionist monetary policy. Central banks around the world followed the same prescription. All in all, the central banks of the world increased their balance sheets by $8.3 trillion, with only $2.1 trillion worth of GDP growth to show for it.
This left $6.2 trillion of excess liquidity in the banking system that did not go where the economic planners had hoped. Central banks now own $9.7 trillion of negative interest-yielding bonds. The financial system has been left with a bubble mania, financed by artificial credit and unsustainable debt. The national debt in 2007 was $8.9 trillion; today it’s $20.5 trillion. Rising interest rates will come and that will be deadly for the economy and the federal budget.”
This is exactly what Peter Schiff predicted would happen. He talked about it in a recent podcast.
It’s not a mortgage crisis, it is a dollar crisis. That is the only place we are headed. In fact, this is the exact crisis that I have been forecasting since the very beginning, because it is a byproduct of the monetary mistakes that I knew the Federal Reserve was going to make in the aftermath of the ’08 financial crisis – to reflate, or attempt to reflate, the stock market bubbles and the housing bubbles that they had created but that had popped.”
Peter said the central bankers succeeded in reinflating the bubbles even beyond his wildest imagination. But that’s not good news.
So, they have inflated the mother of all bubbles, and when the air comes out, or in order to prevent the air from coming out, they have to crash the dollar.”
Peter has been saying that the central bankers have reached the end of their rope. There isn’t enough stimulus or interest rate tinkering left in the tank to reinflate the bubbles the next time they burst. That’s why he’s predicting a currency crisis in the future. Ron Paul is equally pessimistic about the Fed’s ability to save the economy again. He said we ultimately need radical monetary reform.
We’re at the point where another QE inflationary binge will not tide us over in the next economic downturn. We’re fast approaching the time when true monetary reform will be required to deal with the ‘sin’ of living beyond our means. If that is not done, expect a long period of economic chaos, inner city violence, and political warfare.”
Paul said gold will likely play an important role in monetary reform.
Though currently, there is a lackadaisical interest in gold compared to crypto-currencies, I believe gold is in the early stage of the third major bull market since 1971, which started two years ago when gold was $1050/oz. If history is of any benefit, gold will be used in the coming monetary reform, whether it’s accomplished by the government or the market. But if the choice of a monetary unit turns out not related to something tangible, it will prove to be a first in history. Just because our current money is now a total fiat dollar, it can’t be used to justify a market developed fiat currency. We must remember that the dollar was originally defined as a weight of silver or gold. The destructive nature of the monetary event of Aug. 15, 1971, was a consequence of our government refusing to maintain the dollar’s relationship to something tangible, thus making it a fiat currency. This explains why we’re in such a mess. A fiat currency developed in the market, won’t solve the current financial crisis the world faces … All paper or fiat money self-destructs and has limited lifespans. Gold currencies last until governments debase them into a fiat currency. The fiat dollar today, for many nefarious reasons, is constantly being destroyed by counterfeiters posing as politicians and central bankers. The day is fast approaching when the fiat dollar standard will need a major overhaul. The age of quantitative easing is ending.”
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