Peter Schiff on the Economy

Here's a video from 2006 where Peter Schiff predicts the current crisis. It's funny to hear the other guy telling Peter how stupidly wrong he is. Guess who looks stupid now!

Peter's latest newsletter makes the following chilling prediction, some of which is already coming true:

"The government will now attempt to keep bad loans from failing and real estate prices from falling. Rather then allowing market forces to rein in excess borrowing and replenish savings, it will encourage even more borrowing and drain what is left of our savings pool. Rather than allowing our economy to return to one based on legitimate production, it will continue to encourage reckless consumption."

"In the end, by refusing to allow market forces to work their cure, our economy will inevitably die from the disease. Our economy will now face death by hyperinflation, which will cause a complete loss of confidence in the dollar and result in prices and interest rates skyrocketing out of sight. The evaporation of our national wealth will lead to civil unrest, food and energy shortages, and the possible imposition of martial law. If such a scenario unfolds, what is left of our Constitution will surely be completely shredded."

Let's hope that this time he's wrong.

Comments

[Stephen Downes]

It would be an unmitigated disaster is interest rates go up significantly.

In the United States, national debt is now $10 trillion. A 10 percent rate would be $1 trillion a year, almost equivalent to the cost of the Iraq war.

Consumer debt is even more unmanageable. The tide of defaults would become a flood, and consumer spending (60 percent of the economy) would drop to an almost dead standstill.

The constitution, meanwhile, was shredded years ago, by the same government that instigated this crisis (and the Iraq war), something that will become clear should there be significant unrest.

[Graham Glass]

Hi Stephen,

I totally agree with you.

Since the US relies on other countries to finance its operations, it's very likely that interest rates will indeed have to go up in order to persuade those countries to continue to loan the US money.

And sadly, you're right about the Constitution too, something I've been passionate about on my blog.

Cheers,
Graham

[steve pinto]

I agree generally with Peter, but the one thing that I believe will mitigate the hyperinflation in the US is the fact that much of the rest of the world will also be in the same situation. Therefore, the need to raise interest rates in the US to attract foreign capital will not take place. This is becasue the other countries will also have to lower rates, print more money and thus bring to mind the old saying, "a raising tide (or lowering tide) raises (or lowers) all ships. The tide is the world financial condition and the boats are the other countries. One last comment; I believe the EURO will soon sink against the US dollar. Europe is too fragmented in its interests to stay together during a crisis. Comments?

[Dave Jones]

I've read some other things by Schiff, including one of his books, http://www.amazon.com/Crash-Proof-Economic-Collapse-Sonberg/dp/0470043601/. He's pretty sharp, and I agree with much of what he has to say; however, with him, you need to keep one thing in mind: His company, Euro Pacific Capital ( http://www.europac.net/ ) specializes in providing Americans with access to investments denominated in foreign currencies, foreign precious metals depositories et cetera. So he has a strong interest in keeping Americans skittish about the economy.

I recently picked up the following book by David Smick: http://www.amazon.com/World-Curved-Hidden-Dangers-Economy/dp/1591842182/ . I found it to be very good -- in large part because Smick emphasizes the global aspects of the current economic crisis (and it *is* a global problem -- many other countries are potentially in a much worse situation that the USA).