Peter Schiff’s Latest Comments About Gold and Gold Stocks

With the dismal performance of gold stocks testing the patience of even hardcore gold bugs, Euro Pacific Capital CEO Peter Schiff believes investors should not panic and sell, but hold on, the bottom in the gold mining stocks is probably in.

And if the bottom is not in, hold on anyway.

“We could see another 10% pop in a week or two in the mining shares,” Schiff told King World News on May 23.  “There’s a very good chance that the bottom is in, especially if we can get a rally in gold.”

At this time, it may be worth repeating a famous quote from economist John Maynard Keynes: “The market can stay irrational longer than you can stay solvent.”  On the way up and on the way down, markets can mis-price assets to ridiculous levels for longer periods of time than appears rational.  Today, it’s the U.S. dollar, U.S. Treasury market and gold, which have been mis-priced for so long.

“Right now the U.S. dollar has been rising because of worries about Europe, but the dollar is sicker than the euro,” Schiff said.  “So both currencies should be falling against gold and gold should be taking off here.”

To put into better context how “sick” the U.S. dollar really is, consider an article penned by USA Today journalist Dennis Cauchon, who outlined in his May 23rd piece the horrific fiscal shortfalls in Washington—a fiscal debacle so large that economist John Williams of ShadowStats.com expects hyperinflation in America some time in 2014 as global investors might eventually witness 100 percent Fed monetization of fresh U.S. Treasury debt.

Under the Generally Accepted Accounting Principles (GAAP) rules of reporting financial disclosures, “the [U.S. budget] deficit was $5 trillion last year under those rules,” stated Cauchon.  “The official number was $1.3 trillion. Liabilities for Social Security, Medicare and other retirement programs rose by $3.7 trillion in 2011, according to government actuaries, but the amount was not registered on the government’s books.”

Whether investors are aware of the fraudulent U.S. Office of Management and Budget (OMB) accounting, or not, the reality of millions of baby boomers retiring each year and the growing budget deficits that come with an aging population will reach an inflection point, whereby investors of all stripes come to expect money printing as a way of life and begin trotting, then running, to gold and the gold shares in an effort to protect from a Greece-like financial collapse.

And the quick-fix to Washington deficits through Fed ‘stimulus’ and the higher tax receipts that result from a U.S. “bubble economy” has finally reached that ‘Minsky Moment’, according to Schiff.  After trillions of dollars of Fed stimulus since 2009, the economy just isn’t responding like it had for nearly 70 years of Fed intervention—a prediction made by 20th century economists Hyman Minsky and Ludwig von Mises, among others, of the ramifications of chronic central bank money supply injections.

“The market is just rolling over, as it’s coming to grips with the fact that the fantasy they believed in is just that: fantasy,” Schiff said in an earlier KWN interview of May 18th, referring to the recently reported poor economic numbers from Washington and private sources.  “It’s not reality.”

Schiff went on to say that gold—and by extension gold shares—will rise “as investors realize that QE3 [quantitative easing] is coming, because the Fed has already said that.  If the economy needs it, it’s going to get it.  And the economy is addicted to it [stimulus].  I mean, this economy needs QE like a heroin addict needs another fix.”

Back to the May 23rd interview:  Schiff suggested that the relative strength of the HUI index of mining shares to the gold price so far this week indicates to him a bottom is in and a buying opportunity is at hand.   As far as the gold mining shares, “we could have a pretty serious up-move in the gold stocks in a very short period of time.”

Jim Rickards: “Chaos” to Dollar Endgame “Most Likely”

Currency Wars author and adviser to the U.S. Department of Defense, Jim Rickards, said the most likely endgame to the currency war between the U.S. dollar, euro and Chinese renminbi is “chaos” for the U.S. dollar.  Sign-up for my 100% FREE Alerts

“I lay out four scenarios [in my book], which I call ‘The Four Horsemen of the Dollar Apocalypse’,” Rickards told Euro Pacific Capital CEO Peter Schiff (posted Feb. 7, 2012 on goldseek.com).  “The first case is a world of multiple reserve currencies with the dollar being just one among several. . . The second case is world money in the form of Special Drawing Rights (SDRs). . . The third case is a return to the gold standard.

“My final case is chaos and a resort to emergency economic powers. I consider this the most likely because of a combination of denial, delay, and wishful thinking on the part of the monetary elites.”

In the case of the U.S. returning to a gold standard, tomorrow, Rickards believes a gold price of $7,000 would adequately back the dollar from hyper-inflating.  But as time moves on along with expanding Fed balance sheets, that price tag climb, which, according to his previous analysis falls in a “range of between $5,000 to $11,000 per ounce of gold.”  See Jan. 6, 2012 KWN interview.

