January 14, 2012
– Comments (3)
Schiff arguing that S&P rating actually should be taken seriously? People are buying TBills because they believe in their safety regardless of what an organization might say.
Sounds like he bet against the dollar and is taking a bath.
Notes based on the video (with a tiny bit of reading between the lines):
S&P downgraded 9 Euro nations, money poured into dollars, Euro at 16 month low, T-bond prices rally.
Investors so concerned with foreign debt they're buying US debt, yet US is in more debt than Europe and has less capacity to pay.
Germany, Finland, and Netherlands are still AAA rated. 3 more the same as US. Only 2 EU countries have higher debt-to-GDP than the US. Plus there's more debt we're on the hook for: Fannie, Feddie, student loans. And more unfunded future obligations: Medicare, SS, not to mention the states, who rely on extracting from the same population.
Low interest rates due to this demand generate the illusion that our economy is in better shape. Our bonds not *yet* marked down. When our rates rise, we will implode.
Economy measured by how much we produce, not how much we spend. They'd be the same if other nations weren't loaning us so much money. Our spending is debt-fueled. Borrow to consume is a sign of weakness.
Fed had no clue (specifically 2006-2008). Thought there was no problem just before the bust. Schiff was right and publicly so. People who got it completely wrong are still being listened to.
Markets closed for MLK day.
Except he has been wrong since then. Doesn't matter that a person made a ton of money guessing right only to give it all back later.
And if production is the true measure, the US has one of the highest production rates per person. It is too late to turn the clock back. The deed has been done. What matters is what we do prospectively. Personally I think Bernanke has gotten it right in meeting the current situation. Problem is Congress hasn't, they prefer to stay gridlocked. Europe is another issue. Eventually the weaker economies will "revolt" against the Germans.