Tuesday, March 23, 2010

Quote Collection


The more money government spends, the more resources it drains from the private sector. The fiscal 2011 budget proposed by President Obama contains $3.8 trillion in federal spending. Think of the government as a cancer feeding off the private sector. The larger it grows, the more jobs it kills. Unfortunately, most politicians follow the misguided advice of economist John Maynard Keynes, who advocated government spending as a means of job creation. In reality, government spending merely results in government jobs replacing more efficient private sector jobs. Peter Schiff, Editor

China overtook the U.S. as the world’s biggest property investment market last year and will probably keep the lead in 2010 on economic growth and a lower reliance on debt, Cushman & Wakefield LLP said. Real estate investment in China more than doubled to $156.2 billion last year, while the total for the U.S. slumped 64 percent to $38.3 billion. Simon Packard, Editor

Some will argue that the new jobs created by government stimulus spending will provide the additional purchasing power necessary to revitalize consumer spending. There are two problems with this expectation. First, those jobs being “created” by the government are outnumbered by those being destroyed by government domination of resources. Second, even if it were possible for job growth to return, having hopefully learned from their mistakes, workers will be far more frugal with their paychecks than they were in the past.

Others hope that rising real estate prices will give consumers more confidence to spend. The reality is that housing prices are still too high and will likely fall further. But even if they did rise, consumers will still be reluctant to resume their shopping spree. Home equity extraction loans which just a few years ago turned houses into ATMs, are now much harder to come by. When it comes to spending, it’s not just about confidence, it’s about cash.

The only possible way consumers can spend is if the government gives them the money. However, since the government cannot legitimately give money to one American without first taking if from another, the most likely means of doling out cash will be to run it off the printing presses.

That, in a nutshell, is our government’s plan for economic recovery. Print a bunch of money and give it to consumers to spend. This is not a plan for recovery but a recipe for disaster. Those betting that this program can succeed in putting together a healthy and sustainable economy simply do not understand the nature of their wager. The smart money is going the other way. Peter Schiff, Editor

Governments all over the world are debasing their currencies destroying their citizens’ purchasing power by spending beyond their means and using debt to stay afloat. In the United States, Bernanke is trying to goose an economic recovery with massive deficit spending. History proves time and time again without exception that this behavior cannot be sustained before economic chaos, disaster and upheaval ensue. Greg McCoach, Editor

Beware the Gold and Silver ETFs, they are run by the investment banks that are technically insolvent. I doubt they have the actual gold and besides you have no claim to it. I am quite certain the same amount of physical gold has been sold many times and the investment banks hold gold the same way they practice fractional reserve banking. They hold a dollars worth of gold but are selling $10. Ron Struthers, Editor

It is elementary economics that any good which is under-priced will be over-consumed. The more radically under-valued the good, the more extreme the over-consumption. The consequences are clear, more than 90% of the world’s silver stockpiles and inventories are gone, forever.

With the amount of elemental silver in the Earth’s crust approximately 17 times the amount of elemental gold, it is no surprise that for 5,000 years the gold/silver ration has average 15:1.

Today, the gold/silver price-ratio has been ranging between 60:1 and 70:1. This ratio would be totally unsustainable even if all the world’s silver were still available for demand – rather than gone forever. However, with 90% of the world’s available silver gone, what this means is that the gold silver price-ratio is at its most-radical extreme (by at least a factor of ten) than at any other time in 5,000 years. Jeff Nielson, Editor

In a nearly unanimous vote, Money Market funds now have the ability to suspend redemptions, courtesy of the SEC’s just passed 4-1 vote. This explains the negative rate on bills: at this point, should there be another meltdown, money market investors will not, repeat not, be able to withdraw their money purely on a whim. As the SEC noted: “We understand that suspending redemptions may impose hardships on investors who rely on their ability to redeem shares.” Too bad investors’ hardships considerations ended up being completely irrelevant. Ron Struthers, Editor

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