Industry sources said the flour shortage was a direct result of the order by the Department of Trade and Industry (DTI) forcing flour millers to cut their price by as much as P160 per bag.

Philippine Baking Industry (Philbaking) president Walter Co said five millers have stopped deliveries as of Tuesday night and they account for about 50 percent of total supply in the market.

Co said they have sent a letter to the DTI last Wednesday. “The directive to millers by DTI is to sell at P680 per bag and if they charge higher then they will be sanctioned so flour millers decided not to sell rather than be charged in court,” Co said.

Likewise, Philippine Baking Industry (Philbaking) past president and Gardenia president Simplicio Umali said that flour millers are already cancelling their deliveries. “Five millers have informed our group that they will not be able to deliver,” Umali said.

Umali warned that they can shut down their operations next week if the shortage continues. “This is the first time in 11 years that we come into a situation so we are in a panic situation now,” he explained.

“We have started to reduce the output to stretch the availability of bread for a longer time. We can supply bread until Saturday and Sunday but by Monday we are not sure anymore if we can operate if the supply does not come,” Umali said.

Umali said that the order price is at P740 which is above the DTI mandated P630 to P680 per bag. With the current situation, Umali urged the government and the flour millers to come out with a price that is acceptable to both parties.

“I am in favor that prices should be evaluated but it should not affect the supply. DTI should listen as to what the real prices in the world market is,” he noted.

In a separate interview, Trade Undersecretary Zenaida C. Maglaya said that they are looking into the shortage allegations. “We have to verify.” She said DTI operatives are currently checking on the millers.

If it is true that millers are refusing to sell their flour, Maglaya said the DTI will charge them with hoarding. “If we need to forcibly enter their plants to check if there is really no flour we will,” she said. “We have police power,” Maglaya stressed.

Maglaya said one miller has already agreed to lower their price. Delta Milling Corp. is now selling flour for P650 per bag.

Meanwhile, Universal Robina Corp. (URC), one of the five flour millers accused of holding the supply which created the artificial shortage said yesterday they are not hoarding flour.

URC together with Morning Star Flour, Philippine Foremost Milling Corporation, Liberty Mills and Wellington Flour Mills were accused of not selling flour after the Department of Trade and Industry (DTI) ordered that flour be sold at P630 to P680 per bag. The five control 50 percent of the market.

Philippine Association of Flour Millers (PAFMIL) executive director Ric M. Pinca said that was wrong in accusing the flour millers of not delivering flour.

“They have all denied that they are not selling flour,” Pinca said. Trade officials cracked down on flour millers after the reported shortage. Pinca said Aileen Ongkauko, president of Philippine Foremost said trade inspectors were at their plants yesterday and witnessed the delivery of flour.

At the same time, Pinca said millers will follow the order of the DTI. “At first we did not understand the order but now we are complying.”

On May 17, David Laws, the new British government’s Chief Secretary to the Treasury, walked into his office. There on the desk was a note from the previous holder of this high office, Liam Byrne, who had departed along with Gordon Brown’s Labour Party cabinet. The note was brief.

“Dear chief secretary, I’m afraid there is no money. Kind regards – and good luck! Liam.”

Mr. Laws was a bit miffed. He informed the media that it is traditional for an outgoing senior office holder to leave some guidelines for the incoming office holder. This note, Laws said, was not helpful.

On the contrary, it may have been the most helpful note left by an outgoing politician in modern history. It told the truth.

Mr. Byrne later told the media that it was a joke. “I do hope David Laws’s sense of humour wasn’t another casualty of the coalition deal.”

Ha, ha, ha. The joke was on Mr. Laws and the incoming government. There isn’t any money left. The government is running an enormous deficit. The money required to keep the government going will have to be borrowed, either from investors or from the Bank of England.

Mr. Laws was said to be up to the task. This glowing assessment appeared on the site of the Wall Street Journal, a media outlet always ready to believe that deficits don’t really matter, that a government can always dig itself out of a fiscal crisis. All it must do is raise taxes and cut spending. Of course, no government ever does the second. But the folks at the WSJ never are fazed by this invariable law of modern politics. We read of Mr. Laws:

Now he is central to the coalition’s plans and must handle much of the most difficult work. He will have to get used to becoming very unpopular with a significant chunk of the electorate and parts of the commentariat. He will be presented as Mr. Cuts, which the Tory high command clearly thinks is good for its prospects. In theory, Laws will take all the flak for Osborne.

Ah, yes: Mr. Cuts. There will be lots of cuts. There will be a slice-and-dice cost-cutting regime, despite the fact that it is a divided British government in which the Conservative Party could not win a majority.

Laws looks like he realizes all this and is impressively unfazed. He has a job to get on with, as Gordon Brown would say. But it’s a very different task to that undertaken by the former PM. The Lib Dem Laws is on a mission to put the Gladstonian liberal approach – of sound money and low taxation when possible – back into operation.

Said his colleague and friend Malcolm Bruce to Allegra Stratton: “Laws is an unreconstructed 19th-century Liberal…. He believes in free trade and small government. Government should do the job only government can do. There’s no point in having a large public sector if the users of the public services are getting poorer. But he specifically made the point in the house [on Wednesday] that his economic liberalism is tempered by his social liberalism.”

Yes, my friends, there is a New Era coming in Great Britain – a new era of Gladstonian cuts. Yes, it is also true that the Conservatives ran Disraeli against Gladstone, because they could not tolerate his free trade, low-taxes policies. But all this has changed. It’s a New Era.

His agenda has the potential to be quite revolutionary in its effects, if he is not blown over by a hurricane of protest or events unforeseen. But it also might catch on, and make Laws very popular indeed. He has barely been in office for two weeks but the words “potential future prime minister” don’t sound entirely silly.

That was published on the morning of May 28. By the afternoon, Laws had resigned. A hurricane had hit. It seems that he has been a closet homosexual. That was acceptable to the media, but the closet had been in the form of a $1,200/month apartment rented – at government expense – from his partner of nine years. After 2006, this was illegal by government law. Mr. Laws promised to repay $60,000 in subsidies, but it was too late. The 2009 scandal of Members of Parliament who had taken government money to pay for their non-government-related expenses is too fresh in the minds of politicians and voters. Laws resigned.

His immediate replacement was exposed two days later as having avoided paying capital gains taxes on a similarly subsidized residence. It was legal, because of an anomaly in the tax code, but it was one more reminder to the voting public that the politicians have effectively gamed the system to avoid the burdens that the system has imposed on voters. This has been true of political life for several millennia, but the public never seems to catch on.

