Whitslack

Employment: Neither Quality Nor Quantity

Peter is largely right on the money, as usual. However, like sticktoitiv, I have to disagree about health care being an unproductive industry. It's true that it doesn't produce any goods, but it does produce a highly valued service. Health care providers have training (and have generally spent large amounts of money to acquire that training) that most people do not have. I cannot set my own bone if I should break it; I cannot remove my own appendix if it becomes inflamed. There is real value in the health care industry. However, the picture does become a little muddied when you start to consider an economy that's 100% service-based.

Consider a simplified economy where half of all workers are doctors or nurses and the other half are stockbrokers and financial planners. Could such an economy be self-sustaining? Assuming no one had to eat, maybe. But since people do have to eat, that economy would have to import food. In order to do so, we'd have to export something. (Currently our main export is inflation, but in a sustainable world it'd have to be a zero-sum game.) If the countries producing our food valued our health care and financial services, we could export those, but it's usually not too convenient for consumers to buy health care or financial services from the other hemisphere. Basically, we'd have to export goods to import goods. And that means we'd have to produce goods. Either we'd need farmers in addition to our doctors and bankers, or we'd need some other goods producers to produce goods that we could trade for food.

So in a way, health care is not a productive industry, but in a way it is. Service-producing industries are not necessarily bad, but we cannot survive on *only* producing services.

The Intrinsic Value of Nothing, Part 2

Paco, I love your posts and your philosophy, but why do you keep holding TBT? The volatility is going to eat you up! You could probably sell call options (or buy puts) on *both* TBT *and* TLT and make money on both! All these leveraged ETFs are ultimately going in the same direction: down.

Dollar Forced to Abdicate Its Throne

Voting to effect real change is as pointless as a slave politely asking his master to be kinder. It might work for a little while, but before long the same old patterns will reemerge. The structure of the system itself encourages the kind of waste and excess we've seen. The only solution at this point is simply not to participate in the fraudulent system. Conduct your affairs using sound money and let the government's scam money atrophy away.


On Oct 25 11:56 AM doubleguns wrote:

> What you propose requires Washington to change. They aren't going
> to change unless we change them. Vote them all out. goooh.com

Bullish Sentiment Continues for Gold and Silver Stocks

On Oct 08 12:31 PM twitee wrote:
> Did any analyst predicted the last year crash.....

Peter Schiff predicted it way back in 2007, and the other analysts laughed at him. Who's laughing now? Really, anyone who understands and believes in Austrian economic theory knew this was coming sooner or later. The Austrian economists now tell us this is not a recovery, it's a cover-up — a papering over with paper money. Buy gold and silver while your wages still have any purchasing power left in the world market.

Inflation Premiums at Multi-Week Highs Suggest Breakout for Commodities

I think "untrusting investor" must have meant "buy puts, wait for prices to decline, then sell at a profit," if indeed he/she believes that prices will fall in the next 1-24 months. I don't know why anyone would write puts in a declining market — to keep the premiums and have the options expire worthless, you'd have to write them at so far below the current stock price that you'd get next to nothing for selling them.


On Sep 26 06:42 PM untrusting investor wrote:

> Ok, you probably will be OK over 5-10 years and make a little. But
> much better entry prices will be available over the next 1-24 months
> for those who are patient. The much safer and probably more profitable
> trades over the ST are to sell puts, collect the premiums, and wait
> for better put or entry prices.

Cash for Clunkers: A Cautionary Tale for Healthcare Reform

"If this made sense, why didn’t we level every foreclosed home in the U.S.?"

Just wait. I'm sure this is on the horizon. They will spin it by saying there's too much supply and giving this destruction of property a sound-bite-friendly name like "thinning the herd." Then they'll tout how good it is, since it puts contractors and homebuilders back to work. Never mind that destruction of valuable property is always a net negative.

Short the U.S.A.

I can't believe you got through that whole article without once writing the word "libertarian." That's what you are. It's what I am too. It may have a stigma attached to it (for what reason I don't know), but it's not as bad as "Jeffersonian liberal," a term which many (most?) people will misinterpret.

Employment: Minimum Wage, Maximum Stupidity

Agghghh! You people are all missing the point. Abolish the minimum wage and suddenly the cost of producing goods and services falls through the floor. Price wars flare up, and everything gets cheaper. If Antonio's Pizzeria is allowed to pay its workers $2/hr., they can make a profit selling pizzas for much less than the $10 Vancetti's is charging. Natural effect: prices fall, and the people earning $2/hr. can afford to buy pizzas.

