Peter Schiff: Deflation vs. Inflation Argument on FSN
Thursday, April 22nd, 2010 at
4:07 am
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Tagged with: bernanke • Bob • collapse • Deflation • dollar • economic • economy • financial • Gold • Inflation • newhour • obama • peter • Prechter • schiff • Sense • vs
Filed under: Inflation
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Peter is dead on. I am a staunch supporter of Peter and find myself repeating verbatim many of his ideas. The result… people think I’m paranoid. Infuriating. People don’t want to believe.
Peter you are so right!…i just dont understand why a average american is not able to understand this basic things!!!..I have really become a huge fan of yours over the past few months..i mean when you talk it makes so much sense..I have heard other experts who have the opposite point of viewthan yours and it just ridicules me as to the bs reasons they give for their beliefs..i meanany person who has studied basic economics in school will understand what you trying to explain!!!wake up usa
I think he is giving the Govt a bit too much credit.
Govt is not that smart.
Inflation is inevitable but it’s a matter of timing. People aren’t borrowing much anymore, saving at record rates, defaulting on mortgages, getting foreclosed and defaulting. All of which are deflationary. Deflation first, then inflation. Inflation will begin only after 99% of experts and your non trading friends become firmly convinced of the reality of deflation and consider you crazy to think otherwise.
obama just another wall st. partner. nothing he’s doing will get any better. he’s selling us all out. has nothing to do with race,party,dreams,hope,change. welcome to the new world order! it’s time to arm yourselves. it’s time to revolt against this corrupted gov’t. over throw these crooks. getthem all out. we need a newparty, we the people. new branch for the people. by the people.
Deflation and inflation are only possible due to fractional-reserve banking. Without fractional-reserve banking, these things would not even be a topic for discussion.
@jaffijoe
We don’t even have fractional reserve banking anymore. Banks have NO reserve requirements whatsoever after Volcker. The Fed gave up its power to enforce reserve requirements. The Fed was initially created as a compromise between banks and government. Slowly but surely the private banks have been taking it over as they no doubt intended all along. Anyway, fractional reserve would add at least some discipline to banking and would be superior to what we have now. Banks hate it.
That is not accurate at all. Banks still have reserve requirements for deposit accounts. The only thing that changed is accounting rules and what can be counted as reserve assets. Also, the Fed was always privately owned since its inception in 1913.The shareholders get 5% APR on earnings, the rest is handed over to the Treasury. The ability to create money our of debt is never a good idea, even if the reserve requirement is at 90%. Simple fact is that market-born money is the only way to go.
Also, the Fed was created due to the fact that state chartered banks were inflating and causing regional panics. Rather than making the expansion of money supply completely illegal, they instead instituted the Federal Reserve, our third and most powerful central bank. Its expansion of credit has created every boom-bust cycle since. After 1971, this has gotten worse. Now, they can inflate upon already inflated reserves to perpetuity.
@jaffijoe
The Fed no longer sets reserve requirements so there is no legal controlling authority to enforce this. Show me a single law that ENFORCES reserve requirements. There is none. Although very difficult for you to accept, the Fed does not control the economy. It can supply discipline or grant favors but it cannot change the larger trend. I’m going to make a lot of money going long on the US dollar then years later I’ll ride the short side. I know what I’m doing.
Lastly, creating money out of debt is a good idea but it requires honesty and discipline. The derivatives used to control risk CDOs and CDSs have been steadily debauched creating the false sense of a riskless mortgage industry. When you buy a corn or soytbean contract, it represents something. The CDOs didn’t contain actual mortgages. Banks cooked up a phony portfolio and sold it! . When these CDOs looked great it lowered the perceived risk and banks went on overdrive selling mortgages
Sections 2 and 19 of the Federal Reserve Act, as well as Federal Reserve Regulation D outline the Fed’s control of reserve requirements.
That law doesn’t matter because it applies to checking accounts. Other account types had their reserve requirements lowered to practically zero in the early 90s. The banks operate as though they have no checking accounts and daily sweep deposits into savings and money market funds. This understates checking account balances which allows banks to meet reserve requirements. This allows banks to nominally meet their checking account reserve requirements without actually having the money.
“Lastly, creating money out of debt is a good idea”
are you fking kidding me?
The socialist plan:
Since we all have too much debt, we all need to spend lots more to solve this problem. Big government needs to grow a lot bigger, we need much higher taxes on the productive, much more money needs to be printed, failures need to be bailed out, needs must all be met and finally the debt must be increased exponentially.
Right on, Jaffijoe, you can’t fertilise an economy with credit expansion because it simply leads to sudden binges which, when ended by price corrections, would end if not for meddling government keeping the credit-expansion constant. And the bigger the boom (the longer I mean) the bigger the bust.
And as for banks having reserve requirements, the only sound way to manage them is to let them be free and therefore more responsible, as well as being free from the fraud of central-banking.
And regarding jdbrown371′s comments, I think somebody needs to learn a little bit of the ugly history of central-banking before they blame financial crises made inevitable by central-banks, on the free market.
Ask WHY banks pursued reckless sub-prime lending and securitised bad assets thus intoxicating the whole financial industry.
That question’s answer is the mass-fraud of low interest rates and the moral hazard of the ‘lender of last resort’ among myriad other interventions.
Market be free!
And as for ‘honesty and discipline’ in expanding credit, have you never considered that the honest way is to allow the market to select money of stable value, as it perennially has, in the form of gold?
Oh, but Friedman doesn’t like the gold-standard? No, Friedman prefers central-banking and fiat currency-and thinks the money supply can be extended centrally without too-great an increase, by use of a computer! But how would Commissar Intel know the correct rate? Through tyrannous means perhaps!
Ugh Attacking friedman is like attacking your brother that likes Jeff Gordon he still likes Nascar thank the good lord but he chose a horrible driver.
Creting money of debt destroys the real economy and causes massive inflation multplying it by a factor of ten is even more absurd..
Actually in terms of price deflation it would continue in the prosperous oh wait another capital good invention and massive production lower prices events.
Deflation in reality never occurs I mean serious raising interest rates would cause the delfation the only course of action to take in reality it merely gives value to the money and the money does nto exit the supply ah contraie it enters the hands investor on the wings of an interest rate
You are downright wrong.
One problem it is not “privately” owned its its a state monopoly that bankrupts banks and that 5% pile of crap doesn’t account for the massive inflation remember if the inflationrate is higher than the interest rate its always a loss.
Sorry, I don’t know anything about Nascar, I’m British!
The only way to make banks responsible and rational is surely to abolish the institutions that are expressly intended to induce credit expansion, by the mass fraud of the control of interest rates-to understand what damage central banking does to banks, just think what happens in a mini boom-and-bust scenario if I countefeit $1 billion, give it to a few entrepeneurs, they invest in production goods and bam prices go up-they’re bankrupt.
@Deutsche22 I agree with you let others may think ur paranoid, yet those who don’t know what is going on will only see bad times when everything goes down.