We see Punch and Judy battling it out again for the right to swindle the public one more time.

BUT WHERE WILL THEY GET THE MONEY?

Maybe you have seen the videos by Clarke and Dawe, the Australian comedians. If not, you really should. They are funnier than much Liam Byrne.

Mr. Byrne warned Mr. Laws that the country was out of money. Mr. Laws had insufficient time to solve this problem. His replacement now inherits the problem. It is the problem facing all of Europe.

It is also facing U.S. banks, mainly the largest ones. They have purchased an estimated trillion dollars in bonds issued by European nations. A series of defaults would call these assets into question. This is why the Northern European politicians are frantically borrowing money from investors to cover the losses that Southern European nations have produced.

There is no possible way that Southern European nations will ever pay off these debts. Modern finance theory assumes that debts of sovereign nations will never be paid off, for these debts have in part been monetized. If they are all paid off, this will force central banks to monetize other assets. Otherwise, the central banks would have to shrink their monetary bases back to whatever gold they still have, assuming they have any, since most of their gold holdings have been leased to bullion banks, which then sold the gold to buy government bonds.

Follow the money, advised Deep Throat in the screenplay of All The President’s Men. No one can actually follow the money. The debts and cross-debts are too large and too complex. Add to this at least $600 trillion worth of derivatives, which are mostly based on the interest and market value of bonds, and the central bankers have a very big problem facing them.

So, the squandering governments in Northern Europe have pledged about a trillion dollars’ worth of bailout money for the even more wasteful governments of Southern Europe. Everyone knows there will be some sort of default, but they do not expect this in the near term. It will be later. How much later? No one knows and no one cares. Until then, investors lend money to governments that will surely default. This is the foundation of international finance. It is also the basis of Social Security, Medicare, Federal pensions, and the municipal bond markets.

Most voters don’t know and don’t care. Politicians do know but don’t care. There are no negative sanctions for continuing to pooh-pooh the inescapable reality of the unfunded liabilities of all Western governments. There are instant negative sanctions for any politician who admits the truth and publicly calls for the immediate reform and partial default of these programs. No one in the electorate wants to face the truth: either granny will get stiffed near-term or the working-age voters will get stiffed long-term. Voters want to delay the cuts now, on the assumption that the can will be kicked down the road indefinitely. They discount the inevitable future for the sake of present bailouts.

This mentality subsidizes the expansion of private lending to governments. This is why the United States government can borrow for ten years at a rate below 4%. This is why capital is pulled out of the private sector in order to fund the delay of the inevitable bankruptcy of Western governments.

ASSETS WITHOUT LIABILITIES

The voters believe that there is no connection to the liability side of citizenship. They believe fervently in the asset side of citizenship. They do not believe that the bills will ever come due for them. They believe fervently that they are entitled to every dime already promised, plus whatever more they can get Congress to enact.

They vote for their beliefs. They vote only for politicians who insist that the liability side of citizenship can be deferred or transferred to others. They vote only for politicians who promise that the asset side of citizenship will increase. Every politician knows this.

Liabilities and assets must match on every balance sheet. The government’s balance sheet is the reverse of the citizenry’s. Every asset possessed by a citizen is a liability to the government. Every liability must be matched by an asset. What is this asset? Future government income. Where will this come from? From taxes, from borrowing, and from borrowing from the central bank (inflation).

Citizens believe only in the asset side of their balance sheets. The assets – promised future income – must not be offset by liabilities: future taxes, including the inflation tax. The politicians encourage this belief. They vote ever-increasing assets based on future government income, but they refuse to tell voters about the size of these liabilities. They pretend that an off-budget liability is not really a liability. After all, this is what the government’s own ledgers show.

The liabilities of the voters – the trust funds full of IOU’s from the government on behalf of the citizenry – are counted as assets of the Social Security and Medicare systems. When anyone raises a question regarding the future source of the future funding of these assets – the general fund – he is dismissed as a crackpot, a Tea Party voter.

For voters, the trust funds’ IOU’s are all assets, not liabilities. For politicians, the same is true. The trust funds’ IOUs from the government are assets politically, because the vast majority of voters believe that the trust funds’ assets are not legal claims on their future income. The assets are future claims on someone else’s future income, not theirs. “Don’t tax you. Don’t tax me. Tax the guy behind the tree.”

The accounting charade is promoted by the Congressional Budget Office. The CBO lies in the early part of this paragraph, but tells the truth in the sentence beginning with “If intragovernmental transfers. . . .”

According to CBO’s current baseline projection, trust funds as a group are expected to run a surplus of $119 billion in 2010 and $1.6 trillion from 2011 through 2020 (see Table D-1).That surplus is bolstered by interest and other sums transferred from elsewhere in the budget. Such intragovernmental transfers, which are projected to total $590 billion in 2010, reallocate costs from one category of the budget to another but do not directly change the total deficit or the government’s borrowing needs.

If intragovernmental transfers are excluded and only income from sources outside the government is counted, the trust funds as a whole are projected to run annual deficits that will increase from $471 billion in 2010 to $907 billion in 2020.

It plays the same game of deception in the next paragraph, which deals specifically with Social Security. The truth is revealed in the sentence beginning with “Excluding interest. . . .”

Total trust fund surpluses are dominated by those for the Old-Age and Survivors Insurance portion of the Social Security program. Including interest and other intragovernmental payments, CBO estimates a surplus of $110 billion for that fund this year and a cumulative surplus of nearly $1.5 trillion from 2011 through 2020.

The DI program is projected to run annual deficits through the entire projection period. For Social Security as a whole, the estimated surpluses peak at $139 billion in 2015 and decline to $107 billion in 2020. Excluding interest (which accounts for the bulk of the intragovernmental transfer), surpluses for Social Security become deficits of $28 billion in 2010 and $202 billion over the period from 2011 to 2020 (see Figure D-1).

The politicians know that most voters will never see this report. So, they emphasize the early portion of each paragraph. They quote other official documents that reinforce this systematic deception.

The voters refuse to hear any other version. They plug their ears to anyone who comes with the message of the second part of these paragraphs.

The politicians tell voters that the government has assets without liabilities. The voters believe that they also possess assets without liabilities. Yet every government promise that voters regard as an asset is in fact a liability. It is deliberately concealed by the government. The voters like it this way. They will vote out of office any politician who dares challenge this deception as an outright fraud. The voters delight in the fraud. Why? Because it shields them from this question:

“BUT WHERE WILL I GET THE MONEY?”

As surely as departing Chief Secretary to the Treasury warned “There is no money,” so are the trust funds of the United States government. Social Security will run a deficit this year. Medicare has been running one for at least two years.

