Peter Schiff has been banging on about this for nearly 12 months now ie that it is impossible for the Fed to taper and that the Fed will have to increase asset purchases and not decrease them.
Peter Schiff has also compared QE to a drug addiction and that the addict builds up a tolerance to the drug and so needs bigger and bigger doses to get the same effect.
And this is why Ben Bernanke is praying for stale mate on the debt ceiling.
The longer QE infinity goes on, the worse the economy is performing. Job creation is lagging, GDP growth is flat, government debt is ballooning, the Fed’s balance sheet is ballooning, Gold is in backwardation, interest rates are climbing.
The Fed and Bernanke need to save face before this house of cards starts to fall.
The Fed and Bernanke need to be able to point the finger at something other than their own policies in order to explain an implosion in the value of the US Dollar.
And just in the nick of time we have the debt ceiling debate on the horizon with both parties saying they will not or can not negotiate.
Bernanke cannot be happier.
Obama is already bringing up “default” in his dealing with the press. It’s a beautiful example of preemptive psychological propaganda.
A program that would lead to a dollar collapse has been in overdrive since 2008.
Again Peter Schiff and Marc Faber amongst others have been saying that QE is going to lead to a dollar collapse and just when things are coming to a head, prime movers in government are now preempting the inevitable by blaming Congress or “the Tea Party” if the US government were to default on their obligations. Rather than the painfully obvious source of the problem, the Fed’s and Bernanke’s easy money policy.
So what is on the cards market wise over the next 2-6 weeks?
I expect the news headlines to get more and more surreal.
Expect to see headlines which say:
“government shut down has much bigger negative effect on GDP than first anticipated.”
“unprecedented declines in the value of the dollar caused by “rebel” Republicans”
“huge increase in gas prices directly caused by the “Tea Party”
“steep declines in bank stocks caused by government gridlock”
“childish games of congress cause mortgage rates to spike”
Basically imagine every problem that has been caused by the Fed policy over the past 5-10 years. And now imagine all of the issues being blamed on the “Tea Party”.
I personally cannot believe this whole situation is not one big pantomime for one simple reason.
Boehner is supposed to be the one playing hard ball for the American people.
Boehner is supposed to be the pro small business, pro strong dollar, pro America core of the Congress
I used to believe that about Boehner but then I saw this.
Boehner is just another character playing his part in the contrived soap opera.
What is in the long term future of America?
It comes down to one thing and it does not take a genius to figure it out. The USA will go down the road of all other governments.
Americans have unprecedented buying power coupled with low taxation which makes them by far the richest people in the world.
I forecast Americans coming much closer in line with the wealth of western Europeans.
This will mean a huge decline in the buying power of the dollar versus the Euro.
Or to put it another way, an 50-100% increase in the price of goods in a very short period of time, probably less than a year.
And this will be coupled with huge federal tax increases. I would predict the average tax burden will increase by around 50%.
All of these measures will be passed in the name of socialised medicine and honouring the government’s debt commitments.