Peter Schiff writes:

Now that the Fed has recklessly shown its hand, the mad dash to get out of Treasuries and dollars should not be far off. The more the Fed prints to buy bonds the less the dollar is worth. Holders of our debt (read China and Japan) understand this dynamic. We must expect that they will not only refuse to buy new bonds, but they will look to unload those bonds they already own.

Under normal circumstances, if creditors grew concerned that inflation was eating into their returns, the Fed would raise interest rates to entice them to buy. However, the Fed will avoid this course of action as it fears higher rates are too heavy a burden for our debt-laden economy to bear. To maintain artificially low rates, the Fed will be forced to purchase trillions more debt then it expects as it becomes the only buyer in a sellers market.

Assuming you have read the full piece from which the above quote was taken, one could ask the question: Is Schiff alluding to Hemmingway? Hmmm, let’s follow this just for fun because, if the bell is tolling, as Schiff suggests, the question then becomes for whom? I love rhetorical riddles and this one really should sit for a spell before you reach your conclusion…

Schiff has been stunningly correct (but at times precisely incorrect in the short term) in his larger, longer, view of economic matters; when he speaks in terms of long term trends it would be wise to take him very seriously.

Being a student of George Reisman (pronounced rees-man), I see in Schiff much Reisman-esque thinking. Peter would wise to keep some of this to himself, however, lest he wish to face the fate of the Republicans who were persecuted after the rise of Francisco Franco… Who? What?

Too dramatic, you say?

Well, one should not be surprised to know that in most government schools Nazi Germany is a unit that is brought up totally out of context, eliminating, for all intents and purposes, the Spanish Civil War and its antecedents (particularly philosophical). Generally speaking, kids in government institutions being force-fed history do not get anywhere near the dose of context that is required to understand Hitler, the Nazis, and the gestalt of national socialism. But if you knew that the Spanish Civil war was a precursory or proxy for WWII, and you knew the philosophical fronts of the battles, would you not understand Nazism in a, well, actual way? Of course you would.

Of course, one of the primary reasons for the omission of the basis is more often than not that the institution itself and its education degreed automatons don’t understand the philosophical battles that were brewing, where those battles came from, either – at the end of the day they have a unit to present, and a fixed period of time to present it.. Pragmatism rules the government schools.

Similarly, in today’s analysis of economic matters people in general do not get any context in which government intervention is taking place. Schiff, however, is the antidote to much of this and is generally an inoculation to such context swapping and context blanking that is so obvious to some of us on the outside looking in.

Time will tell, but Peter’s rhetorical question at the end of his piece is loaded: “Got Gold?”

Well, yes. I do… nowhere near as much as I wish I had.

So, let me leave you with this thought: If you knew today that the price of gold will likely double in 12 to 18 months, and the value of the dollar would drop like a pair of loose trousers at the Mustang Ranch over the noon hour, what would you do?