The dreams of millions of voters will be shattered by this reality: “There is no money.” These dreams will be shattered in one of two ways: open default or mass inflation followed by hyperinflation. In the second case, “There is no money” will not literally be true. What will be true is this: “There is no money with 2010′s purchasing power.”

The voters will be at an age where they cannot easily rebound. But they will be able to vote. This is why, at some point, the electorate will have to decide: outright default to the coming generation of oldsters – an ever-increasing age to receive benefits – or else an outright default to richer oldsters: a means test for receiving payments. Richer people will not be paid. I think the second option is likely before the implementation of the first.

There will be increasing price inflation before the day of reckoning hits, for the Federal Reserve will buy the government’s debt. But, at some point, the default must be open if the dollar is to be saved. Otherwise, hyperinflation at rates above 40% per annum will destroy the capital markets.

CONCLUSION

You must decide. Which default is most likely? When is it likely? When will I be affected? Then you must take expensive steps to prepare for the scenario you select as most likely. If you continue to act as if there will be no day of reckoning, you will find yourself unprepared for that day.

If you sit there and do nothing, you will at some point face this reality: “There is no money.”

How Does The Financial System Work

Clarke and Dawe Explains The Inflation Crisis

Clarke and Dawe on the Subprime Mortgage Crisis

Clarke & Dawe’s Guide To Surviving The Economic Crisis

Clarke And Dawe Spins The Credit Crunch

Clarke & Dawe Tiptoe Around The Recession

(Bloomberg) Canada’s dollar was worth more than the U.S. currency for the first time since July 2008 on the back of the rising price of crude oil and the prospect of higher interest rates.

Canada’s dollar, dubbed the loonie for the aquatic bird on the C$1 coin, last traded through parity with the greenback on July 22, 2008, 11 days after crude, the country’s biggest export, reached a record $147.27 a barrel. Oil rose to a 17- month high today.

“As we trade around it and move through it, the parity level becomes much less of a target and more of an accepted norm,” said Sacha Tihanyi, a currency strategist in Toronto at Bank of Nova Scotia, Canada’s third-largest bank. “Everything continues to be in line for Canadian dollar strength.”

The currency gained as much as 0.3 percent to C$99.88 per U.S. cents, and traded at C$1.0012 at 4:12 p.m. in Toronto, compared with from C$1.0022 yesterday. One Canadian dollar buys 99.88 U.S. cents.

The loonie traded on a one-for-one basis with the U.S. currency in September 2007 for the first time in three decades, capping a five-year run on the back of booming demand for the nation’s commodities.

Canada, the largest trading partner of the U.S., has benefited from rising demand for copper, gold, wheat and oil from the U.S. and emerging economies such as India and China. The country is the world’s largest producer of uranium, the second-biggest exporter of natural gas, and sits on the largest pool of oil reserves outside the Middle East. Canada is also the world’s second-largest exporter of wheat.

Cheaper Imports

The strengthening Canadian currency makes it cheaper to import materials priced in U.S. dollars, according to Duncan Reith, senior vice president of merchandising in Toronto at Canadian Tire Retail, the nation’s largest auto parts and sporting goods retailer. “It’s helping us provide better value to our customers because we buy a lot of our product in U.S. dollars from the Pacific Rim,” Reith said.

The advancing Canadian dollar also risks penalizing manufacturers and service companies such as Fredericton, New Brunswick-based ADI Systems Inc., a provider of technology used in industrial water treatment systems. Privately held ADI, which has about 25 employees, generates 90 percent of sales in U.S. dollars, said President Graham Brown.

“We have to accept we’re making less money when converting our U.S.-dollar profit back into Canadian dollars,” Brown said in a phone interview. “In a very competitive market, we’re really not in a position to bump up our prices to compensate.”

Interest Rate Expectations

The Standard & Poor’s/TSX Composite Index slipped 29.64 points, or 0.2 percent, to 12,156.71, led by energy companies and railroads.

Crude oil for May delivery rose 22 cents, or 0.3 percent, to $86.84 a barrel on the New York Mercantile Exchange, the highest settlement since Oct. 8, 2008. Prices are up 9.4 percent this year.

The central bank will boost its target overnight rate by 2 percentage points to 2.25 percent by the middle of next year, according to the weighted average of eight economists in a Bloomberg News survey of economists.

Matthew Strauss, senior currency strategist in Toronto at Royal Bank of Canada, expects the central bank to raise rates by the middle of this year.

“Once they start hiking, we think it’s going to be a pretty aggressive process with probably around 100 basis points worth of hikes in the second half of this year, followed by an even more aggressive campaign into 2011” Strauss said in a Bloomberg Television interview.

Deficit Projection

The six-month overnight index swap rate, a measure of the average overnight rate expected by traders during that time, rose to 0.5250 percent, the highest intraday level in more than a year. The central bank next meets on April 20 to determine monetary policy.

Canadian employers added 25,000 jobs in February, the third straight monthly gain, according to the median of 21 forecasts in a Bloomberg survey. Statistics Canada releases the report on April 9 at 7 a.m. in Ottawa.

Canada is on course to be the first Group of Seven nation to erase its budget gap after the global financial crisis. Finance Minister Jim Flaherty presented on March 4 a budget that forecasts the budget deficit narrowing to C$1.8 billion in 2014 from a record C$53.8 billion last year.

“It’s a perfect storm for the Canadian dollar,” Jonathan Gencher, director of foreign exchange sales at Bank of Montreal in Toronto. “Canadian rates are higher and Canada will be moving before the Fed. Oil is higher. The fundamentals suggest we’ll hang around here for a while.”

Students are not alone in their dissatisfaction. Polls show residents see California headed the wrong way with a gaping budget shortfall, legislative gridlock, slashed social services and double-digit joblessness.

Marchers may be the vanguard of a debate about whether California should temper its aspirations or pay more to maintain universities and other “Golden State” hallmarks.

“This is unprecedented, unparalleled, you know. This is ridiculous,” said Jesse Cheng, a student nonvoting member of the university governing board. “For the students at the (University of California) now, this is our political moment… We can stand up and improve our system and get our state out of these incredibly difficult times.”

Marches are planned in Berkeley, the 1960s protest hub, Los Angeles, Sacramento and campuses of state universities inside and outside the University of California system.

Racist acts, including a swastika and anti-gay graffiti has raised temperatures on campuses. Fee hikes of more than 30 percent to over $10,000 per year will make the university more costly than rivals in other states.

