The Bear on the Titanic

This is his "arguing about the tab on the titanic" statement, right? (I can't get video at work.)

Couple of thoughts:

1.) The US printed its way out of the Vietnam war back in the '70s. And we had high oil prices back then, too. Today is no different. This is going to end with a lot of stagflation and economic doldrums, but it is not going to end with some apocalyptic vision. We are likely to simply track five more years of a secular bear market.

2.) Yes, we also had high oil prices back in the '70s. And the rise of Germany, Japan and the middle-east was just as scary as- perhaps moreso than- the China situation looks today. Especially after we got run out of Vietnam by a bunch of guerilla fighters with fairly primitive machinery and booby traps.

3.) As the US transitions away from a consumer economy, the fact that we don't make anything here is actually a somewhat good thing. It means we're a resources economy. We have the LNG, corn, coal, iron, and wood to supply to China's growing middle class. The US was always rich- as far back as the Revolutionary War- because of its resources, not because of its manufacturing base. It's what makes the US great, and it's something that Peter Schiff is going to find himself tripping over in five years- when the secular bear is going to end- if he's not careful.

4.) I hate to say it, but the US needs to consider better environmental regulations so we can safely exploit the shale natural gas that we have without damaging our historical agricultural natural resources base- what's kept us a rich country while the rest of the world was surviving famines. I used to be opposed to the environuts until I- an ardent nuclear booster- saw what happened at Fukushima. The fact is that we don't know enough about shale natural gas yet to declare it safe for the environment. Transitions to using all-natural fracking chemicals in many areas are a great start, but there's generally a 20-year time lag between us realizing something has environmental implications and us understanding what those implications are. Maybe it is a good idea to restrict drilling near key watersheds like upstate New York and the Great Lakes with a 20-year sunset provision. Michigan did the same thing with drilling in the Great Lakes, and after the Gulf Spill, it looks like that might have been a wise move.

I am all for not giving into the panic-mongering of the environuts, but it is probably wise to protect the most important watersheds. New York State is doing the right thing with drilling restrictions; hopefully the Great Lakes states will do the same in the Lake Superior/Michigan/Huron/Erie/Ontario watersheds- and also consider further restrictions on oil and hazardous material shipments on the lakes.

The world's largest supply of liquid freshwater is too important to run an experiment on- admittedly one with a high probability of being perfectly safe- until we really know what we're doing. We spent two decades on nuclear power research before we cleared the construction of large nuclear reactors that could cause an accident affecting hundreds of square miles- let's at least keep the Shale gas experiment out of the Great Lakes and upstate New York for a few more decades- until there is a scientific consensus about all of the environmental impacts.

We need to stay guarded against positive sentiments- with the capture of Bin Laden, there's a lot more risk of sentiment getting too positive- but Schiff is painting a picture of gloom that looks like the Aztec Empire when Cortez was at the gates, while I see something more like the US economy in the 1970s. We're going to get stagflation and likely a roughly flat market- perhaps keeping up with inflation-, but that means you need to buy TIPS, oil companies, real estate, resource companies, and maybe a little gold or foreign currency. It does not mean the world is ending and you need to get all your money into gold and silver.

Peter Schiff is like a little Chihuahua with anger management issues- he needs to be put on a shorter leash and the rest of us need to avoid going into a tizzy every time he starts barking. There's a huge crash coming for Chinese manufacturers in the next five to ten years. Adjusting for subsidies and environmental impact, US manufacturers are a lot more efficient than their Chinese counterparts. There will be a US industrial recovery coming- the biggest boom we've seen since the '50s- and Schiff is going to find himself with his pants down if he's invested in Chinese manufacturers when that happens.

Also, is it just me or are folks noticing issues with the CSS on these forums? I've noticed it on three different computers and IE builds so far.

I never heard of this guy before and didn't agree with pretty much anything he said. What I really don't understand is the fact that some people think the quantitative easing will go on forever and that interest rates will always stay this low. I think the chances of QE3 and beyond are extremely slim and the FED has already strongly hinted at the fact they will raise rates at the beginning of next year. Yes this will likely cause a correction in the stock market but that is a lot better then just sitting their and doing nothing while the country fell into a depression in 2008.

The biggest problem with the anti-dollar crowd is that there isn't a credible cross to for investors to take. You have some strong currencies in small banking and tax haven countries (the Swiss Franc comes to mind), but the economies they are tied to don't nearly have the capacity to absorb a dollar decline. Buying a Euro makes little sense to me. Germany is clearly backing the MC Hammer countries as a way to devalue its own currency to support its advanced industrial exports. The Chinese do not allow their currency to float. The Aussie dollar and the Looney are built on industrial commodity inflation that despite the money printing could not persist under the doomsday scenario Schiff and those of his ilk portend. The Yen is more poorly positioned than the dollar as debt issuance for rebuiding is forthcoming. The Korean Won benefits from growth in Asia and the US, it should suffer alongside the Aussie dollar and the Looney in said doomsday scenario. That very issue may be driving people to Gold and more recently Silver, but I cannot see that lasting. The only thing I agreed with Schiff about were all of the Gold scams out there. The myriad of cheesy physical gold investment firm advertisements on Television shows and sporting events that clearly aren't aimed at astute investors rivals the old Ditech home loan commercials GMAC ran at the height of the sub-prime market. Full disclosure: I do not hold a long or short position in precious metals so I guess those of you who bought a gold fund a year ago can call me wrong, but this has all of the makings of a bubble. Silver started to move higher when it became unaffordable for gold bugs to buy physical gold. I understand that there is currently more paper gold (held in ETF's and futures contracts) than there is physical gold to deliver. At first blush that seems like a reason for prices to rise, but the way I see it the holders of that paper gold do not want to take delivery ever so the demand it isnt real. There is unsustainable demand for Gold as a financial asset. Yesterday's events only serve to underscore the value of FIT currency that fed bashers overlook. That FIAT power is backed by something more than money supply and fiscal policy, in the case of the dollar it is backed by the iron fist of the US military industrial complex. US military spending (currently aided by easy money) causes the greatest weapons and strategic innovations to happen in the US, its simple market dynamics, and that in turn causes the US to control the flow of the best firepower througout the world. Now Gold is nealry $1600 and the DXY has been heading down for months. In 1998 Cisco was valued at a half Trillion dollars and in 2005 3 bedroom homes in Lake Las Vegas were $1.5 Million. Today we live in a new world order bubble: everyone thinks the planet has reached carrying capacity, the Chinese corporatist state will overrun the US, and all trade will revert to gold coinage by weight. The pendulum will swing the other way, we will continue to innovate, the Chinese are a net importer of food and a corporarist state of modern day slaves and plantation owners-that middle class rise isn't coming, and new forms of digital (not even paper) money will continue to dominate trade. It may be time to get short of the western doomsday trade and plan for rising interest rates, falling commodity prices, and dissapointing growth for everything tied to the rising emerging market middle class.