If you Wikipedia “Pump and Dump,” Jonathan Lebed, the brains behind the NIA, is the first reference as an example of the fraud. It’s like the old joke, “look up pump and dump in the dictionary and there is a picture of Jonathan Lebed” No wonder NIA keeps his name hidden. if you were running an on-line pump and dump operation, would you want the wikipedia poster boy for pump and dump scams to be the public face of your company?

Peter Schiff, economist and candidate for US Senate, comments on the Goldman Sachs hearings in the Senate and explains why the greater blame for the financial crises lies with the government and Federal Reserve.

“The Congress constantly beefs up the Fed, cuts rates, stimulates the economy, lowers rates. The consequence of those low rates was a housing bubble. It was all those exotic mortgages that blew up, and now they’re going to blame Goldman for it.”

Schiff believes the regulatory reform bill is a waste of more resources and time and does nothing to address the root cause of the financial crises. “It was all government subsidies and insurance that created the moral hazard,” he says. “It isn’t a free market problem, it’s not a capitalistic problem, it’s a government problem.”

In its recent look back on the first ten years of the century, Time magazine proclaimed the period to be “the decade from hell.” The editors made their case based on what they saw as the signature events of the last ten years, notably the ravages of terrorism, failed wars, and a global financial crisis. Taken together, these factors produced an era that Time is convinced will be remembered as one of the low points in our history.

As the media hates to dwell on the negative, the commentary was rife with notes of optimism about pending recovery. It could hardly be accidental that in the very next issue, Fed Chairman Ben Bernanke was named “Man of the Year” for his supposedly Herculean efforts to keep the economy afloat as we departed the Naughty Aughties. Although Time takes pains to point out that the “Person of the Year” honor reflects impact rather than adulation, its profile of the chairman was triumphant.

Even if you believe the “survived the worst/turned the corner” narrative offered by Time, it still should strike anyone as ironic that Chairman Bernanke, a chief architect of the economic problems that surfaced in 2007, should be held in such high esteem.

Apart from its misplaced reverence for the Fed Chairman, I would take issue with Time’s entire characterization of what has now become history.

Under no circumstances could the past ten years be described as “the decade from hell.” In fact, in terms of economic good fortune, the period shares parallels with the Roaring Twenties. I would describe this as a decade of sin that paved the way to hell.

Yes, we had spectacular problems like September 11th and the invasion of Iraq – which were horrific for those who were directly affected – but for most Americans, it was a time of unexpected wealth and unearned prosperity. Up to the days of the stock market crash, the economics of the decade will be remembered for cash-out refinancing for millions of homeowners, no-doc liar loans, no-money-down car purchases, eight-figure Wall Street bonuses, cheap Chinese imports, and trample-to-death holiday sales. In other words, the decade now closing gave us the biggest and most irresponsible spending orgy in U.S. history. The past decade was the party; the one ahead will be the hangover.

The fact that Time completely ignored these issues shows how poorly the mainstream media understands the forces bearing down on our economy. Yes, they were able to identify some of the adverse consequences we experienced this decade. That’s the easy part. But as far as seeing the causes behind the effects, they haven’t a clue. As a result, Time has no ability to see the underlying pattern and will happily encourage our leaders to repeat the mistakes of the past on a grander scale.

For now, Congress and the President remain as clueless as Time. To show its resolve to “get to the bottom of things,” the Obama Administration has impaneled a commission to investigate the causes of the financial crisis. Do not expect the proceedings, which are just getting underway, to come up with anything but the most politically useful explanations.

Blame will be laid at the feet of “ineffective regulators” who failed to “get tough” with industry, banks, and corporate leaders who held the “public good” hostage to their “personal greed.” There is no hope that anyone who actually saw the crisis coming will actually be asked to testify. If they called me, I would be happy to give them an earful. Unfortunately, the only way my views will ever be heard by the powers-that-be is if I am elected to the Senate – which is exactly what I plan to do next fall in my home state of Connecticut.

My sincere hope for the coming decade is that I can help our leaders see what Time cannot: we need to stop committing the economic sins that are leading us to hell, so that our stay down there will be as brief as possible. We need everyone to stop spending more than they earn. That is true not just for individuals, but for our government as well. Just this week, the Treasury Department removed its internal caps on bailout funds to Fannie Mae and Freddie Mac. Meanwhile, another bailout was proffered to ailing GMAC. If we continue the same bad behavior, it might not just be one decade from hell, but several.