Students see that closing doors to less affluent, minority students — privatizing the university — and building on the effects of a 1996 state initiative which banned affirmative action at state institutions.

California did not even charge an Education Fee — the equivalent of tuition — in the 1960s, when state investment built campuses into national-level institutions, roads to link the state and canals that made the desert bloom with food.

“Beyond the fact that there isn’t money, there is a sense that education has become a private good,” University of California spokesman Pete King said.

The state has cut support and so university fees have risen, he said. Fee hikes will take university costs above the four state schools it compares itself with, including schools in Virginia and Michigan, the university said.

For Hoover Institution scholar Bill Whalen, who used to work for moderate Republican Governor Pete Wilson, the university’s issues reflect an overreaching by the state on services and promises — without the financial power to do so.

“We are at a time where we can’t afford this path of spending, we just can’t keep up with it. It’s like the Soviets trying to compete in the arms race,” he said, arguing that the university and state needed to clarify their missions.

The university also gets plenty of criticism. Students say administrators have been slow to address racism on campus and are forcing university diversity to plummet with higher fees.

A new campus that opened in the agricultural Central Valley in Merced in 2005. It was a long-planned expansion to increase services where they were needed most for some, and a bad move at the wrong time to others.

“There is nothing else to call that but a hair-brained scheme,” said Patrick Callan, president of the National Center for Public Policy & Higher Education.

Other state universities feel the pinch: rival University of Illinois is weighing tuition hikes of up to 20 percent for incoming freshmen, said Stanley Ikenberry, interim president of university’s campus at Urbana-Champaign, in a newspaper interview this week.

But Callan sees California in a unique position. “There is a kind of hubris on the part of the state and the university” embarking on costly missions when times are worst, he said.

UC Berkeley student and organizer Ricardo Gomez sees the state moving away from conservative economic policies and toward goals like free higher public education.

“These crises are going to offer the electorate and people of California an opportunity to once again to stand up for what we believe in,” he said. He plans to march on Thursday.

(Additional reporting by Andrew Stern in Chicago) (Reporting by Peter Henderson)

Over the past three or four years a strange phenomenon has developed in the global investment markets. With some exceptions, many asset classes, in particular domestic and foreign equities, commodities, and foreign currencies have tended to move in the same direction on a day to day basis. The mega-correlation has lasted so long that most now take it for granted. This leaves investors with relatively simple choices: when to get in to the market in general and when to park assets in cash and U.S. Treasuries.

However, few recall that this pattern is relatively new in the annals of financial history. Fewer still realize the reason for the current anomaly. From my perspective the most logical explanation is fear, which has become global, pervasive, and persistent. Traditionally, when investors fear inflation they buy stocks, commodities, gold, and foreign currencies, and sell dollars and U.S. treasuries. When they fear deflation they sell stocks, commodities, gold, and foreign currencies, and buy dollars and U.S. treasuries. The problem is that right now, no one knows which one to fear. Depending on the news the pendulum swings from one extreme to another on a daily basis.

The natural consequence of an inflationary boom should be a deflationary bust. We’ve had the boom, but so far we have avoided the lion’s share of the bust, or at least the deflationary part. If the government were pursuing a sounder monetary policy, one that allowed markets to function properly, the deflationary scenario would be playing out. While in the long-run this is the correct approach, such a scenario would be very bearish for stocks, commodities and many foreign currencies. If on the other hand, the government fights the recession by putting the inflation pedal to the metal (which is the course they have chosen) investors should look to real assets and certain foreign currencies to protect their purchasing power. But for the most part, that is not happening.

The foreign exchange markets seem to be the center point for this inflation/deflation tug-of-war. After all, if asset prices are falling, cash is king. Since the dollar is still the reserve currency, it is the king of cash, and benefits most from the global deflation scenario. When the dollar rises, treasuries go along for the ride, as investors need a “safe” place to park them. But when the U.S. government reveals yet another staggering deficit forecast, inflationary fears come right back. Hence, a market without a clear direction.

Many look at this dynamic from the perspective of risk appetite rather than fear. They claim that when investors seek risk, they buy risky assets, such as stocks, but when they are risk adverse they seek the safety. But those who fear inflation sell dollars and treasuries not because they seek risk, but because they seek to avoid it.

Of course, if investors felt that the Fed would actually fight inflation with aggressive rate hikes then higher inflation would be perceived as detrimental to stock performance. However, just about everybody realizes that there is virtually no inflation scenario virulent enough to encourage Ben Bernanke and his cohorts to actually raise rates. In actuality, the most feared probabilities are that inflation runs out of control, or that deflation overwhelms the Fed’s efforts to prevent it.

From this perspective regardless of the direction of the stock market, assets are simply being re-priced to reflect one of two very unpleasant outcomes. Those who look at rising stock prices as a harbinger of economic growth are therefore mistaken. These moves more than likely reflect investors growing fear that the U.S. debt levels will swamp the dollar.

Given the extent of the fundamental problems that underlie the American economy, and degree to which government policies are making these problems worse, there can be little conviction that our economy will return to sustainable growth anytime soon. Therefore, attributing stock market strength to inflation fears rather economic strength makes far more sense.

Also, if higher U.S. stock prices really did result from an improving U.S. economy, the dollar would be rising in tandem with stocks. However, every time stock prices rise the dollar falls. The best explanation for this dichotomy is that it is inflation not growth that drives both stocks and the dollar. So rising stock prices do not really indicate a bull market in stocks, but a bear market in the dollar. Those who cannot differentiate between the two will continue to misread the market and the economy.

Duncan learned first hand from working in Thailand for most of the 1990s in the run-up to the Asian financial crisis that rapid credit growth causes excess capacity and leads to busts. Then governments have to finance rescue plans — very similar to what is now taking place around the world.

After predicting in his 2003 book “The Dollar Crisis” that the US property bubble would trigger a global recession, Duncan’s new book argues that governments will have to keep stimulating their economies because US demand for cheap goods will not return to the halcyon days of the 2003 to 2007 boom.

Talk of an exit from the easy money policies in 2010 is entirely premature since investors will most likely see more US stimulus spending next year to prop up demand.

“This current round of stimulus will begin to wear out and everything will start to weaken again, and that will require another round of stimulus, not just from the US but from China as well,” Duncan told Reuters.

“If this stimulus is delayed or withdrawn, we will get significant drops in asset prices and go back into recession.”

Duncan is part of a group of economists like Marc Faber, Nouriel Roubini and James Grant, who believe the financial crisis is a symptom of something structurally wrong with the United States economy that will not be solved by the end of recession.

