Peter Schiff released a new commentary yesterday, demolishing Ben Bernanke’s metaphor that likens quantitative easing to the first stage of a rocket being shot into space. Unlike a rocket that can jettison its spent fuel tanks, the economy is going to be dragged down by the lingering effects of QE for years to come.
“Herd mentality can be as frustrating as it is inexplicable. Once a crowd starts moving, momentum can be all that matters and clear signs and warnings are often totally ignored. Financial markets are currently following this pattern with respect to the unshakable belief that the Federal Reserve is ready, willing, and most importantly, able, to immediately execute a wind down of its quantitative easing program. Although the release last week of the minutes of the Fed’s last policy meeting did not contain a shred of hard information about the certainty or timing of a “tapering” campaign, most observers read into it definitive proof that the Fed would jump into action by December or March at the latest. The herd is blissfully unaware that the Fed may not be able to reverse, or even slow, the course of QE without immediately sending the economy back into recession.”
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