However, if we can confess our sins, and vow to reform our ways, perhaps this will merely be a decade in purgatory. Perhaps we can turn it into the decade of hope, hard work, individual liberty, savings, production, investment, sound money, de-regulation, exports, budget surpluses, capitalism, limited government, and respect for the Constitution. These traits will harden us to withstand the fallout from our reckless past.

As of yet, our troubles continue to snowball – and I don’t like a snowball’s chances if we have a real decade from hell.

December 31, 2009

Copyright © 2009 Euro Pacific Capital

by Peter Schiff

Like a battering ram in a medieval siege, gold keeps hammering away at the gate. For the third time in less than twelve months, the yellow metal is once again crashing into the $1,000 per ounce level. As of press time, it looks like gold will close above that level today and will set a new record in the process. Even if the breach is fleeting, who can doubt that it will mount another assault soon? In the meantime, there is no shortage of market analysts who are not buying gold while questioning the motives of those who are. Although they offer a variety of strained reasons, they nearly all agree that it has nothing to do with inflation, which is nearly universally considered dead and buried. As a self-confessed gold bug, I can assure all that inflation is the only reason I buy gold. And recently, I’m buying a lot.

When individuals choose to accumulate savings in the form of gold rather than interest-bearing paper deposits in government-insured accounts, there is only one reason for doing so: they fear that the interest will not be enough to compensate for their expected loss of purchasing power through inflation. This fear reflects both current inflation and the expectation for future inflation. While there are those who buy gold to speculate on its appreciation, the underlying factor that drives that appreciation in the first place will always be inflation. If governments were not creating inflation, there would be little investment advantage to owning gold.

Some believe that gold investors are primarily motivated by fear. It is often assumed that gold is the one asset class that holds its value when all other asset classes are falling due to market uncertainty. But this explanation brings us right back to inflation. When economies move into recession, there is always political pressure for governments to intervene. Their one tool is the printing press.

When governments act to prop up sagging markets, or bailout investors or depositors of failed institutions, they create inflation (print money) to pay for it. This, in effect, transfers capital from prudent investors to speculators. At the same time, it pulls the rug out from under the safest vehicles of traditional investment – bonds and cash. It becomes hard for investors to protect their principal, much less grow their wealth. Some turn to gold, with its historically guaranteed ‘floor’ against losses, and others start making ever riskier investments to try to ‘beat’ the inflation rate.

Gold’s appeal as an asset of choice during times of political uncertainty, particularly during wartime, is again a function of its being a hedge against inflation. Wars are always expensive. They are also often unpopular, which makes paying for them through tax increases politically dangerous. As a result, they are almost always financed through the ‘secret tax’ of inflation. For a nation that loses a war, or suffers revolution or systemic civil conflict, there is always the chance that its currency could become worthless. While this may not be the kind of inflation that we read about in the business section, it is the ultimate form of the monetary malady – whereby a currency loses all of its purchasing power.

Whenever the price of gold rises sharply, I always take it as an early warning sign that inflation expectations are rising. If those expectations are not met, its price will fall. If the market is correct, gold will maintain its gains. And if the inflation continues to intensify, so too will gold’s rise. Most analysts, however, simply look at the dubious CPI to determine the presence of inflation and inflation expectations. They perennially forget that prices are a lagging indicator and only a symptom of inflation, and may in fact not be rising at the moment when inflation kicks into high gear.

The anti-gold camp takes their greatest solace from the bond market, where things have been eerily quiet. They maintain that since bond yields have not risen much, inflation must not be a problem, and so the gold bugs are simply paranoid. The bond market, they tell us, is populated by ‘vigilantes’ who sound a bugle call at the first whiff of inflation. But this argument ignores the fact that central bankers themselves are the biggest bond buyers and are in effect ‘vigilantes-in-chief.’ Their outsized participation in the market has led to gross distortions. When the Fed or another central bank buys treasuries, real returns are not considered. Purchases are made for political reasons rather than investment merit, which renders meaningless the signals current bond prices are sending.

The gold-bashers also believe that reduced consumer demand due to unemployment will keep inflation pressures at bay for the foreseeable future. However, inflation will ultimately act to reduce the supply of goods much faster than unemployment reduces demand for goods, sending prices up despite lower demand. The stagflation of the 1970s is an example of such an outcome.