The institution of capitalism has been so corrupted by binges of borrowing financed with money printed on demand that governments now indefinitely have to take the reins of economies, Duncan argues in his book.

“We can’t describe this economic system as capitalism, I describe it as statism,”

Think again about China’s prospects

For many investors, emerging markets such as China are the wave of the future. However, Duncan, a partner at Blackhorse Asset Management, a hedge fund in Singapore, said investors were too optimistic about China, which he said is certainly headed for bubble trouble.

He is doubtful the fiscal stimulus and new loan growth amounting to about 40 percent of gross domestic product will lead to structural change in the export-dependent economy.

“That will just lead to more excess capacity with no one to sell it to, which means product prices will be extremely depressed, companies won’t profitable and banks won’t be repaid.”

The real antidote to the cycle of credit-fueled bubble and bust, in Duncan’s view, is for the US government to spend an additional USD3 trillion in the next 10 years to reindustrialize.

Stop making things that can be bought cheaply somewhere else and develop solar, biotechnology and nanotechnology products of the future. That will over the very long term shrink the US trade deficit and provide sustainable growth, Duncan said.

Among his more austere prescriptions, Duncan would fix exchange rates, apply credit controls and only allow money supply to grow in line with population growth. He would also dissolve the Federal Reserve.

Duncan believes these radical steps are the only way to put the US economy back on a path toward fiscal prudence and sound money, or what he calls economic orthodoxy. “They are radical,” he said. “Radically orthodox.”

Maria: What about copper and things that are tied to the global economy?

Jim: I think I’d rather buy agriculture. If your good at it you can buy futures. If your not you can buy stocks that trade right here on the New York Stock Exchange, but maria, become a farmer. I’m saying your should become a farmer, go learn to drive a tractor.

Inventories of food are the lowest the’ve been in decades. Not years, but decades. We have a shortage of farmers here too.

Jim also commented on Washington and the Federal Reserve’s actions during the financial crisis.

Jim: Like everyone else I’m pessimistic on the dollar. Everyone is pessimistic so maybe there will be a rally. But, gigantic spending and incompetence in Washington…I see nothing that is going to turn the dollar around.

The federal reserve has tripled its balance sheet, full of garbage. Which you and I are going to have to pay for. Why do we want to have the FED, they’re bad for everybody. Mr. Geithner is a very smart person, but he’s been wrong about everything for the last 15 years.

Why are we listening to him, why are we listening to any of those guys down there? They are making our situation worse. They said it in writing just yesterday.

“The solution to our problem is to spend more money, to spend our way out of this.”

Isn’t that what got us into this problem, too much debt, too much spending, and now we’re going to fix the problem with more debt and more spending. Its making the situation worse, and we’re all going to pay the price for this in one or two or three years.

Next time we have problems in the economy, which will be not too long. We don’t have any bullets left, we’ve shot all our ammo, and we don’t have anything left. What are they going to do, quadruple the debt again. Print more money?

We don’t have even have any more trees left.

The comments by Zhu Min, deputy governor of the People’s Bank of China, referred to the overall situation globally, not specifically to China, the biggest foreign holder of US government bonds.

Chinese officials generally are very careful about commenting on the dollar and Treasuries, given that so much of its US$2.3 trillion reserves are tied to their value, and markets always watch any such comments closely for signs of any shift in how it manages its assets.

China’s State Administration of Foreign Exchange reaffirmed this month that the dollar stands secure as the anchor of the currency reserves it manages, even as the country seeks to diversify its investments.

In a discussion on the global role of the dollar, Zhu told an academic audience that it was inevitable that the dollar would continue to fall in value because Washington continued to issue more Treasuries to finance its deficit spending.

He then addressed where demand for that debt would come from.

“The United States cannot force foreign governments to increase their holdings of Treasuries,” Zhu said, according to an audio recording of his remarks. “Double the holdings? It is definitely impossible.”

“The US current account deficit is falling as residents’ savings increase, so its trade turnover is falling, which means the US is supplying fewer dollars to the rest of the world,” he added. “The world does not have so much money to buy more US Treasuries.”

China continues to see its foreign exchange reserves grow, albeit at a slower pace than in past years, due to a large trade surplus and inflows of foreign investment. They stood at US$2.3 trillion at the end of September.

China Daily

Although Barack Obama has refrained, at least for now, from delivering triumphant speeches in a naval flight suit, there is nevertheless a strong tone of accomplishment emanating from the President and his deputies. Over the weekend, top White House economic adviser Lawrence Summers even pronounced that the recession is now over. Without hedging his bets, Summers declared that thanks to the Obama Administration’s wise stewardship, economic stimuli, and emergency bailouts, another Great Depression, set up by the prior Administration, had been narrowly averted. Summers saw no impediments to the return of sustainable growth. He may as well have delivered these remarks from the deck of an aircraft carrier.

I hate to shoot down these high-flying expectations, but the economy is not improving. All that has changed is that we are now more indebted to foreign creditors, with even less to show for it. Washington’s current policies have once again deferred the fundamental, market-driven reforms needed to redirect us onto a sustainable path. Instead, through aggressive monetary and fiscal stimuli, we are trying to re-inflate a balloon that is full of holes. This was the Bush Administration’s exact response to the 2002 recession. It’s shocking how few observers note the repeating pattern, especially the fact that each crash is worse than the last.

Obama’s claim of success largely derives from the slowing tally of job losses, the seemingly renewed strength in the financial system, the pickup in home sales and home prices, and the positive GDP figures. But these ‘achievements’ fall apart under close examination.

First, a closer look at the jobs numbers shows that employment improved in sectors that benefited most directly from monetary or fiscal stimulus: government, healthcare, financial services, education and retail sales. Meanwhile, sectors such as manufacturing continued to shed jobs at an alarming rate. These dynamics actually exacerbate our economic imbalances. Recent trade deficit figures (in which the deficit-reduction trend of early 2009 has sharply reversed) show how this employment growth is preventing needed rebalancing. Essentially, the Administration is nurturing firms that cannot survive without subsidies and support.

Once stimulus is removed, the “saved” jobs will be among the first to go. If the President has not figured this out yet, I am sure Fed Chairman Bernanke has. As a result, the market should discount as pure bluff any claims from the Fed about an eventual “exit strategy” from current stimuli. Such an “exit” would bring about Bernanke’s greatest fear – spiking unemployment.

Second, major investment and commercial banks are not back on their feet, but remain fundamentally insolvent. Their current business model of risk-free speculation depends upon the maintenance of government backstops, the continued availability of cheap money from the Fed, and the use of accounting gimmicks that allow them to conceal losses behind phony assumptions.

