Best of the Week
Most Popular
1.Crude Oil Price Trend Forecast 2016 Implications for Stock Market - Nadeem_Walayat
2.Odds of Winning Walkers Crisps Spell & Go olidays K, C and D Letters - Sami_Walayat
3.Massive Silver Price Rally During The Coming US Dollar Collapse - Hubert_Moolman
4.Pope Francis Calls For Worldwide Communist Government - Jeff_Berwick
5.EU Referendum Opinion Polls Neck and Neck Despite Operation Fear, Support BrExit Campaign - Nadeem_Walayat
6.David Morgan: There Will Soon Be a Run to Gold Like You've Never Seen Before - Mike Gleason
7.British Pound Soars on BrExit Hopes Despite Remain Establishment Fear Mongering - Nadeem_Walayat
8.Gold Price Possible $200 Rally - Bob_Loukas
9.The Federal Reserve is Not Going To Raise Interest Rates and Destroy Gold - Michael_Swanson
10.Silver Miners’ Q1’ 2016 Fundamentals - Zeal_LLC
Free Silver
Last 7 days
Stock Market Re-Testing Overhead Resistance - 30th May 16
David Cameron Questioned on Out of Control Immigration at TEN TIMES Conservative Election Pledges - 30th May 16
Bitcoin Price Skyrockets And Is Now Up More Than 100% This Jubilee Year - 30th May 16
This Is Not The America My Parents Immigrated To In 1957 - 30th May 16
“Debt, Not The Economy, Reaches Escape Velocity” With Graham Mehl - 29th May 16
EU Referendum, Black Vote LEAVE or REMAIN? Which is Worse for Racism for Britain's Ethnic Minorities? - 29th May 16
Billionaire Gross: Jubilee Debt Relief as Prelude to New Global Economic Order - 29th May 16
Wargaming North Korea - Assessing the Threat - 29th May 16
EU REMAIN Population Forecasts - England 4.1 million Explosion, London Migration Crisis - 28th May 16
A Guide to the Trump-Sanders Debate - 28th May 16
Gold And Silver – At Significant Support. New “Story” Developing - 28th May 16
The Next Systemic Lehman Event - New Scheiss Dollar & Gold Trade Standard - 27th May 16
Energy and Debt Crisis Point to Much Higher Silver, Metals Prices - 27th May 16
Gold Junior Stocks Q1 2016 Fundamentals - 27th May 16
These Crisis Markets Are Primed to Deliver Big Gains, Platinum Never Cheaper! - 27th May 16
Operation Black Vote BrExit Warning for the Wrong EU Referendum - 27th May 16
UK Immigration Crisis Hits New Extreme, Catastrophic ONS Migration Stats Ahead of EU Referendum - 27th May 16
Many of the World’s Best Investors Made Their Fortunes This Way…And You Can Too - 27th May 16
The Ugly Truth About Stock Market Manipulation and Gold Prices - 27th May 16
Gold Price Looking Vulnerable While Gold Stocks Correct - 27th May 16
The 5 Fatal Flaws of Trading - 27th May 16
The Next Big Crash Of The U.S. Economy Is Coming, Here’s Why - 27th May 16
A New Golden Bull or Has the Market Gone Too Far Too Fast? - 27th May 16
It Feels Like Inflation - 26th May 16
Negative Interest Rates Set to Propel the Dow Jones to the Stratosphere? - 26th May 16
S&P Significant Low has Occurred – Not Likely! - 26th May 16
Statistics for Funeral Planning in UK Grave - 26th May 16
Think Beyond Oil And Gold: Interview With Mike 'Mish' Shedlock - 26th May 16
Hard Times and False Mainstream Media Narratives - 26th May 16
Will The Swiss Guarantee 75,000 CHF For Every Family? - 26th May 16
Is There A Stocks Bear Market in Progress? - 26th May 16
Billionaires Are Wrong on Gold - 26th May 16
How NOT to Invest in the Gold Market - 26th May 16
The Black Swan Spotter...Which Saw the Oil-Crash coming; now says the “Invisible Hand” will push Brent to $85 by Christmas - 26th May 16
U.S. Household Debt Still Below 2008 Peak - 25th May 16
Brexit: Wrong Discussion, Wrong People, Wrong Arguments - 25th May 16
SPX is at Strong Resistance - 25th May 16
US Dollar, Back From the Grave? - 25th May 16
Gold : Just the Facts Ma’am - 25th May 16
The Worst Urban Crisis in History Could be Upon Us - 24th May 16
Death Crosses Across The Board Are IRREFUTABLE Stock Market Sell Signals - 24th May 16
Bitcoin Trading Alert: Bitcoin Price Stays below $450 - 24th May 16
Stock Market Crash Death Cross Doom Prevails - 23rd May 16
Did AMAT Chirp? Implications for the Economy and Gold - 23rd May 16
Stocks Extended Their Rebound On Friday - Will They Continue Higher? - 23rd May 16
UK Treasury Propaganda Warns of 3.6% Brexit Recession, the £64 Billion Question? - 23rd May 16
Stock Market Support Breached, But Not Broken! - 23rd May 16
George Osborne Warns of 18% Cheaper House Prices - BrExit for First Time Buyers - 22nd May 16
Gold Bull-Phase I Continues to Confound (The Trek to “Known Values”) - 22nd May 16 r
Avoiding a War in Space - 22nd May 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Why 95% of Traders Fail

