by Peter Schiff, Schiff Gold:
From both an economic and political standpoint, it seems the only certainty in the world right now is uncertainty. As Danielle DiMartino Booth says, that’s a good reason to buy gold. Booth worked as an as an analyst at the Federal Reserve Bank of Dallas. After leaving the Fed, she founded Money Strong, LLC, an economic consulting firm. She also authored Fed Up: An Insider’s Take on Why the Federal Reserve Is Bad for America. In a recent appearance on Jay Taylor’s Turning Hard Times into Tough Times podcast, Booth called gold “the ultimate safe-haven investment.”
If you think the central bankers of the world are going to do their dire-best to launch QE4 or lord knows what else … that Mario Draghi is buying corporate bonds, the Bank of Japan is buying stock ETFs, if you think the same situation is going to come to pass here in the United States, and obviously the price of gold is reflecting that the Fed is going to go in the opposite direction, that they’re heading toward the tightening path, then gold is your ultimate safe-haven.”
During the podcast, Booth and Taylor discuss the Fed and its approach to monetary policy. Booth contends that the central bank is made up of a bunch of academics who don’t pay much attention to how the economy actually works. She also wonders out loud if the Fed’s recent bullishness on monetary tightening is motivated, at least on some level, by politics.
HIGHLIGHTS FROM THE INTERVIEW
“I wrote this book from the inside to tell the story of how the Fed went from being a lender of last resort to savior and then destroyer of America’s economic system.”
“If you look at what motivates people – look at a Wall Street banker – what motivates a Wall Street banker? Greed. Money. Plain and simple. If you look at what motivates academic economists from the time they are earning their PhDs, the shangri-la for them, the ultimate carrot, is when they get published in a prestigious journal. That is where they find validation within their peer-group. And the one thing I found to be so disturbing, if you will, is that same goal was really driving most people inside the Fed. There were others … who were beating the table for a lot of the people on the inside to do more real-time work and help policymakers understand kind of how the economy was working as opposed to furthering a pool of thought or exemplifying to the world just how brilliant you were.”
“[Keynes] warned that if you leave interest rates at too low of a level you’re going to end up cannibalizing aggregate savings across an economy, which will cause people to pull back on their spending and put a governor on economic growth. He actually warned against low interest rates … There’s a certain irony with a lot of people in the media using Keynes as kind of the poster-boy of the quantitative easing, negative interest rate era, because, I think the behavior of central bankers today would have Keynes spinning in his grave.”
“I call it taking grandma to Vegas. I’m sorry, but our seniors should not be forced into the junk bond market. It’s ridiculous.”
“[My book] is an accessible book for everybody who thinks the Federal Reserve is a secretive order of bankers out to destroy the world. It really isn’t. It’s just a bunch of academics.”
“I am concerned that all throughout the years of the prior administration, if the equity markets said, ‘Boo!’ the Fed would come running to the rescue. You didn’t even really need a 5 or 6% downside in equities, to say nothing of a true 10% correction, in order to really get the Fed off the mark and into defcon-1 mode and putting more liquidity out there. So, I find it very curious that now they’re not only talking about tightening by way of raising interest rates in a traditional manner, but they’re also talking about shrinking the balance sheet, and they know darn well that this economic cycle is long in the tooth to be kind. It really is old, if you want to put a better word on it. So, I find it to be very curious, unless the Fed is being political, that they would be talking not just about raising interest rates, but about beginning to shrink the balance sheet as well … which would suggest we’re going to have a lot of downside in stocks.”
“What I do consider gold to be is your ultimate safe-haven investment. If you think the central bankers of the world are going to do their dire-best to launch QE4 or lord knows what else … that Mario Draghi is buying corporate bonds, the Bank of Japan is buying stock ETFs, if you think the same situation is going to come to pass here in the United States, and obviously the price of gold is reflecting that the Fed is going to go in the opposite direction, that they’re heading toward the tightening path, then gold is your ultimate safe-haven.”
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