Too Big to Burst
It is widely believed that the Federal government has an unofficial policy that some banks and other financial institutions are simply too big to fail. As a result, it is assumed that the government will take any action necessary to ensure that they do not. It now appears to me that there is a similar doctrine in effect for bubbles, in that some are simply too big to burst. Housing, which is the lynchpin holding together the entire U.S. economy, certainly fits that category. To paraphrase Winston Churchill "never in the field of economics has so much been owed by so many to just one thing."
Through the wealth effect and cash-out equity extractions, the housing bubble has enabled Americans to consume far beyond their collective means. The result is a bubble economy, where incomes, jobs, tax revenue, corporate earnings, and the solvency of our lending institutions, are all dependent upon sustained, stratospheric home values. When prices return to earth, the economic impact will be catastrophic.
This dismal reality is certainly
not lost on those in Washington. The only way for housing prices
to stay high is for the Fed to keep inflating. Conveniently,
the captain currently at the helm of the monetary ship of state
just happens to be Ben Bernanke, who as a Fed governor spoke
about the Fed's ability to fend of deflation by using the handy
invention of the printing press. Though his words may have may
have spoken in reference to consumer prices, his actions will
certainly be concentrated on asset prices, especially housing.
The U.S. dollar will likely be biggest casualty of this scheme and the gold the biggest beneficiary. To learn the best ways to get out of the dollar, download my free research report available at www.researchreportone.com and subscribe to my free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp To discover the best way to buy gold, visit www.goldyoucanfold.com
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