However, Rickards doesn’t expect the Fed to go quietly into the night.  “An honest debate about a gold standard is the last thing Bernanke wants.” Rickards said in the Jan. 6 KWN interview.

Instead, the Fed intends to fight for its survival until either the markets discipline the Bernanke Fed—as was the case of the bond vigilantes smack down of Paul Volker in 1980—or when Congress moves to limit Federal Reserve powers.

As to the former, Bernanke cannot respond by aggressively raising short-term interest rates without turning trillion dollar U.S. budget deficits into two trillion dollar deficits (without draconian budget cuts), which most assuredly would lead to a Greece-like run on the dollar.  To the latter, the litmus test of a Reagan-like Revolution remains lukewarm among Republicans toward the presidential candidacy of Congressman Ron Paul, the man whose track record for fighting the entrenched Keynesian mindset in Washington is legendary.

In addition to reining in a profligate Fed, the Congress and president must undertake politically unsavory measures to reign in its profligacy and coziness with banks, as well, which, according to Rickards include:

ñ Breaking up banks

ñ Banning derivatives

ñ Raising interest rates

ñ Cutting government spending

ñ Eliminating capital gains and corporate income taxes

ñ Institute a flat tax

ñ Reduce regulation to job creation

Those steeped in not only economics, but also U.S. politics, are keenly aware that any one of these issues creates a political firestorm for both parties, not to mention powerful forces behind the banking cartel of the U.S who would seek to torpedo any legislator it deems a threat to its 100-year-old money printing factory.  Assuredly, the blackballing of Congressman Paul hasn’t gone unnoticed by Washington politicians.

Could even ‘Rough and Ready’ Teddy Roosevelt undo the madness of the banking cartel’s grip on Washington?

Today, anyway, Rickards sees no tough man on a horse lighting a fire under the body politic like a Teddy Roosevelt once did in 1900; he thinks, instead, the course to a dollar devaluation is inevitable.  There’s too much reform and too little time to alter the course of the U.S. dollar’s debasement.

In fact, Rickards anticipates that the euro will end up much better off than the U.S. dollar.  That’s quite a statement.

At least, in Europe, there’s a shred of infighting about spending cuts, according to Rickards.  In contrast, in the U.S., not a peep about tackling entitlements and an overhaul of the tax system, from either party.  Simpson-Bowles has so far been all but completely rejected by an experimental Super Committee.

“I expect Europe and the euro will emerge the strongest after this currency war by doing the most to maintain the value of its currency while focusing on economic fundamentals, rather than quick fixes through devaluation,” Rickards explained.  “This is because the U.S. and China are both currency manipulators out to reduce the value of their currencies. In the zero-sum world of currency wars, if the dollar and yuan are both down or flat, the euro must be going up. This is why the euro has not acted in accord with market expectations of its collapse.

“The other reason the euro is strong and getting stronger is because it is backed by 10,000 tons of gold – even more than the U.S. This is a source of strength for the euro.”

Rickards recommends investors hold 20 percent of their assets in gold bullion, with another five percent held in silver.  He anticipates the currency war (to see who can debase the most) between the dollar, euro and renminbi to last an additional five years, at least.  Sign-up for my 100% FREE Alerts

Cuban Missile Crisis, the Sequel; $3,000 Gold Possible

In what appears as swift retaliation by Iran against U.S.-led economic sanctions imposed on the Persian Gulf state, suddenly Iran says it will no longer accept the U.S. dollar as payment for its oil shipments to India, Japan and China.

In addition, bilateral trade between Iran and Russia will break from the dollar for settlement in favor of Iranian rial and Russian rubles, according to Iran’s state-run Fars news agency.  Sign-up for my 100% FREE Alerts

But unlike a similarly bold move taken on Oct. 30, 2000, (effective Nov. 6) by Saddam Hussein to rid Iraq of the U.S. dollar as payment for Iraqi oil, Iran asserts the new arrangement to drop the dollar was Russia’s idea.

“The proposal to switch to the ruble and the rial was raised by Russian President Dmitry Medvedev at a meeting with his Iranian counterpart, Mahmoud Ahmadinejad, in Astana, Kazakhstan, of the Shanghai Cooperation Organization,” according to Bloomberg.

So, is the U.S. about to embark on another Iraq, or is the situation with Iran more akin to an October 1962 Cuban Missile Crisis with Cuba’s big brother, Russia?

Amazingly, or not (media ignored the euro-for-Iraqi-oil story, too), since the bombshell Iranian announcement, only a handful of news outlets of the West covered the dollar-dumping announcement of this vital story.  Of course, though, zerohedge.com (and PrisonPlanet.com’s posting of the zerohedge post) was one of these handful, providing adequate sourcing and commentary of the breaking news about Iran/Russia from China-based ChinaDaily.com.cn.

