Peter 'Dollar Demise' Schiff Versus John 'Dollar Reprise' Mauldin
Based on the coming 'oil revolution', John Mauldin makes the point that the US can run $300-400 billion deficits and the Fed "can print trillions" and the dollar will surge (since the rest of the world demands it). Peter Schiff begins quietly adding that "we don't have that much oil" then goes on to discuss the 'ifs' in Mauldin's thesis, beginning the wildcard that "we can't suppress interest rates indefinitely" as we await this supposed oil export boom to begin - and that somehow the US is expected to generate a budget surplus when even the perpetually optimistic CBO in its most recent forecast gave up on expecting a surplus in the future of America. Ever. The ensuing 3 minutes or so is worth the price of admission as Dollar bull meets Dollar bear in a nose-dripping, face-ripping trip into the future.
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Peter is right... perhaps a decade too early, though, and not before the Third World War.
KING DORRAR, ROR!
ZH would be a bargain at ten times the price:)
Shh!
Schiff looks moronic spouting about hyperinflation; there hasn't even been inflation. And Mauldin is correct - technological advances will procure more and more oil, and oil's price will fall as supply increases.
So you're dining at Orly's 99 cents/lb all-you-can-eat chicken buffet also?
I guess you believe that all the price increases that we have been seeing and paying, on almost every basic good, in the last five or ten years are purely due to "speculation" as well?
Oil's price is not sticky because of future developments in technology. When supply meets demand, or increases while demand stays steady, oil's price will fall - thus why it is transitory.
Food prices follow energy prices.
And speculators will run like chickens from a gun once the price begins to drop because speculators chase trends.
Please do let us know when the 80 year annual trend of steadily rising prices (which just coincidentally began with the demise of the gold standard) comes to an end. I'm sure that fiat currency depreciation has absolutely nothing to do with it, though, right?
Boy, those are some very patient 'speculators'!
The rise in prices coincided with a rise in living standards and wealth creation.
http://www.youtube.com/watch?v=eyCpidT53nY&feature=player_embedded
Grillo wants searing austerity. He is Europe's version of the tea party and Italy is the next Britain.
Felix Zulauf is far from some Max Keiser type (regardless of what one thinks of Max Keiser; no comment on that subject from me), and if anyone knows anything about him, it strikes me as a rare moment that someone of his background puts out an unequivocable statement that we'll soon experience an epic crash, which he just did 30 days ago (as I just learned).
I also find it interesting that he essentially states that the G7 has to go along with allowing the Eurozone and Japan to debase their currencies by the largest % on a relative scale (even if the ECB currently isn't acting as if this is the true end goal, when they'll ultimately concede it), as a matter of necessity, in order to keep the EU intact (i.e. keeping Germany in it) and Japan alive (if barely).
I see dire predictions all the time; I rarely see such predictions by someone luke Zulauf.
Mauldin seems tired. The verbal pauses are hard to take. Regardless, the discussion seems to be hindered by divergent interests. Mauldin wants to support the current debt-based system; Schiff sees it as a problem to be fixed. One essential point that doesn't get addressed is the multipolar nature of world affairs. The market has players with different interests. Al Korelin is a fine moderator, but it would be interesting to see how the panel responds to the idea that there is such a thing as Peak Debt. I wonder if that is where Mauldin's analysis would break down. He doesn't see commerce without encumbrance.
Note Mauldin's reluctance to acknowledge that his children may have no future. He's in denial. Big movers around the world see collapse coming and are taking steps, while he wants to argue the logic: "If this...and this...then it will be okay." BUT THOSE 'IFS' ARE NOT HAPPENING! THE POLICY IS ONE OF CAN-KICKING. Schiff is not being cynical: he's being realistic. Decisionmakers are gutless, nearsighted, self-interests, corrupt pansies. People can side with Mauldin if it comforts them for a while, but facts only point to collapse.
More footage to add to the "Peter Schiff was right" videos. Damn near a full length movie now if you string them all together.
Grab some popcorn. How many versions can you find?
http://www.youtube.com/watch?v=2I0QN-FYkpw
Think about a Ponzi scheme, it works while you take in more than you have to pay out. What Maulding is saying is that while we keep deficits under GDP growth, we will be OK because we are taking in more than we have to pay out. Eventhough it still is a Ponzi. Schiff was trying to point out that it is a Ponzi, something that Mauldin didn´t deny. So in essence they were both saying the same thing.
The key is the outcome of the game they are playing, and that is where I know that it will be bad. If interested read my other post here.
Until next time,
Engineer
Hi Spine001, I read your post. "Your thoughts are large." We likewise seem to be talking about the same thing (though your perspective is probably more studied than mine): Mauldin accepts a little ponzi, like being just a little pregnant. Schiff thinks we can make a system free of the artificial oligarchic boom/bust centrifuge. Big non-aligned players seem to be siding with Schiff. They see a better way, and we are starting to see it manifest in those unreported but massive international barter agreements.