The minimum wage is just a political gimmick, and it's sadly a very effective gimmick because the people at the bottom of the ladder haven't yet learned enough about economics to understand why it's a gimmick. All the minimum wage does is make everything more expensive, increase unemployment, and increase the burden to society of all those receiving "assistance" from the taxpayers.

What's Next, Inflation or Deflation?

"Core CPI, which includes food and energy, is 1.8% higher than it was last year."

Doesn't core CPI *exclude* food and energy?

National Health Insurance, 'Cap and Trade': Two Steps in the Wrong Direction

Peter Schiff does it again. This article covers THREE concepts that I often bring up in conversation with government teat suckers:

• Government-run "businesses" can operate at a loss indefinitely because their losses will always be subsidized by taxpayers held at gunpoint. What private business, which actually has to break even just to continue operating, stands a chance of competing with that? Extortion is illegal, unless the government is doing it.

• So-called health "insurance" is not really insurance at all but more of a prepaid health service plan. There is no incentive for one to curtail consumption or minimize waste when a given procedure will be covered whether one obtains it from an emergency room that charges $700 or from a walk-in clinic that charges $300.

• The correct solution to rising health care costs is to get *market forces* acting on them again. This means putting consumers back in the driver's seat so they will, in due course of serving their own self-interest, seek out the best quality service for the lowest price. The reason health care is broken is because the forces that make capitalism work have been artificially shunted and distorted by tax policy.

How to Hedge, and Against What

I don't know about this analysis. Since people are saving more, banks are amassing more deposits on their books, which means banks will be allowed to create heaps more new money by lending. (Look for a video series called "Money as Debt" if you want to know how this works.) In the present environment where government policy is changing on an almost daily basis, banks are too fearful and/or uncertain to make any moves, so they're just collecting deposits and shoring up their balance sheets. But at some point, profit motive will again assert itself, and the banks will return to lending. With the additional deposits on hand due to all the increased savings, they'll be set to create new dollars in much greater quantities than the Fed has done. (The Fed has more than doubled the monetary base in the past year.) Lots of new money and decreased production and inventories translates directly to higher prices.

The correct thing for the Fed to do (if we concede that it should even exist at all) would be to remove all the excess liquidity that it injected into the system. However, it won't do this, for two reasons: 1) it's politically unpopular because it exposes the U.S. economy for the shame that it is, and 2) it actually will be unable to remove the liquidity, since its only mechanism for doing so is to sell all the toxic crap it bought back into the market, but no one wants to buy any of that for anywhere near the ludicrous prices the Fed paid for it in order to inject the liquidity in the first place. I'd hate to be Ben Bernanke; he's playing a lose-lose game.

Bond Market to Bernanke: Take Your Foot Off the Accelerator

You misunderstand. The Fed's job is to *create* inflation (in moderation) in order to lessen the burden of government debt. It performs an elaborate balancing act: too little inflation, and the government would have to raise taxes to service its debt (an unpopular move); too much inflation, and the people would lose confidence in the system. (Has it ever struck you as suspicious just how much our monetary system relies on public confidence for its continued viability? Isn't that the very definition of a con game?)

If interest rates were determined by supply and demand, rather than being fixed by a central bank (i.e., the Federal Reserve), we wouldn't have inflation, since the money/credit supply would be self correcting. Not enough savings means no capital readily available to lend, means higher interest rates, means more savings. Conversely, an excess of idle capital means more investment demand, lower interest rates, and increased economic growth. There is absolutely no need for some centralized body to be fixing interest rates. That only leads to inefficiencies in capital allocation, due to the time lag between market moves and the Fed's policy reactions.

At the very least, a proper audit of the Fed is called for, to verify to Congress and to the public that everything they're doing is legit. Call your congressperson and instruct him or her to sponsor H.R. 1207, the Federal Reserve Transparency Act of 2009. It's up to 179 cosponsors at last count. (Only 218 votes are needed for a majority of the House.)

Not Your Grandpa's Deflation

In response to some of the other comments: "A government that is big enough to give you everything you want is big enough to take away everything you have."

To the author: thanks for an unusually entertaining read. I actually chucked aloud at some of your witticisms.

Treasuries, Mother of All Bubbles, Is Primed to Pop

No mention of the leverage-induced tracking error of TBT (and all leveraged ETFs). Yes, it is true, if Treasuries head straight down the toilet, TBT will do quite well, but if they waffle around a while, the volatility will eat TBT for breakfast. You're actually better off shorting both TBT and TLT in equal amounts and pocketing the compounding error.

Don't Be Fooled by Inflation

I love this metaphor!

"Although [inflation] can often look like growth, it is no more capable of creating wealth than a hall of mirrors is capable of creating people."