The bottom line is that gold is continuing its long-term bull run, and those who dismiss the message behind its rise do so at their own financial peril. When it comes to inflation, gold is the canary in the economic coal mine. Just as unseen toxins kill the canary before the miners succumb to the fumes, a spike in gold is a harbinger of reckless monetary devaluation. Our leading commentators think that since they can’t see or smell the gas, all those canaries (gold prices, commodity prices) must be dying of natural causes. Good luck to them when the toxins flood the mine.

Copyright © 2009 Euro Pacific Capital

Asked by This Week’s George Stephanopoulos about the Obama Administration’s terrible economic prognostications in advance of passage of the $787 billion “stimulus” spending bill back in February, Vice President Joe Biden regurgitated a familiar talking point:

Stephanopoulos: While we’ve been here, some pretty grim job numbers back at home – 9.5 percent unemployment in June, the worst numbers in 26 years. How do you explain that? Because when the president and you all were selling the stimulus package, you predicted at the beginning that, to get this package in place, unemployment will peak at about 8 percent. So, either you misread the economy, or the stimulus package is too slow and too small.

Biden: The truth is, we and everyone else misread the economy.

Of course, if you eliminate the “and everyone else” from that sentence, he’s simply stating the painfully obvious. The only appropriate response to such a sentence is a sarcastic: DUHH!!!

The “and everyone else” part is the big, well-rehearsed lie. There were plenty of people who predicted a severe recession well in advance of Obama’s bad predictions. Representative Ron Paul predicted the housing bubble would result in a crash,writing in 2002 that “like all artificially-created bubbles, the boom in housing prices cannot last forever.… Perhaps the Federal Reserve can stave off the day of reckoning by purchasing GSE debt and pumping liquidity into the housing market, but this cannot hold off the inevitable drop in the housing market forever. In fact, postponing the necessary but painful market corrections will only deepen the inevitable fall. The more people invested in the market, the greater the effects across the economy when the bubble bursts.”

Peter Schiff, the economic adviser for Rep. Paul’s presidential campaign, predicted the crash and the severity of the crash years in advance in a series of television interviews that today are compiled into a series of “Peter Schiff was right” videos on YouTube that have garnered millions of views. (Perhaps Biden is unfamiliar with YouTube?) Legendary investor Jim Rogers predicted in January 2008: “We are probably going to have one of the worst recessions we’ve had since the Second World War. It’s not a good scene.”

But under the Washington idea of “everyone,” people who follow the U.S. Constitution and understand the Austrian school of economics don’t count. The reality is that dozens of Austrian school economists (as well as a few from other economic schools) predicted the recession with astonishing precision, but according to the Washington view, only people who follow the erroneous philosophy of John Maynard Keynes recount.

Read the rest of the article

A false dawn for the dollar
July 4th, 2009 – Russia Today

The US administration has been saying it sees the first green shoots of economic recovery. However consumer spending remains low in America, and some experts argue the signs are misleading.

What can you get for a dollar? Not much these days.

Its value dropped considerably at the end of June – and this is despite the Obama administration announcing signs of an economic rebound.

Experts think these are false claims of hope. They see a gloomy future for the dollar and say the $787 billion stimulus package passed earlier this year is only making things worse.

“The green shoots that they think they see don’t reflect any genuine economic growth. They reflect the initial reaction to the stimulus. If you shoot someone up with heroin, you’re gonna get a reaction before there is a withdrawal,” says economic expert Peter Schiff.

And as job losses continue in the US and Americans have less money to spend, their problems become everyone’s problems.

“America consumes 25 per cent of the world’s energy. It takes $3 trillion of the world’s exports every year. If America doesn’t consume, the global markets will slow down dramatically,” believes trend expert Gerald Celente.

Faith in the dollar as a global reserve currency is long gone.

“I think the dollar’s days as a reserve currency are over,” Peter Schiff says.

This becomes obvious when China, the biggest foreign holder of the currency, wants out. They’ve even asked for the topic to be discussed at the upcoming G8 financial summit.

Economists are predicting the death of the dollar. But the US has been printing more and more of them to keep its sick economy afloat.