Most of the usual suspects of traditional media, however, have drawn attention to the threat of a closing of the Strait of Hormuz, instead—an important issue, no doubt, but its no longer news at this point in the crisis and certainly doesn’t compete with the latest development regarding the trashing of the Greenback from a member of OPEC on the same day Russia lays anchor in Syria to the north of Israel.

According to China Daily, “Russian warships patrolling the eastern Mediterranean Sea have docked at Russia’s naval supply facility in the Syrian port of Tartus, the private Addounia TV reported Saturday.

“Governor of Tartus Imad Naddaf received the ships’ leaders and expressed appreciation to Russia’s support for Syria, the report said.

“Russia’s state-owned Itar-Tass news agency quoted a source from the Russian Navy as saying that ‘It is planned that the port of Tartus will be visited by a big anti-submarine ship of the Northern Fleet Admiral Chabanenko and an escort ship Yaroslav Mudry.

So, it appears that the Iranians are a lot more prepared to deal with the U.S. than its neighbor to the West was, Iraq.

And for those familiar with the most likely reason for the attack on Iraq may also be familiar with William R. Clark, author of Petrodollar Warfare: Oil, Iraq and the Future of the Dollar.  Of course, ‘weapons of mass destruction’ was merely a sophomoric ruse in the call to war with Iraq.  So what was the reason?

In his book, Clark makes a case for a world that will most probably include a future riddled with war in the Middle East, as the U.S. takes preemptive measures to secure—not only oil—but more importantly, to assure a continuation of dollar hegemony in global trade as a means of preventing a Greenback collapse as a medium of exchange and value.

As a preface to his book, Clark posited an essay in January 2003, titled, Revisited — The Real Reasons for the Upcoming War With Iraq: A Macroeconomic and Geostrategic Analysis of the Unspoken TruthIn the essay, Clark cites an anonymous source who told him the NY Fed (through the Treasury ESF) ultimately dictates foreign policy via the U.S. dollar, and that any threat to the artificial support of the dollar must illicit an immediate response at the NSA level.

After reading Clark’s essay, anonymous, or not, the source appears to be a very, very good one.

According to anonymous:

The Federal Reserve’s greatest nightmare is that OPEC will switch its international transactions from a dollar standard to a euro standard. Iraq actually made this switch in Nov. 2000 (when the euro was worth around 82 cents), and has actually made off like a bandit considering the dollar’s steady depreciation against the euro. (Note: the dollar declined 17% against the euro in 2002.)

The real reason the Bush administration wants a puppet government in Iraq — or more importantly, the reason why the corporate-military-industrial network conglomerate wants a puppet government in Iraq — is so that it will revert back to a dollar standard and stay that way. (While also hoping to veto any wider OPEC momentum towards the euro, especially from Iran — the 2nd largest OPEC producer who is actively discussing a switch to euros for its oil exports).

Saddam sealed his fate when he decided to switch to the euro in late 2000 (and later converted his $10 billion reserve fund at the U.N. to euros) — at that point, another manufactured Gulf War become inevitable under Bush II. Only the most extreme circumstances could possibly stop that now and I strongly doubt anything can — short of Saddam getting replaced with a pliant regime.

Big Picture Perspective: Everything else aside from the reserve currency and the Saudi/Iran oil issues (i.e. domestic political issues and international criticism) is peripheral and of marginal consequence to this administration. Further, the dollar-euro threat is powerful enough that they will rather risk much of the economic backlash in the short-term to stave off the long-term dollar crash of an OPEC transaction standard change from dollars to euros. All of this fits into the broader Great Game that encompasses Russia, India, China.  [Emphasis added]

As we know, following Iraq’s decision to dump the dollar in favor of the Euro, 14 months later U.S. President George W. Bush delivered his ‘Axis of Evil’ speech on the first State of the Union address of his presidency on Jan. 23, 2002.  Iraq, Iran and N. Korean are the nations of that axis, according to Bush.

With Iraq as the first casualty of the Great Game, that leaves Iran and N. Korea left as targets and responses from Russia and China.

Calls for $3,000 gold are everywhere.  With central banks printing money at astonishing rates without formally announcing anything about it; tensions in the Persian Gulf rivaling the Cuban Missile Crisis; and an election year that sports the most threatening presidential candidate (Congressman Ron Paul of Texas) to the ‘establishment’ since John Kennedy (or maybe as far back as Theodore Roosevelt 1900-08), it appears early on that surviving 2012 without a major event is a very long shot, indeed.  Sign-up for my 100% FREE Alerts

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