Peter Schiff⚠️The Global Monetary System !! Printing Money Is Not The Cure For Cononavirus - financialanalysis

Breaking

Popular Posts

Thursday, February 20, 2020

Peter Schiff⚠️The Global Monetary System !! Printing Money Is Not The Cure For Cononavirus

In his most recent podcast, Peter Schiff talked about coronavirus and the impact that it is having on the markets.Earlier this month, Peter said he thought the virus was just an excuse for stock market woes. At the time he believed the market was poised to fall anyway. But as it turns out, coronavirus has actually helped the US stock market because it has led central banks to pump even more liquidity into the world financial system.
All this means more liquidity - central banks easing. In fact, that is exactly what has already happened, except the new easing is taking place, for now, outside the United States, particularly in China.”
Although the new money is primarily being created in China, it is flowing into dollars — the dollar index is up —  and into US stocks. Last week, US stock markets once again made all-time record highs.
In fact, I think but for the coronavirus, the US stock market would still be selling off. But because of the central bank stimulus that has been the result of fears over the coronavirus, that actually benefitted not only the US dollar, but the US stock market.”
In the midst of all this, Peter raises a really good question.
The primary economic concern is that coronavirus will slow down output and ultimately stunt economic growth. Practically speaking, the world would produce less stuff. If the virus continues to spread, there would be fewer goods and services produced in a market that is hunkered down.
Why would the Federal Reserve respond, or why would any central bank respond to that by printing money? How does printing more money solve that problem? It doesn’t. In fact, it actually exacerbates it. But you know, everybody looks and central bankers as if they’ve got the solution to every problem. They don’t. They don’t have the magic wand. They just have a printing press. And all that creates is inflation.”
Sometimes the illusion inflation creates can look like a magic wand. Printing money can paper over problems. But none of this is going to fundamentally fix the economy.
In fact, if central bankers were really going to do the right thing, the appropriate response would be to drain liquidity from the markets, not supply even more.”Peter explained how the Fed was originally intended to create an “elastic” money supply that would expand or contract along with economic output. Today, the money supply only goes in one direction — that’s up.
The economy is strong, print money. The economy is weak, print even more money.”
Of course, the asset that’s doing the best right now is gold. The yellow metal pushed above $1,600 yesterday. Gold is up 5.5% on the year in dollar terms and has set record highs in other currencies.
Because gold is rising even in an environment where the dollar is strengthening against other fiat currencies, that shows you that there is an underlying weakness in the dollar that is right now not being reflected in the Forex markets, but is being reflected in the gold markets. Because after all, why are people buying gold more aggressively than they’re buying dollars or more aggressively than they’re buying US Treasuries? Because they know that things are not as good for the dollar or the US economy as everybody likes to believe. So, more people are seeking out refuge in a better safe-haven and that is gold.”
Peter also talked about the debate between Trump and Obama over who gets credit for the booming economy  – which of course, is not booming.
China's "Mandate Of Heaven" Is In Jeopardy.One event is taking center stage in the world that affects not only basic survival for millions of people, but the health of the global economy overall.
Of course, I’m talking about the coronavirus outbreak currently playing out before our eyes in China.
China’s economy was slowing substantially before the outbreak of the highly contagious and deadly virus last fall.This slowing was the predictable result of excessive debt levels, Trump’s retaliation in the trade wars, and China’s encounter with what development economists call the “middle-income trap.”
Developing economies can grow at double-digit rates as they move from low-income (about $3,000 annual per capita income) to middle-income (about $10,000 annual per capita income).
The main requirements are limits on corruption, a large pool of available labor, and an attractive legal environment for foreign direct investment. Once investment is used for infrastructure and labor is mobilized, large-scale basic manufacturing can commence.
This powers growth and the accumulation of hard currency reserves from export earnings.
The difficulty begins when an economy tries to move from middle-income to high-income (about $18,000 annual per capita income). That move requires more than cheap labor and infrastructure investment. It requires applied technology to produce high-value added products.
Only Taiwan, South Korea and Singapore have made this transition, (excluding Japan after World War II, and oil-exporting nations).
This explains why China has been so focused on stealing U.S. intellectual property.
Trump has been closing that avenue. China cannot generate the needed technology through its own R&D. China is stuck in the middle-income trap and a slowdown in growth is the inevitable result.
The story gets worse for China.
As of Friday, the total reported number of people infected by the coronavirus was 64,435. And the death toll was up to 1,383, including three people outside of China.Those figures are official statistics released by China and other countries around the world where the virus has spread.
However, there is substantial medical, anecdotal, and model-based evidence that the actual infection rate and death rate may be ten to twenty times higher than those official statistics.
Over 60 million Chinese in several major cities are under “lock-down” where individuals are confined to their homes and may only leave once every three days to buy groceries.
Streets are empty, stores are closed, trains and planes are not moving, and factories are shut. The Chinese economy is slowly grinding to a halt.
This not only affects China’s economy as a whole, but the contagion filters down into individual companies that are dependent on China both for supply chain inputs and final sales.
And it will have a rippling effect on the U.S. economy also. This story has a long way to run.

No comments:

Post a Comment