$500
Gold and Interest Rates
Peter Schiff
Nov 28, 2005
As the Fed continues its inflation
campaign, most have yet to come to grips with the reality of
America's uniquely precarious situation. In an act of prestidigitation
that would impress Harry Houdini, the Fed is now attempting to
make inflation disappear by no longer publishing data on the
growth of M3, while mystifying the public with phony CPI statistics.
However, the relentless rise in the price of gold is evidence
that fewer people are being fooled by the Fed's slight of hand.
Gold's recent rise to just
under $500 per ounce, gaining over $30 per ounce in November
alone, indicates the market's expectations of higher current
and future inflation. Higher long-term interest rates are sure
to follow. As fiat currencies continue to lose value relative
to gold, lenders world-wide will demand higher rates of return
to compensate for that loss, ending the low interest rate environment
that has nourished the global economy for the past six years.
Nowhere will the fallout be
greater than in the United States, where the economy is more
vulnerable than any other to the crippling effect of higher interest
rates. As the world's biggest debtor, America will be forced
to pay higher interest rates to creditor nations. The resulting
drain on America's national income and strain on consumer spending
will plunge its economy into a severe recession.
Under normal circumstances,
debtors would benefit from higher inflation, which would greatly
diminish the real burden of repayment. However, these are hardly
normal times. Due to the irresponsible debt management of the
Clinton and Bush administrations, the average maturity of the
eight trillion dollar national debt is now under three years.
Therefore our creditors are not stuck holding low yielding, long-term
debt. They can simply refuse to roll-over maturing paper, or
demand substantially higher interest rates for doing so.
In addition, under normal circumstances,
a debtor nation would improve its lot by wiping out the real
value of its liabilities through currency depreciation. Not so
for the United States, where a hollowed out industrial base makes
its citizens extremely vulnerable to a loss of confidence in
its currency. Not only will Americans have to live without the
products currently supplied by foreign manufactures, but the
jobs associated with their distribution as well. In addition,
without access to foreign savings, the rug will be pulled out
from under the housing market and consumer spending, as well
as the employment associated with each.
Nov 25, 2005
Do
not wait for pull backs that may never come. Buy gold at current
prices and do not look back. I still believe the best way for
average investors to participate is though the Perth Mint in Australia.
For more information on their unique, safe, private, low-cost
program visit www.goldyoucanfold.com.
In addition, as the dollar's
value is likely to sink far faster than those of other fiat currencies,
investors can learn strategies to protect wealth and preserve
purchasing power by downloading my free research report on the
coming collapse of the U.S. dollar at www.researchreportone.com
and subscribing to my free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp.
Peter Schiff
C.E.O. and Chief Global Strategist
Euro Pacific Capital, Inc.
1 800-727-7922
email: pschiff@europac.net
website: www.europac.net
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Mr. Schiff is one of
the few non-biased investment advisors (not committed solely to
the short side of the market) to have correctly called the current
bear market before it began and to have positioned his clients
accordingly. As a result of his accurate forecasts on the U.S.
stock market, commodities, gold and the dollar, he is becoming
increasingly more renowned. He has been quoted in many of the
nation's leading newspapers, including The Wall Street Journal,
Barron's, Investor's Business Daily, The Financial Times, The
New York Times, The Los Angeles Times, The Washington Post, The
Chicago Tribune, The Dallas Morning News, The Miami Herald, The
San Francisco Chronicle, The Atlanta Journal-Constitution, The
Arizona Republic, The Philadelphia Inquirer, and the Christian
Science Monitor, and has appeared on CNBC, CNNfn., and Bloomberg.
In addition, his views are frequently quoted locally in the Orange
County Register.
Mr. Schiff began his investment career as a financial consultant
with Shearson Lehman Brothers, after having earned a degree in
finance and accounting from U.C. Berkley in 1987. A financial
professional for seventeen years he joined Euro Pacific
in 1996 and has served as its President since January 2000. An
expert on money, economic theory, and international investing,
he is a highly recommended broker by many of the nation's financial
newsletters and advisory services.
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