"even if the ECB currently isn't acting as if this is the true end goal, when they'll ultimately concede it"
first, the eurozone isn't the EU and so it's scope isn't to "keep the EU intact" - it's just not being trashed by the USD like a pack of rats by a terrier
second, the eurozone 17 and in major part the eu 27 are more or less going on the "austerity" path, with a goal of getting to sustainable budgets and debt - which is exactly what Austrians and Peter Schiff advise and Krugman deems absurd
third, a currency war has always two legs. the FED has an immense advantage in the "go down" direction, the ECB has an immense advantage in the "let's brake" department
fourth, as you know I'm a big fan of yours, but I do have to admit that I hate when you write things like "the G7 has to go along" - who is the G7? it's not a separate entity and it's very, very sloppy thinking/writing imho
http://en.wikipedia.org/wiki/File:Gdp_versus_household_income.png
You were saying Mr. Krugman?
As if there is a causal relationship. Like a guy who beats his kids and sees that they grow up then concludes beating his kids helps them grow.
Money printing just like beating children is evil. It is theft and oppression. The progress that has been made in the last 100 years is despite the money printing not because of it. Stop lying.
....and both parents having to work to make ends meet.
Schiff looks moronic spouting about hyperinflation; there hasn't even been inflation. And Mauldin is correct - technological advances will procure more and more oil, and oil's price will fall as supply increases.....
What our Dr. Krugman is talking about is correct, that is always the behavior of the economic symstem. What is important is what he is not talking about, the long term effects of accelerating the rate of monetization on the correct functining of the markets. It is a lot more complex and you have to use chaos theory to model this, but put it simply, once you start monetizing, at the rate we are now, you can not stop, without crashing the system, imagine Ponzi stopping his money taking. But as soon as the markets realize that this is your problem, they second guess you and the rally to infinity starts, since they know you can not stop. At that point the power of the FOMC decision makers becomes too big over maker functioning worlwide. That power, (or gain as youn would model it into your system) is so large that the system becomes unstable, that means, it goes into a state of apparent stability but where any event can destabilize it. In engineering we call this METASTABILITY. Once the destabilization starts, you can not stop it, all your checks and balances in the system become powerless to stop the flood.
Krugman and the FOMC theorists know they are playing with fire, the big mathematicians of the Federal Reserve system have already modeled this. I passed (it was a lot of work but we are all connected :) and I had a very credible career in my field) them the theory and they modeled it and saw what I was saying since 2007, that you can not monetize the problem and expect a stable outcome, that the probability is that you will loose control of the system (by the way that means something that terrorizes central bankers, that you move the knobs and the system doesn´t respond the way you expect).
Then, why are they doing it the way they are, sadly, the reason is pretty simple, but sad: It is that they don´t have any other plan...
If you doubt me, read the minutes of the last FOMC meeting, the part about "markets starting to not function correctly". This will only get worse...
Until next time,
Engineer
Food prices follow energy prices.
Solar energy requireminents to produce food, have been roughly the same for about 300 million years.. Solar energy is responsible for all food on this planet, in one form or another.
If you believe that then I submit you've never farmed for a living.
the whole situation is miss understood in a basic sense.
Basically the Govt has two options for systems to expand the money supply, One is the current one, where the Gov issues debt when they spend more than the tax revenue (and other revenues) they receive, They issue bonds and in extreme case can have the central bank buy the debt which basically increases the money supply (i.e. dilutes the currency) to pay the debt.
The other possible option is to have no central bank (like was done before the FED) in which case the Govt can simply increase the money supply to cover excess spending.
Historically the second options has been looked down upon because the Got will be tempted to spend excessively causing large inflation and possible currency collapse (i.e. so they destroy all the peoples wealth),
In the current situation the FED use to only target short term rates via money market operations to control rates (and expand / contract the money supply) .. By buying long term bonds they are greatly increasing the risk of chaotic interest rate spike if inflation ever gets out of hand and possible they may create hyper inflation because they have diluted the currency to much.
So the real question is has the FED increased the money supply too much and thus is the US headed for excessive inflation and possible rate rise shock, which could lead to Govt funding collapse. or
has the increase in money supply by the FED been required because 1) the contraction in money supply was so large during the 2008 crash that such a large increase in money supply was required to compensate and 2) the contraction in demand from changing demographics (i.e. aging baby boomers) is further leading to a contraction in demand and hoarding of cash for retirement (again contraction of money supply) so say a 5-10 year period of unusually excessive money supply is required until the tax receipt / pension payouts balance again .. and then the supply can be reduced as the budget balances.
I think no one knows which is correct or which way this is headed but its all about the money supply and weather FED increase is excessive or required.
ie Govt debt can always be paid by increasing the money supply its weather the required increase ends up making the currency worthless or is sustainable..
Krugman: Schiff looks moronic spouting about hyperinflation; there hasn't even been inflation. And Mauldin is correct - technological advances will procure more and more oil, and oil's price will fall as supply increases....