Third, while it is true that home prices have stopped falling, this represents failure, not victory. True success would be a drop in home prices to a level that homebuyers could actually afford. Instead, we have maintained artificially high prices with tax credits, subsidized mortgage rates, low down payments, and foreclosure relief. With 96% of new mortgages now insured by federal agencies, market forces have been completely removed from the housing equation. With so many government programs specifically designed to maintain artificially high home prices, devastating long-term consequences for our economy are inevitable.

Finally, it is true that the GDP yardstick shows an economy returning to growth. However, as I have often repeated, this measure has deep flaws that render it almost useless for judging the soundness of an economy. Currently, the figures are merely reporting increasing indebtedness as growth. Using GDP as the main financial indicator is equivalent to judging a man’s success by the cost of his house, car, and wristwatch. Rather than gauging income, these figures merely indicate a level of spending and have nothing to do with earning power.

Paul Volcker, the only independent voice in the Administration, has not been deceived by his colleagues’ sunny claims. He recently noted that our economy still evidences “too much consumption, too much spending relative to our capacity to invest and export” and that the problem is “involved with the financial crisis but in a way [is] more difficult than the financial crisis because it reflects the basic structure of the economy.” Yet, President Obama has chosen not to address these concerns.

As Summers and Obama like to point out, the vast majority of economists take it on faith that, with the right finesse, the stimulus can be withdrawn without pushing the economy back into recession. But based on the distortive effects of stimuli and bailouts, our economy has adapted to a climate where cheap credit is not only plentiful but critical.

Eventually, the cheap credit will dry up. Not because the Fed decides it should, but because our foreign creditors stop lending. When that happens, this Administration will look as clueless about economics as the last one was about the pitfalls of nation-building.

But for now, the chattering classes believe strong government action has delivered us from calamity. For them, at least, it’s “mission accomplished!”

The ceiling was set at $12.104 trillion dollars. The latest posting by Treasury shows the National Debt at nearly $12.135 trillion.

A senior Treasury official told CBS News that the department has some “extraordinary accounting tools” it can use to give the government breathing room in the range of $150-billion when the Debt exceeds the Debt Ceiling.

Were it not for those “tools,” the U.S. Government would not have the statutory authority to borrow any more money. It might block issuance of Social Security checks and require a shutdown of some parts of the federal government.

Pending in Congress is a measure to increase the Debt Limit by $290 billion, which amounts to six more weeks of routine borrowing for the federal government. (The House just passed the increase, though the Senate has yet to act. It is expected to approve the measure.)

Republicans and conservative Democrats blocked moves by House leaders to pass a $1.8 trillion dollar increase in the Debt Limit so the Democratic majority would not have to face the embarrassment of raising the Debt Limit yet again before next November’s midterm elections.

The Debt Limit has been raised about a hundred times since 1940, when it was $49 billion – about five days worth of federal spending now.

The White House projects a record $1.5 trillion dollars deficit this year alone, and a 5-year deficit total of $4.97 trillion.

The Debt figure goes up and down on a daily basis based on government borrowing and revenue. Technically, not all of the National Debt is subject to the Debt Limit – a small percentage is exempt.

CBS News

“A bald man with a gray beard and tired eyes is sitting in his oversize Washington office, talking about the economy. He doesn’t have a commanding presence. He isn’t a mesmerizing speaker. He has none of the look-at-me swagger or listen-to-me charisma so common among men with oversize Washington offices. His arguments aren’t partisan or ideological; they’re methodical, grounded in data and the latest academic literature. When he doesn’t know something, he doesn’t bluster or bluff. He’s professorial, which makes sense, because he spent most of his career as a professor.”

“He is not, in other words, a typical Beltway power broker. He’s shy. He doesn’t do the D.C. dinner-party circuit; he prefers to eat at home with his wife, who still makes him do the dishes and take out the trash. Then they do crosswords or read. Because Ben Bernanke is a nerd.”

Yes good ol’ Benjamin Bernanke, with the power to bring the world to it’s knees and his love of dropping bags of money out of helicopters, he’s just your everyday guy who goes home to his loving wife, eats a TV dinner and does the crosswords before lights out. He’s just like you and me.

Day after day Ben is hard at work printing money and holding down those interest rates down to zero for months on end. Despite all of that power, does he let it go to his head? No, good ol’ Ben always remembers to take care of his friends. Because where would we be today without those who are “Too Big To Fail”, and it certainly wouldn’t be Christmas without “Tiny Timothy Geithner”.

Despite the Federal Reserve’s ultimate desire to be independent from Washington Bernanke still makes the time to meet with his friend Treasury Secretary Tim Geithner every week; during the Bush Administration, when Geithner served as head of the New York Fed, he was essentially Bernanke’s Ambassador to Wall Street.

Professor Bernanke of Princeton was a leading scholar of the Great Depression. He knew how the passive Fed of the 1930s helped create the calamity — through its stubborn refusal to expand the money supply and its tragic lack of imagination and experimentation. Chairman Bernanke of Washington was determined not to be the Fed chairman who presided over Depression 2.0. So when turbulence in U.S. housing markets metastasized into the worst global financial crisis in more than 75 years, he conjured up trillions of new dollars and blasted them into the economy; engineered massive public rescues of failing private companies; ratcheted down interest rates to zero; lent to mutual funds, hedge funds, foreign banks, investment banks, manufacturers, insurers and other borrowers who had never dreamed of receiving Fed cash; jump-started stalled credit markets in everything from car loans to corporate paper; revolutionized housing finance with a breathtaking shopping spree for mortgage bonds; blew up the Fed’s balance sheet to three times its previous size; and generally transformed the staid arena of central banking into a stage for desperate improvisation. He didn’t just reshape U.S. monetary policy; he led an effort to save the world economy.

Bernanke has saved the United States from the correction and single handedly avoided the catastrophe of a bubble burst. Thanks to his emergency action the bubble has been re-inflated and the world is safe again, at least until next election year. We should all take some time over this holiday to thank his swift actions because after all inflation doesn’t create itself.

To Read More of the Bernanke Greatest Person of 2009: Time Magazine

Fear of the abyss that gripped financial markets a year ago has dissipated and many investors see improving economic data from around the world as reason to believe the economic rebound that is now under way will only blossom further.

Yet some investors caution that high U.S. unemployment and a lack of credit to drive investment and spending are major impediments to a full recovery.

Chances that growth will remain anemic are strong. As a result, the Fed is likely to keep interest rates — now close to zero — pat through much of next year, spurred by the fear of deflation, these investors say.

