by Peter Schiff, Euro Pacific Capital | June 7, 2010
In recent months, GDP numbers have rebounded – primarily as a result of record low interest rates reliquifying the credit market and government stimulus jolting consumer spending. Although the “positive growth” has delighted Obama’s economic brain trust, it has done little to boost the fortunes of Main Street. As I have said many times, GDP largely measures spending, and spending is not growth.
Last Friday we received the latest indication that the real economy is not recovering in the slightest. The Labor Department reported that non-farm payrolls increased by 431,000 jobs in May. In a press statement, the President himself crowed at the news, noting that the official employment rate fell to 9.7% from 9.9%. However, just inches below the headline, red flags were everywhere. Only 41,000 of those jobs were generated in the private sector – far below the median forecast of 180,000. Even more troubling was the fact that the Census Bureau alone accounted for 411,000 new jobs, which were almost exclusively temporary positions.
Ben Bernanke, otherwise known as Helicopter Ben today states that he is puzzled by the continued climb of gold.
“I don’t fully understand movements in the gold price,” Mr. Bernanke admitted.
What Mr. Bernanke does not seem to recognize is the extraordinary inflation pressures already in the system. The fact that asset prices are being artificially held up is price fixing and is accomplished through inflation. Gold is not reflecting immediate price inflation so much as mid to long term inflation concerns. Simply put, gold is recognizing the effects of quantitative easing on the monetary base. The Federal Reserve and central planners generally have no ability to think long term as a pool of collective consumers without coercion otherwise known as a free market do. It is debatable if manipulation of gold prices by central banks occurs or to what extent. It is definite that bailouts to preferred corporations and banks constitute economic fascism and inflate the asset value of the company receiving the infusion. This is turn coerces investors into preferred asset classes of the political class, mainly the paper equities of the otherwise failing institutions. This misallocation of capital only prolongs the misery and delays the day of reckoning. An economy can not be endlessly built on a pyramid of debt and be driven mainly by consumption. There is a point that consumers leave the game, even if employed. Households have to budget and plan; governments seem to believe they do not. Bernanke in his narrow Keynesian economic view think the only measure and indicators of inflation are bond yields or the manipulated CPI numbers.
Daniel Ellsberg, legendary leaker of the “Pentagon Papers” in 1971, still has a bone to pick with the White House. In an interview with SPIEGEL ONLINE, the 79-year-old peace activist accuses President Obama of betraying his election promises — in Iraq, in Afghanistan and on civil liberties.
SPIEGEL ONLINE: Mr. Ellsberg, you’re a hero and an icon of the left. But we hear you’re not too happy with President Obama anymore.
Daniel Ellsberg: I voted for him and I will probably vote for him again, as opposed to the Republicans. But I believe his administration in some key aspects is nothing other than the third term of the Bush administration.
Today Raw Story reports that Dennis Kucinich says we may be funding our own killers in Afghanistan.
“Our troops are dying in Afghanistan, and now it turns out we may be funding their killers,” Kucinich said in a statement e-mailed to Raw Story, renewing his longstanding call for a pullout. “Our continued presence in Afghanistan is detrimental to our security.”
“Gold rallied to a new all-time high this morning as worried investors continue to pile in to the precious metal,” said Rajesh Patel, head trader at financial betting firm Spread Co.
“We are seeing continued signs of stress in the financial markets and investors, novice to expert are looking at gold now as a hedge against further turmoil.” Gold is viewed as a safe-haven investment in times of economic trouble.