Click here to visit my website and view all of my archived Newsletters beginning Oct 19, 2007 to follow the journey of the Dollar, Gold, Oil, Federal Funds Rate, Discount Rate and the 30 Year Fixed Rate

"The FED is very reluctant now to raise rates even though they should be raising them. I think they are going to try to talk tougher but I think they are afraid to raise rates because they might raise rates and the dollar will fall anyway and that will really put them in a bind. The FED needs to be substantially increasing interest rates and not just by a quarter point, they should double or triple them and that is probably not even enough" -Peter Schiff

 

 

 It is unfortunate that the Supreme Court, in its ruling this week that U.S. currency is unfair to the blind, did not make the next logical step and declare it unfair to everyone who buys gasoline.

In their search for explanations as to why oil has surged past $130 per barrel, Washington, Wall Street, and the financial media are as clueless as cavemen after a freak summer snow storm. Despite the head scratching, the blame game is nevertheless in full force. Speculators and big oil companies are being trotted out as scapegoats, and increased margin requirements and taxes on windfall profits and futures trading have been mentioned as appropriate sanctions. In fact, this week the House of Representatives overwhelming approved a bill to sue OPEC for violating U.S. anti trust laws. It should be clear that all of this is pure farce, and that no one understands what is actually happening.

The reality is that after years of reckless consumption and dollar debasement, Americans are now being priced out of markets over which they formerly held unchallenged title. As more affluent foreigners consume more of the resources and products they previously supplied to us, Americans are being forced to cut back. The rising dollar-based price of gasoline is simply an illustration of this global trend.

Poorly concealed behind contrived government statistics, the signs of America's falling standard of living are everywhere; all one has to do is look. We are unloading SUVs for less desirable compacts, and are paying more to fly on crowded planes (where we pay to check luggage and dine only on what we bring onboard). We drink our lattes at McDonalds or not at all, and we increasingly forego dining out, trips to the mall, and vacations, just so we can scrape together enough to fill our gas tanks and kitchen pantries, pay taxes and insurance, or make credit card, mortgage or car payments.

The collective belt tightening is simply the down payment on the Government's massive bailout of Wall Street investment banks and mortgage lenders. As the Fed creates money to buy bad mortgages and other shaky securities held by banks and brokerage firms, the value of the savings and wages of everyone on Main Street will continue to fall. As a result, the costs of products previously taken for granted have begun to bite.

The various housing bills and stimulus packages now passing through Congress will add significantly to the staggering final price tag. In the end, the "free lunch" currently being dished out by Washington will be the most expensive meal ever served. The cost will be borne by ordinary Americans citizens every time they open their wallets. Four dollar gasoline is just the beginning.

For all the talk of increased global demand, few seem to understand from where it actually comes. The surge in global demand is both a function of the increased purchasing power of foreign currencies and the fact that foreigners are choosing to spend more of their incomes themselves. In other words Greenspan's famous "global savings glut" is turning into a global consumption binge, with Americans unable to crash the party. This trend will only get worse as the dollar-denominated price of just about everything that is either imported, or capable of being exported, goes through the roof.

We can look for scapegoats all we want but the simply fact is Americans are going to have to get used to a much lower standard of living. Those who have been putting all the food on our tables are finally pulling up chairs themselves.

For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar denominated investments, read my new book "Crash Proof: How to Profit from the Coming Economic Collapse."  

 

 

 

May 24, 2008

Bruce Norris is joined this week by president of 7 Steps to a 720 Credit Score and The Mortgage Equity Group, Philip Tirone. Bruce and Philip discuss when Philip first got in the lending business, what was required of borrowers in the late 90s, what types of loans were available, how 2004-2006 changed, the consumer and how they became investors, banks and their willingness to renegotiate, how debt was sold and collateralized, how subprime has spilled over to prime borrowers, how drastically the lending business changes in such a short time in today's market, how the bankers and economists seem to be out of touch with the local market, how the market has changed for investors, the pillars of financing, how important provable income is to obtain loans, what ratio of income to loan amount is now acceptable, qualifying people on net income, how credit scores have become so important, how banks now want to see money in the bank, the percentage of people now being able to qualify for loans, stated income loans in the current market, portfolio loans in the current market, how different consumers are treated differently even with FHA, how popular FHA has become, types of inventory or projects lenders shy away from, condos and rules that might make it difficult to get a loan, the products banks are trying to push, the reality of price declines, the losses not finished for lenders.
 

 

 

 

(Sep 18, 2007)- "If the dollar loses value too quickly, it could wreak havoc on the economy and financial markets - driving up interest rates and inflation and slashing Americans' purchasing power" -Peter Schiff 

 

 

(Sep 19, 2007)- "People keep talking about Fed bailouts as if there is no cost. All the Fed can do is create new dollars. What that does is diminish the value of all the dollars everybody already has. They try to socialize the losses among all the holders of dollars" -Peter Schiff

 

May 23 - Hamburgers and hot dogs? Check. Lighter fluid? Check. Beer? Check. More money?
Americans are about to fire up their grills for the summer cookout season, and one thing has become painfully apparent: It's going to cost a lot more than it did last year to roast a burger, or just about any other favorite. Food inflation is at its highest in almost two decades, driven by record prices for oil and gas, and mounting global demand for staples, such as wheat and corn, and for proteins, such as chicken. And that's reaching into Americans' backyards. The price of an average cookout - with burgers, hot dogs, beer, soda, condiments, salad, paper plates and lighter fluid - could run families 6 percent more than last year. That's making shoppers pause as they fill their carts for the Memorial Day weekend, the unofficial start of cookout season.......................

 

(Aug 16, 2007)- "The housing bubble has burst. Prices are going to collapse and sales are going to fall through the floor." -Peter Schiff 

 

 May 22 -- Nearly 50 San Diego County dwellings per day were lost to foreclosure in April, as the tally of mortgage failures rose 169 percent above last year, DataQuick Information Systems reported yesterday. Buckling under the weight of risky adjustable-rate loans, many borrowers are giving up on ever bringing their debt current. "Some of the people have lost their jobs and they can't afford their payments, but a lot of them just don't want the home anymore," said Linda Ring, a real estate agent who specializes in foreclosures. "They don't want to ride out the storm" April was the county's 37th consecutive month of year-over-year increases in foreclosures and notices of default, the start of the foreclosure process, the DataQuick research firm reported. There were 1,413 residential foreclosures countywide, a 35 percent increase from March but a rise of nearly 170 percent over April 2007...................

(Sep 21, 2007)- "With the Federal Funds Rate cut, the Fed revealed that it has no interest in defending the dollar or containing inflation. This kind of irresponsibility is all gold needs to move higher from its current levels unless the Fed somehow finds its backbone within a year or two, then gold has a good chance to take out its inflation-adjusted high of nearly $2,000 per ounce within this decade." -Peter Schiff

 

(July 31, 2007)- "It's going to soon hit $90 and go north of $100 next year. We should see $150 to $200 oil in the next two to three years because of the drop in the dollar.'' -Peter Schiff