Dollar is down, Gold is up, and CPIs are in by Peter Schiff |
August 18, 2016
Yesterday was the end of
some short-lived rallies as stocks fell back from their
record highs and the dollar index retreated back to pre-Brexit
lows. In the long term, these changes are showing the dollar
continues to lose its purchasing power due to central banking’s
bad fiscal policy. As the dollar declines, gold prices are
likely to respond with upward movements throughout the remainder
of the year.
The Bloomberg Dollar Spot
Index halted a drop of up to 1.2% after William Dudley,
Federal Reserve Bank of New York president and chief executive
officer, said policymakers could potentially raise interest
rates as soon as next month.
The dollar has lost ground
over the past month as lackluster data in the world’s biggest
economies fueled speculation the Fed would be slow to raise
Core CPI Numbers
Aside from a weak dollar, today we got another
reminder that inflationary pressures are continuing to mount.
Despite the Department of Labor’s Core Consumer Price Index
(CPI) numbers showing inflation stagnating, real inflation
is alive and well.
As Peter Schiff has pointed out many times,
CPI is no longer a tool to accurately measure inflation,
but an instrument of propaganda used by the government to
hide accelerating inflation from the public and financial
Modest CPI increases over the past several
years do not reflect an absence of inflation, but a design
flaw in the index that fails to fully capture the magnitude
of price increases. Central bankers drawing economic conclusions
regarding inflation and monetary policy based on this highly
flawed data point are making a major policy error. If CPI
shows inflation is stagnant, then be assured it’s actually
growing at a healthy rate.
Bullish Gold and Emerging Markets
While US stocks and the US dollar fell,
gold rallied for a second day and emerging market currencies
hit their strongest level in more than a year. Stocks from
those nations gained for the ninth day in a row.
Gold rallied because investors are looking
for a safe haven to combat the continued monetary easing
that is likely to come in the form of another rate cut or
more QE before the end of the year.