“We are at risk of getting into a deflationary environment for the first time since the 1930s, a serious risk. I’m very concerned about that risk,” said Aaron Gurwitz, in charge of investment strategy at Barclays Wealth, which has $221 billion in assets under management.

“Central bankers are very concerned about that risk, and for that reason we expect rates could be kept low for a very long time,” Gurwitz told the Summit. “We expect some central bank action in the fourth quarter of next year, but just a token move.”

JAPAN MISTAKES

Fed Chairman Ben Bernanke is faced with the difficult task of deciding when to scale back the enormous monetary stimulus the Fed has injected to revive the crippled U.S. economy. A move too soon could squash the economy and cause further pain, such as occurred in Japan a decade ago.

Gurwitz said the Bank of Japan tightened too quickly in 2000, choking off growth and pushing the economy back into deflation, which is when prices decline and further hobble growth. The Fed will err on keeping liquidity available, he said.

Pressure on wages and the inability of companies to increase prices are signs of deflation that suggest growth rates and inflation will remain low, said Bob Doll, who oversees about $390 billion in assets as global chief investment officer of equities at BlackRock Inc (BLK.N).

“How many industries do you know that are raising prices? How many industries do you know where there’s a constant sale going on? These are all reminders that deflation is with us, and deflation means low nominal growth,” Doll said.

The human spirit is to overcome diversity and move forward, but the number of hurdles the United States and other countries face makes chances of stumbling much higher than normal, said Max Darnell, chief investment officer at First Quadrant LP, where he oversees just under $18 billion.

The U.S. economy may be headed for a “double-dip” recession if broad access to credit remains impaired, he said.

“It’s very hard to formulate well thought-out expectations for growth,” Darnell said. “This is one of the reasons why you find so many people that are very objectively oriented, being more pessimistic.”

Darnell cited the lack of credit as a major impediment to a return to solid growth.

Bill Gross, who runs influential bond management firm Pacific Investment Management Co, told the Summit Pimco expects the United States and other parts of the developed world to experience subpar growth.

While Gross said Pimco does not expect a return to zero or negative growth, and it expects positive, albeit limited job creation for the next three to six months, there is evidence of continued deflationary pressures.

Gross cited the property scare in Dubai last month and a downgrade in the credit worthiness of Greece as examples that, if not handled properly, could be downward tipping points.

Jonathan Xiong, a senior portfolio manager at Mellon Capital Management where he helps manage $18 billion in assets, said the United States must avoid replicating Japan’s woes.

Since a property bubble burst in Japan 20 years ago the country has struggled to overcome deflationary bouts despite rounds of government stimulus spending.

“One very bad scenario is that we could end like Japan,” Xiong said, adding that too many investors foresee the return of higher inflation, which is mistaken.

“The skew and the size of returns between a deflation and an inflation environment is enormous. The downside in a deflation environment could be horrendous,” he said.

“You should let a little bit of inflation pick up before you take the liquidity away from the market because the deflationary story as we see it in Japan could be very detrimental,” Xiong said.

(Additional reporting by Manuela Badawy; Editing by Andrew Hay and Leslie Adler)

The Dollar Bubble starring Peter Schiff, Ron Paul, Marc Faber, Gerald Celente, Jim Rogers, and others. Prepare now for the U.S. dollar collapse. Presented by the National Inflation Association

For More about the NIA visit: Inflation.US

During President Obama’s high profile visit to China this week, the most frequently discussed, yet least understood, topic was how currency valuations are affecting the economic relationship between the United States and China. The focal problem is the Chinese government’s policy of fixing the value of the renminbi against the U.S. dollar. While many correctly perceive that this ‘peg’ has contributed greatly to the current global imbalances, few fully comprehend the ramifications should that peg be discarded.

The common understanding is both incomplete and naive. Most analysts simply see the peg as China’s principal weapon in an economic struggle for global ascendancy. The peg, they argue, offers China a competitive advantage by making its products cheaper in U.S. markets, thus allowing Chinese firms to gobble up market share and steal jobs from U.S. manufacturers. The thought is that were China to allow its currency to rise, American manufactures would regain their lost edge, and both manufacturing firms and the jobs formerly associated with them would return. In this narrative, the struggle centers on the United States’ diminishing leverage in persuading the Chinese to lay down their unfair weaponry. It’s a sympathetic picture, but it tells the wrong story.

While the peg certainly is responsible for much of the world’s problems, its abandonment would cause severe hardship in the United States. In fact, for the U.S., de-pegging would cause the economic equivalent of cardiac arrest. Our economy is currently on life support provided by an endless flow of debt financing from China. These purchases are the means by which China maintains the relative value of its currency against the dollar. As the dollar comes under even more downward pressure, China’s purchases must increase to keep the renminbi from rising. By maintaining the peg, China enables our politicians and citizens to continue spending more than they have and avoiding the hard choices necessary to restore our long-term economic health.

Contrary to the conventional wisdom, when China drops the peg, the immediate benefits will flow to the Chinese, not to Americans. Yes, prices for Chinese goods will rise in the United States – but so will prices for domestic goods. As a corollary, the Chinese will see falling prices across the board. As anyone who has ever been shopping can explain, low prices are a good thing.

In addition, credit will expand in China while it contracts here. When China abandons the peg, it will no longer need to swell its currency reserves by buying Treasuries or other dollar-denominated debt instruments. Other nations will no longer feel the pressure to keep their currencies from rising, so they too could throttle down on their onerous dollar purchases.

As demand falls for both dollars and Treasuries, prices and interest rates in the United States will rise. Rising rates will restrict the flow of credit that is currently financing government and consumer spending. This change will finally force a long overdue decline in borrowing. So, not only will Americans lose access to the consumer credit that funds their current spending, but the things they buy will also get more expensive.

Our short-term loss will be in sharp contrast to the gain felt by foreigners, who will be rewarded with falling consumer prices and a more abundant supply of investment capital. In other words, the American standard of living will fall while that of our trading partners will rise.

However, this does not mean that I want the Chinese to maintain the status quo. In the long run, the U.S. economy will benefit from the abandonment of a system that guarantees our dependency and inevitable downfall. De-pegging will force the hand of U.S. politicians toward pursuing realistic policies. The Chinese will come to their senses eventually because it is in their interest to do so. Meanwhile, the longer the peg is maintained, the more indebted we become, the more out of balance our economy grows, and the more our industrial base shrivels. In short, the longer they wait, the steeper our fall.