The National Inflation Association is pleased to announce that its first ever documentary, Hyperinflation Nation, surpassed 25,000 views on YouTube within 36 hours of its release and is currently the third top news video of the day.

Hyperinflation Nation features Peter Schiff, Ron Paul, Jim Rogers, Tom Woods and Gerald Celente; and is dedicated to preparing Americans for hyperinflation. The documentary shows how Federal Reserve Chairman Ben Bernanke was wrong about the Real Estate and automobile markets; and how the Federal Reserve’s monetary policy could lead to the destruction of the U.S. dollar.

Hyperinflation Nation goes into detail about the gold, silver and agriculture markets, and explains how they could become the new boom industries of the next decade.

Watch the documentary now:

PART 1

PART 2

PART 3

“Crony capitalism” is a term often applied to foreign nations where government interference circumvents market forces. The practice is widely associated with tin-pot dictators and second-rate economies. In such a system, support for the ruling regime is the best and only path to economic success. Who you know supersedes what you know, and favoritism trumps the rule of law. Unfortunately, this week’s events demonstrate that the phrase now more aptly describes our own country.

On Monday, the Supreme Court refused to hear an appeal from Chrysler’s secured creditors based on the government’s argument that the needs of other stakeholders outweighed those of a few creditors. In this case, the Administration concluded the interests of the United Auto Workers outweighed the interests of the Indiana teachers and firemen whose pension fund sued to block the restructuring. Given the enormous financial support that the UAW poured into the Obama campaign, such partiality is hardly surprising.

When making their investment in Chrysler just a few months ago, the Indiana pension fund agreed to commit capital because of the specific assurances received from the company. In allowing this sham bankruptcy to be crammed through the courts, we have shredded the vital principal of the rule of law, and have become a nation of men, rather than one of laws.

The risk that legal contracts can now be arbitrarily set aside will make investors think twice before committing capital to distressed corporations. Oftentimes enforcing contracts imposes hardships. That’s precisely why we have contracts.

Without absolute faith that deals will be honored, it will be extremely difficult for U.S. companies to borrow money. This will be particularly true for those companies already struggling with too much debt. Without the ability to issue secured debt, how will such companies access the necessary capital to turn around? If secured creditors cannot count on the courts to enforce their claims, they will not put their capital at risk. What good is being a secured creditor if courts can allow the assets securing your claim to be sold for the benefit of others?

Another problem with the government imposing losses on secured Chrysler creditors is that in its bailouts of financial companies (like Citigroup and AIG), the government took steps to specifically pay back creditors, even when those creditors should have been wiped out. This inconsistency and lack of equal protection further undermines faith in our economy.

The message here is clear: loan money to financial entities with friends in Washington and no matter how risky the loan, taxpayers will bail you out if it goes bad. However, loan money to a unionized manufacturer, even if prudently secured by real assets, and you have as much chance of getting your money back as finding Jimmy Hoffa’s body.

As if this wasn’t bad enough, testimony on Thursday from former Bank of America CEO Ken Lewis revealed a concerted effort on the part of Fed Chairman Ben Bernanke and former Treasury Secretary Henry Paulson to pressure Lewis into hiding relevant financial information regarding Merrill Lynch losses from B of A shareholders. Recently released e-mails make it clear that the government threatened to remove corporate leaders if they failed to go through with the merger and keep quiet about the losses.

Again, the justification for the interference seemed to be the “greater economic good” the merger would serve. The right of B of A shareholders to be informed that their company was about to buy a financial black hole was clearly considered to be an acceptable sacrifice.

More importantly, the fact that two of the highest-ranking government officials can conspire to violate both securities laws and private property rights is abhorrent to everything America supposedly stands for. If they get away with it, which I believe they will, the precedent and the message will be chilling.

As a broker who specializes in foreign investments, I am always wary of political risk. I must consider how the threat of arbitrary government action could undermine the value of my investments. However, recent events show that political risk is now greater here than abroad, and U.S. assets, which have historically traded at premium valuations based on faith in our legal system, will soon trade at discounts to reflect this new threat. The fear of having contracts abrogated or property rights violated when doing so serves some contrived greater good will substantially raise our cost of capital and further reduce our competitiveness.

June 13, 2009

Peter Schiff is president of Euro Pacific Capital and author of The Little Book of Bull Moves in Bear Markets and Crash Proof: How to Profit from the Coming Economic Collapse.