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Inflation Propaganda Exposed

- Peter Schiff - Euro Pacific Capital

It would seem that technically, Jacob was correct when he stated that printing is a lie. Very little actual printing goes on, with most of the new money creation being done by keystrokes. Those who get the money first are the ones closest to its creation. They do so by providing some imaginatively valued asset as collateral and then they do all sorts of thngs with that money. Paying interest on previous loans to bondholders is a very popular destination for some of it. And the derivatives market gets a huge chunk, with some $630 trillion currently parked there....As for the banks buying gold, with several notable exceptions, (Russia, China and South Korea) central banks do not appear to be major purchasers. At best it would seem that they have stopped being net sellers.....With regard the new Basel accord, gold was moved from a tier 2 asset to a tier one asset, it is true. However, implementation of the accord will not occur until 2019. But even if it had been implemented on Jan. 1st, its impact would not have manifested in a rush by the banks to buy up what they could. No, the real benefit to the banks is that they would then have an asset whose value would have doubled, thus enabling them to go out and borrow twice as many dollars. But there would be no benefit to the banks in going out and buying more gold in that they would be paying full price for it and could not double its value as they will be able to with what they already have in their possession. And by possession, i mean not just their own gold, but also the gold they hold for clients, for they get to hypothecate that also....As for gold being revalued, remember that while it may happen, it will not do so in isolation. The price of everything else will respond in kind. For those owning gold at that time, should that time ever arrive, that will be the time to sell, for there will be some lag time as the price of everything else plays catch up.

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Beginning of the headline : Economists who hold the popular view that expanding the money supply will provide the best medicine for our ailing economy dismiss the inflationary concerns of monetary hawks, like me, by pointing to the supposedly low inflation that has occurred during the current period of rampant Fed activism... Read More

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