A weaker dollar will price many imported products beyond the reach of most Americas, giving our hollowed out manufacturing sector the opportunity to rebound. However, if our industry has any chance of getting off the mat, we must reduce taxes, repeal regulations, reform our cumbersome legal system, and, most importantly, replenish our savings to finance the necessary capital investment.

If we position ourselves to deal with the consequences, tough love from China will provide a path back to genuine economic growth. However, if our politicians continue to misread the problem and push us deeper in the red, the inevitable ‘rebalancing’ could be truly ruinous.

For More Peter Schiff Visit: Euro Pacific Capital

Politics is about sifting through half truths, untruth’s and downright lies, we’ll get a chance to sift through those as our campaign works and moves forwards. I think the system is broken in Washington and we have to do something to change the rules.

We do something very well in Frankfurt. We balance the budget every year. Republicans and Democrats can quarrel but at the end of the year we balance the budget, because we have to.

If we could pass just one reform in Washington I would say….make them balance the budget, every single year. We need term limits, balanced budgets, and we need to reform the system.

Its not that the Emperor has no clothes…it’s that the Emperor has NO money.

We are out of money, 1.7 trillion dollars in debt, and they are still giving you a check. But where does the check come from though. the stimulus check or 4,500 cash for clunkers check, where does the money come from?

WE HAVE TO BORROW IT.

We don’t collect enough taxes, so we have to borrow it. We are under a serious circumstance in our country and we have to do something serious to reform the system. Its not enough to just elect a different guy to go up there. You have to fundamentally change the rules of the system.

“In questions of power let no more be heard of confidence in man , but bind him of his mischief by the chains of the constitution.”

We used to listen to and obey the constitution but we have lost our way. We have to do something, we have to reform the system, it means changing the rules, and it means we have to acknowledge that there are problems, and we have to work together to fix them.

“My only view is that it’s a much more unstable and dangerous world: In the ’80s, our creditors were Japan, Europe and the [Arab states]—and the three of them were utterly dependent on the U.S. for their national security.”

“Very few people think of gold as money. If you think of gold as money, that level is a range between $4,000 and $11,000 an ounce—that’s the price gold will have to be to support the money supply.”

Read More: CNBC

Demonstrators rushed Covel Commons around 11:10 a.m. today in an effort to protest undergraduate fee increases being voted on this week by the UC Board of Regents.

After hours of chanting outside Covel, protesters pushed against the barricades that prevented access to the building and broke through them, which led to a flood of protesters stampeding to get inside.

“The UC Regents don’t care. … They only care about their progress, basically themselves,” said Miles Goodloe, a third-year political science student who said he was Tasered twice by police. “And I had to get Tasered to understand that.”

As of approximately 1 p.m., UCPD spokeswoman Nancy Greenstein said she did not believe Taser guns had been used.

The UC Board of Regents has been meeting since Tuesday to discuss the 32 percent fee increase, which was passed by the board’s Committee on Finance earlier today. Students from a variety of campus organizations came to Covel this morning to voice their disapproval of the proposed fee hikes.

“It’s ridiculous how I have to protect my education,” Goodloe said.

After demonstrators attempted to break through the barricades, university police forced students back with the threat of clubs and Taser guns.

Protesters made a second attempt to get past the police, which only led to expanded barricades. Police armed with clubs and stun guns then formed a line from the side of Delta Terrace to Covel Commons, pushing demonstrators away from Covel.

UCPD declared the protest as unlawful activity after “bottles, food and rocks were thrown at police officers,” said UCPD Capt. John Adams.

“This assembly is now in violation of the law,” Adams said to the crowd. “On the condition of unlawful assembly, I command that you disperse. All persons who do not leave the Covel Commons courtyard within the next five minutes may be arrested.”

Most protesters then left the area, although some came back later to demonstrate their solidarity.

“We want the public to know we’re invested in this,” said Jan Victor Andasan, campus organization director for the USAC EVP office and a second-year English student. “We’re still here standing together and … we want to know where the money goes.”

Read More: Daily Bruin

Yesterday, it emerged that the key Consumer Prices Index (CPI) measure of inflation had risen to 1.5 per cent last month, up from 1.1 per cent in September.

According to the personal finance website Moneynet, it means that basic rate taxpayers need a rate of 1.875 per cent on their savings before they begin to see a real return, while higher rate tax payers need to earn 2.5 per cent.

For basic rate taxpayers, only one in five variable rate savings accounts pay sufficient interest for them to enjoy a return on their money.

The figures are a fresh blow to savers who have seen their rates of return plummet as interest rates spiralled towards zero per cent.

A spokesman for Moneynet, said: “If inflation continues to rise, savers will find it increasingly tough to get a real return on their money. It’s a miserable time for those working to put some money aside and this looks like it is not going to get any better in the months ahead.

“Given the situation, there’s almost no incentive to save any money.”

In the current situation real assets such as gold and silver have performed far better than a standard savings account

Read More: Telegraph

Peter Schiff on Fox Business says Gold could hit $5000 and a lot higher

Peter Schiff: “Gold is not getting more expensive, the dollar is just getting weaker.”

Fox: “Peter have you sold any of the gold that you’ve bought at 300 or less?”

Peter: ” No way! I’m still buying gold, I’m buying lots more. When you earn money, what are you going to do with it? You have to put it someplace, you cant’ leave it in cash.”

Analyst: “Peter is right. If we ever get our act together, if the fed starts raising interest rates, or at least shows some concern, we’re gunna see a correction in a big way, but thats just not happening”

Fox: “Theres alot of people who are betting on a higher dollar, what do you say to them?”

Peter Schiff: “They are going to be disappointed. Everything we are doing is weakening the dollar, and the fundamentals for the us economy are horrible. Everything that this government has done since this crisis began has actually worsened those fundamentals.

We’re in a much deeper hole than we were a year ago and so the dollar is gonna lose a lot of value
even if we do the right thing its gonna lose a lot of value, but if we keep doing the wrong thing. It’s gonna lose most of its value and it might even lose all of its value and people have to understand, that risk and that threat is very very real.

Fox: “Hold on a second, Peter I can’t let that last comment go. How is it possible for the dollar to lose 100 percent of its value?”

Peter Schiff: “Remember it has no intrinsic value, its just a piece of paper so it only has value to the extent that people have confidence in it and if the confidence goes the value goes.

And if they keep printing them, if Ben Bernanke drops em out of helicopters…and we’re trying to encourage Americans who are already broke to keep spending money they don’t have.

If the government keeps running deficits and try to borrow and spend our way out of this recession, the dollar is going to have no value, because nobody is going to want them.

More Peter Schiff: Schiff For Senate