When you say there hasn´t been inflation, where exactly do you mean? In the USA there has been huge inflation but not accounted in the CPI. But anyway, when the rate of total paper wealth growth exceeds the rate of growth of the total amount of goods and services created, by a larger and larger amount every day, what does the CPI matter? Nothing at all, since you must use forward projections to understand the value of money, not current as you may think. Just use this simplified example, the people in a close island (the earth) have this year 100 extra coins to spend in corn and next season they produce 100 bushes extra bushes of corn, and the value of corn next season is 1 coin per bush. Lets say that the next year you create 100 more coins out of thin air (by magic or pressing a FOMC key), and therefore the people have 200 more coins this time to spend in any extra corn that is produced. Lets assume that the people work very hard to increase production (GDP growth) but it looks like despite this the people are going to produce only 100 extra bushels of corn again, how much is each extra bushel? Obviously it will be around 2 coins per bushel. And what matters is not your current CPI, but how muc.h money you created out of thin air in relationship to the increase in worldwide GDP.
As you move forward, it will matter the velocity of money creation, then its acceleration, then its 3rd derivative and so on, until the whole system crashes. Your CPI will only react after it is to late.
Your argument of no inflation would be insulting to the intelligence of a monkey.
Until next time,
Engineer
You must know that's not how price works. Oil that's cheap to produce is dwindling and being replaced by oil that's increasingly expensive to produce. Just because the oil price has flattened out for the past two years doesn't mean the long term trend of rising real oil prices is finished.
Tight oil is important but beware those who mindlessly parrot exaggerated projections without knowing the business. Tight oil might push back peak oil by a decade or two but it will not make up for Gulf megafield depletion which remains very much in front of us. The depletion rates on tight oil are much faster than conventional. In a rosy scenario, US oil production will increase significantly for some time, but global oil production, not counting hexane or biofuels etc, will remain practically flat, and Asian demand will continue to hold up prices. The notion that food prices are set to come down is just myopic. Rising food prices will continue to shake up political systems across Asia and Africa.
The dollar isn't going down without a fight (i.e. WWIII).
The monatarists have painted themselves into a corner of shit with shit paint, and it's going to be a shitstorm getting out. The only solution they are offering is to rename currency debasement from "quantitative easing" to "NGDP targeting". I just laugh because if I didn't I would slit my wrists.
Mauldin's theory has always been that when pushed into a corner the politicians will make the tough choices and make the cuts.
They wont.
Mauldin is correct until the day that Schiff is right and the whole thing spirals out of control in the blink of an eye in the form of a currency crisis and an international run on the U.S. Tresury market
Stackers sums it up admirably. I concur with his remarks -- particularly insofar as Washington has neither the intention of curtailing spending, nor curbing the rate of increase of same.
In the end, Schiff's thesis is, unfortunately, more likely to win out.
yyep, just like the asian finanial crisis. except the capital flight will go into physical gold. gold wll bbe revalued. that is diffrent then a bull markket. forget everyting yoou know about bull markets
"the capital flight [is going] into physical gold."
fify
Mauldin seemed to have an agenda to me. Politicians do not make a right choice when pushed into a corner. they make even worse choices. Mauldin looked weasely ... and what's with chewing candies?
Mauldin seemed to be on drugs to me. But what do I know.
mauldin makes me puke....he is a name dropper......"oh I had lunch with senator Sukadik and he says not to worry.....everything is under control "........
Lil bit of a runny nose there, Mauldin. And he is wiping his fingers on his pants.
Drinking that wine.
No doubt...he's either on medication or he emptied to wine bottles on the table.
John definitely has been in the " tootski "...
Did you watch the entire video? He goes out of his way to talk about all the politicians he has rubbed elbows with. The guy looks like a vampire on coke. A psuedo intillectual brown noser. And could he kiss Rick Rule's ass anymore than he did during that 30 minute conference. Fuck that guy.
'Vampire on coke', that's a good visual of him.
Bad coke diluted with baby powder, hence the running nose.
Very similar to fiat money. Only precious metal will prevent you from running tears and nose bleeding in the future.
Most politicians today do not have the knowledge to be able to get it right. They have had decades of indoctrination to the path they are pursuing.
Most politicians today do not have the knowledge to be able to get it right. They have had decades of indoctrination to the path they are pursuing.
face ripped
Mauldin looks like Vlad the Impaler... (vampire)
Mauldin is a dipshit who believes that technology will solve all of our problems and that he will live to be 125 because of advances in medical technology. He's one of those guys who found himself in the right place at the right time and now thinks he's a genius. I wouldn't trust him to balance my checkbook let alone manage my money.
People have it all wrong with fracing too. it doesnt pencil. the only reason its popular is cuz of the cheap cost of ccapital for oil companies.
Here's a great paper on shale: http://shalebubble.org/wp-content/uploads/2013/02/SWS-report-FINAL.pdf
oil companies have plenty of revenue, with many of the frack service companies expanding and trying figure out where to park their extra cash. I see hydrofracking will keep the glut of North American gas flowing and see an LNG boomlet. It is not complicated and doesnt require expensive equipment like offshore, so prices will certainly come down some.
Bull now that's funny. I was looking at this dude and his pale face and thought he was dead and they were moving his lips
$140 Brent might be a problem.