I wanted to comment on this video, and point out someone who we should all be paying attention to; take a few minutes to watch it, it’s worth while.
For those of you who don’t know Peter, he’s a student of Austrian economics, and called the bubble bursting at the height of the markets in 2006. The quality you will immediately notice about Peter, is that his economic view and investment strategy is founded in simple logic.
In any case, notice how the CNBC drones are using some theoretical association of gold to inflation and copper to economic recovery. However Peter makes a very important point that America has lost site of, a service based economy is a house of cards, and America must get back to doing what we do best, producing.
We’re a nation of industry and innovation. These trumped up stimulus plans, federal interventions, and incessant printing of money by the treasury seek to prop up the very same house of cards that Clinton built with the .com era, and Bush built with the real estate bubble era.
So regardless of the academic nonsense that we’re seeing out of Washington, CNBC, and other news sources, there remains a couple of simple truths:
1. Inflation is going to rise, big time
2. Jobless rates will continue to increase
3. Our deficit is growing at record rates
4. The stock market is going to reach new lows.
The informed trader can still make a great profit in what remains of a strong bull market. Sure the main move is over, but there will be a final push on the S&P that will turn our short trades of the SPY into a nice profit.
Here’s to profitable trades:
-The Trade Detective
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Tags: inflation, peter schiff, production
the only small quibble i have with schiff is i really don’t get why producing a service is not just as good as producing a “thing”.
it is axiomatic that we can’t borrow and spend to prosperity, like we’re being told. buy i don’t see why there should be a distinction in what we produce. whether it’s a good or service, it must be something that the market demands.
Hi Yo,
I understand your quibble, but look at it in terms of recessions, which of course are inevitable. When the economy contracts, what are consumers more likely to cut back on, tangible goods, or services?
In the case of this recession, clearly services have been the first thing to be cut, such as cutting back on cable services, reducing cell phone plans, mowing our own lawns, cleaning our own homes etc.
There is also the point of market demand. The problem with borrow and spend is that it leads to hapless consumerism, which leads to a reduction in savings and increased debt. Eventually, the consumers ability to barrow reaches it maximum, and you get the situaion we are in today.
No nation in the world has had their economy falter based on a policy of saving and production. It is in this logic that I base my confidence in the Austrian economic model.
Another side effect of a service based economy is of course a further divide in socio-economic classes. This of course benefits a liberal goverment because their policies depend on class warefare to increase government authority and drive their policies. This is stark contrast to the Austrian economic model of laissez-faire.
Before I alienate anyone, I’m not a politican, and I’m not an economist. What I am however, is a person who belives that common sense approaches based on simple logic always prove to be more effective than complicated academic theory. Framed around recent history, it could be argued that academic solutions such as massively lowered interest rates, and academic investment models such as credit default swaps defied logic and lead to the problems we face today.
first I would like to say that I love the site. Its my first time here. Its the first time Ive seen sector rotation given any credit. Its explained in a simple and concise way too.I am going to further study the work by Elaine garzarelli.( funny thing is that Ive been developing a trading system/model like hers. I wish I would have come across her work sooner, as it would have saved me a lot of time trying to reinvent the wheel.) But the other metrics Im trying to incorporate into her my/her model is that of productivity, debt levels, savings, and other economic growth metrics. I am also a student of the austrian school of economics, and would like to incorporate. What do you think are some good metrics that can be placed in this bin. Peter schiff has done some great work and so has thomas woods from the von mises institute. Unfortunately the concepts regarding saving being funneled into unsustainable means of production, and ultimate wealth destruction I dont have a firm grasp on. If I could find metrics for these concepts that then could be used as a fifth component to what elaine has already done, I believe that my investment system would be complete. Any thought on this would be greatly appreciated.
Again congrats on the site.
Reply
Hi Eddie,
Thanks for the comment. Regarding the metrics you are trying to find, I’ve personally never read anything in Austrian Economics that suggests savings will leaded to unsustainable production. In fact, my understanding is that savings are the ultimate driver of real growth in the Austrian model; which (correctly) completely discounts the Keynesian GDP model. I’d be happy to research the concept with you if you can point me to where you found this idea.
-Steve
What I ment to say is that when saving are put into unsustainable means of production, that is to say that we squander the resources we do have into buidling things that we dont have the necessary capital to complete, or the income to buy once they are completed. There is a great explanation of this in the Tomas wood book ” Meltdown”. No absolutely, it is savings that permits us to grow, but its when those saving are put INTO projects that cannot be completed because of the limits of a lack of savings that makes us poor. When interest rates are artificially lowered it makes it appear that there are more saving in physical capital than there really are and there fore the market is dupped into starting projects it will never have customers for. The sentiment of the consumer, expressed through thier lack of saving , has voted to not give up resources in the present for future production capacity. I think there are also related ideas to this in the K cycle ( Kondretieff cycle) which explain secular market cycles.
You can research this in tomas woods book, meldown, and the K cycle theory at kwave.com.
Please let me know what you think, I think finding these metrics would be very helpful for a more complete picture of where we are in the grand scheme of things. Thanks.
Ps I just recieved this post, but the date on your reply says you replied the same day. So Im just reading your reply today. Thanks.