DecliNATIONblog

After Peter Schiff’s great internet fame of mid-to-late ’08 came the ridicule and furry of the bloggers and the WSJ.  Sure the dollar surged and Schiff’s advice looked bad in early ’09.  But he stayed consistant and asked his investors to stay the course and now…he looks like a prophet yet again.

If you have not already done so, please read Crash Proof by Peter Schiff.  In the book he outlines why we had the dot.com boom, the housing bubble, and why they both HAD to fail.

He has been preaching the collapse of the dollar, the rise in gold and silver, and how investors can capitalize to get ahead of the game.

Well this week was sweet redemption as reported by Bloomberg:

The dollar declined beyond $1.41 against the euro for the first time this year as evidence the global recession is easing sent investors in search of assets with higher returns.

and this:

The dollar weakened 1.4 percent to $1.4136 per euro at 4:17 p.m. in New York, from $1.3941 yesterday, extending its decline this month to 6.4 percent, the biggest since December, when it dropped 9.2 percent. The dollar depreciated 1.7 percent to 95.24 yen from 96.85. The yen advanced 0.3 percent to 134.67 per euro from 135.04 yesterday.

The truth is the global economy is doing quite well and as I posted last week, our foreign creditors are catching on to “Our Lord and Savior” Obama’s plan to inflate our way out of debt.

International investors own about 51 percent of the $6.36 trillion in marketable U.S. government debt outstanding, up from 35 percent in 2000, according to data compiled by the Treasury.

South Korea is the latest holder of U.S. government debt to reduce its holdings. China, the largest foreign owner of Treasuries, said in March it was “worried” about its $767.9 billion investment and looking for assurances the value of its holdings would be protected. China has shifted holdings into bills from notes, more at risk when interest rates rise.

Virtually all of the losses Schiff’s clients experienced in late ’08 and early ’09 have been erased and many are now seeing serious growth.

Don’t worry, this is going to get much much worse before it gets any better-which means there is plenty of money to be made with the Peter Schiff approach to investing.

…and righfully so.

Our nations #1 creditor is getting concerned that we will be ‘printing’ our way out of debt, which of course means all of the dollars they own will become worthless.

From the Telegraph (click to read the entire article) comes this beauty:

Richard Fisher, president of the Dallas Federal Reserve Bank, said: “Senior officials of the Chinese government grilled me about whether or not we are going to monetise the actions of our legislature.”

“I must have been asked about that a hundred times in China. I was asked at every single meeting about our purchases of Treasuries. That seemed to be the principal preoccupation of those that were invested with their surpluses mostly in the United States,” he told the Wall Street Journal.

This comes as no surprise to anyone that read Crash Proof by Peter Schiff or Meltdown by Tom Woods.  The problem is all the freaking Keynesian Economists that love and are loved by Washington and the media just can’t figure why this is happening.

Let me put it this way.  The Federal Government is one agency that has no obligation to pay any of it’s debt back.  By the time creditors come calling, individuals in Washington have either left town or they come up with policies (like they are doing now) that allow them to miraculously purchase US Treasuries.  This action of course devalues the dollar, which means the creditor will eventually get paid back, but not with a currency that has any value.

I am sure that this point has not been missed by our Chinese Creditors.

This is probably a really good time to buy gold

Couple this with the hyper-inflation that our devaluing dollar is about to produce and we should start to see some serious economic turmoil.

Gold anyone?

I discovered Peter Schiff about a 9 months ago from a YouTube video, Peter Schiff was Right.  Since then I have read his book “Crash Proof” at which point I became a believer.  I frequent his website daily and on Fridays I make it a point to read his weekly commentary.  Today was no exception.  I had actually found this article last night from thestreet.com, but this edition comes directly from his website.

While economists and real estate investors “celebrate” the slight deceleration in the pace of home price declines in the recent data, a quick look at home price trajectories over the past 100 and 50 years reveals little to cheer about and much to be feared.

More significant than small month-to-month changes is the flow of home price patterns over decades. In his book Irrational Exuberance, Robert Shiller determined that in the 100 years between 1900 and 2000, home prices in the U.S. increased by an average of about 3.4% per year. These figures have not been adjusted for inflation. If they had, home prices would have outpaced inflation by only the slimmest of margins.

I for one and sick and tired of people calling their homes an “investment”, or worse those that expect their home to actually appreciate at 10% a year and NEVER depreciate.  Americans fell in love with the idea that their home doubled as their ATM but those days where one large head fake and hopefully we will never see them again.

He continues…

The government, through deficit spending, stimuli and bailouts, is literally pumping trillions and trillions of new dollars into the economy. Once the bloated inventories of the boom years are worked through, this torrent of new cash will push prices up with across the board. Inflation, more virulent than the variety seen in the 1970s, will put a nominal floor under home prices. But the benefits of seemingly stable home prices will be illusory. What good is a $200,000 house if it costs nearly that much to fill the refrigerator? However, inflation putting a floor under home prices does nothing to increase real demand for houses. With the prices for stocks, commodities and food going up faster than the prices of homes, residential real estate will remain a lousy investment. As a result, be wary of those who have called a housing bottom and now recommend beaten-down homebuilding stocks.

I realize that some individuals have fallen off the Peter Schiff bandwagon because of the dollar rally of late ’08 and early ’09, but they will be back soon enough when our dollar is worthless and his long-term investment strategy proves true.

Enjoy the complete article here.