Schiff's Way out of This Mess

Since midsummer, so much ado has been made about the extension of the Bush tax cuts. In truth, the "benefits of holding taxes low will be more than mitigated by damage done by larger deficits" says Peter Schiff. So many others are in agreement with this fact that it isn't necessary to link them all.

Dr. Doom and Gloom, while very entertaining, informing, and insightful, has become somewhat formulaic in his prescriptions to cure the crisis. And yet, I can't seem to get enough of reading his columns.

What's his solution to the crisis this time around? The same one he's been giving before:

What we really need are massive cuts in government spending so we can have true tax relief. In addition, we need to remove the government-imposed barriers which make our economy uncompetitive, and which are preventing market forces from correcting the imbalances.

He concludes with a clear message, "by expanding government and increasing debt, the plan puts us farther than we have ever been from a real recovery."

Of course this is not to say that we do not need tax cuts. When the people get their money back or are allowed to keep their money this is always a good thing. The problem is the spending.

Read the rest of Schiff's latest column here.

Video: Schiff Report: Chinese inflation is getting worse!

That spells "b-a-d-n-e-w-s" for Americans, because the Chinese will have to stop expanding their money supply and start contracting it to stifle inflation in their own country.

This means reducing exports to the United States and keeping more of their own goods.

As Peter Schiff notes, that's when U.S. inflation will speed up because they may stop hoarding our dollars - and lots of em - and may stop sending us their goods.

Gary North was right: Ben Bernanke is a juggler of digits. But China is juggling, too. It has a decision it has to make about its currency: The RMB.

It has to let its currency rise. The purchasing power of the RMB must go up in order for the 5.1 percent inflation to drop.

Ding! Ding! Ding! It may be time to invest in the RMB, while its still low.

What Keeping Confidence in the U.S. Dollar is all About

Even the outside world (countries outside of the U.S.) have vested interest in keeping confidence in the U.S. dollar high. The main reason is that "at the moment the bulk of the monetary reserves of central banks across the world consist mainly of dollars and US Treasuries."

Because of decades of exporting our inflation to other countries, we have merely pushed off a total decline in the value of our currency. So what is keeping confidence in our dollar now?

Dr. Sander O. Boon explains:

The dollar reserves retain their value as long as the American economy keeps on performing well enough. But when confidence in the American economy crumbles, so does the value of dollar denominated assets, once investors start selling some of them off. The world fears losing its confidence in the dollar, as it would be a very costly affair for the holders of these assets. You could also try to describe the situation as follows: as long as your neighbour keeps his job, the value of your own house remains intact. This is the very fragile basis on which our entire monetary system has been built.

Yikes!

Advice to Tea Partiers

John Samples, a speaker in this video and author of The Struggle to Limit Government, has made his latest book available for free (or at least the Cato Institute has). To download the new book click here.

Dan Mitchell on the Deficit

Pay attention to the last 40 seconds of this clip.

The guy from the Center for American Progress: "I'm sorry but that is such a minority point of view. It is really important to point out that Dan is in the extreme minority here. It's really important for everyone to understand that nobody else except for Dan and the Cato Institute think that that's true!

Yea, and the more the majority keeps pushing Keynesian economics, the more the free-market minority looks credible when they are proven right.