Fed Uses Self Created Credit Crisis to Grab Power

Interest-Rates / Market Regulation Jun 20, 2008 - 01:16 PM GMT

By: Peter_Schiff

Interest-Rates Best Financial Markets Analysis ArticleThroughout history, governments have always used crises to justify blatant power grabs.  Often the crisis subsides, but the expanded government powers remain.  In America this week, the tendency came into sharp focus.  Congress signaled that it is preparing to perpetuate the Bush Administration's domestic wiretapping program, and has even abandoned the pretense that warrantless surveillance be confined to terrorism.  Similarly, even though our financial crisis has yet to reach full flower, Treasury Secretary Paulson announced plans to give the Federal Reserve new and explicit powers to oversee and regulate the financial services industry.  However, a sober look at his plan reveals that it is tantamount to giving the fox complete autonomy to guard the henhouse.


What few economic leaders have acknowledged is that the Federal Reserve itself is responsible for the real estate and credit bubbles, which are the source of our current troubles.  By keeping interest rates too low for too long, the Fed ignited a speculative fever and engendered a disregard for risk management that pushed asset prices above rational levels.  Should we blame the private sector for taking advantage of all the cheap credit, or the Federal Reserve for supplying it?  If a kindergarten teacher passes out handfuls of Pixie Sticks, and then leaves her classroom unattended for several hours, should we blame the five year olds for the hysteria that ensues? 

The reality is that we should be restricting, rather than expanding, the powers given to the Federal Reserve.  Since Greenspan, Bernanke and company have already inflicted so much damage with the weapons already in their arsenal, why provide them with heavier artillery?  Only in Washington do those who screw up get rewarded for doing so. 

Since the Fed has demonstrated complete incompetence at setting interest rates, why not return that function to the market?  Instead of allowing the Fed to inflict unbridled havoc on our economy, why not re-impose some discipline?  Instead of looking for new ways to regulate Wall Street, why not find an old way to regulate the Fed?  Actually there is a simple answer to all of these questions; it's called the gold standard.

In his speech outlining these proposals, Paulson stated that during the past fifty years the performance of the U.S. economy has been second to none.  I do not know what planet Paulson has been living on these past fifty years, but it is certainly not Earth.  If Paulson were referring to the prior fifty year period, from 1908-1958, his statement would have been correct.  But from 1958 to 2008, the U.S. economy has blown a lead even greater than the one the Lakers enjoyed over the Celtics in game four of the just concluded NBA Finals.  In fact, it may well qualify as the biggest economic choke in history.

In 1958 the U.S. enjoyed a standard of living so unmatched that the rest of the world still lived in the Stone Age by comparison.  Our per capita income was so far ahead of our nearest rival that it seemed impossible that any other nation would ever catch up.  Today not only is per capita income in the U.S. barely in the top ten, but we are being rapidly overtaken by countries that up until a few years ago were barely discernable in our rear-view mirrors.  When it comes to economic performance during the past 150 years, the U.S. is the Big Brown of economies.  1858-1908 was the Kentucky Derby, 1908-1958 was the Preakness, and 1958-2008 was the Belmont Stakes.

Not only did the U.S. surrender a substantial lead, but in many respects our current standard of living is lower than the one our grandparents enjoyed.  Sure we have a few more gadgets, larger televisions and more prevalent air conditioning, but the quality of life has actually declined.  In the 1950's, the average man earned enough money to fully support a wife and four kids, all while saving for retirement and paying off his mortgage.  Today the average man can barely support himself.  It takes two bread winners in most families to make ends meet, and that is assuming only two children.  Even with both parents working, the typical mortgage on the family home will never be paid off and retirement is now a pipe dream.  Flush with high pay, low debt, and a strong currency, the Ugly American in the 1950's could vacation in Europe like a king.  Now we can now barely afford the gas for a day trip to a Six Flags theme park.

If Paulson can be so completely clueless regarding the Fed's role in the current debacle and in America's economic stumbles over the past two generations, why would anyone place any faith in his proposed remedies?  In fact, an unaccountable and unelected Federal Reserve, which nonetheless has lately proven to be as politically craven as any two-bit politician, does not hold the keys to our economic revival.  However, with its increased willingness to rescue the big financial firms from their own excesses, perhaps Paulson sees an expanded Fed as the best way to ensure the continued prosperity of his former pals on Wall Street. 

For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar denominated investments, read my new book “Crash Proof: How to Profit from the Coming Economic Collapse.” Click here to order a copy today.

By Peter Schiff
Euro Pacific Capital
http://www.europac.net/

More importantly make sure to protect your wealth and preserve your purchasing power before it's too late. Discover the best way to buy gold at www.goldyoucanfold.com , download my free research report on the powerful case for investing in foreign equities available at www.researchreportone.com , and subscribe to my free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp

Peter Schiff Archive

© 2005-2016 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

Catching a Falling Financial Knife