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All Da King's Men

Peter Schiff, Part II

By Da King Published: October 28, 2011

Here's more of Peter Schiff conversing with the OWSer crowd in New York:

I don't agree with everything Schiff said there, but most of it is exactly right. FDR didn't cause the Great Depression. It started a few years before he even took office. There is, however, a great deal of evidence that his policies interfered with economic recovery (read The Forgotten Man by Amity Shlaes, among other sources). What ended the Great Depression was WWII, not any of FDR's economic policies. Speaking of FDR policies, one New Deal policy was the creation of the secondary mortgage market. That started in 1938 with the creation of, drumroll please, Fannie Mae. Fannie created the mortgage-backed security in 1981. Fannie Mae, via the government, started the housing casino market on Wall Street. How'd those government policies work out ???

Here's something else interesting about Peter Schiff. As he tried to tell the OWSers, he warned of the real estate implosion before it happened:

In an August 2006 interview he said: "The United States economy is like the Titanic and I am here with the lifeboat trying to get people to leave the ship... I see a real financial crisis coming for the United States." On December 31, 2006 in debate on Fox News, Schiff forecast that "what's going to happen in 2007" is that "real estate prices are going to come crashing back down to Earth". Schiff is one of a minority of economists credited with accurately predicting the financial crisis of 2007–2010 while "nearly all [macroeconomists] failed to foresee the recession despite plenty of warning signs".

Bingo. Schiff was right on the money.

What does Schiff see coming in the future for the United States ? That can be summed up in one word - hyperinflation. It's hard to argue with him. The only question is when it will happen. The main reason will be our debt:

In a March 2009 speech Schiff said that it would be impossible for the U.S. debt to China to be repaid unless the U.S. dollar's value is substantially diluted through inflation. In September 2009 Schiff said that "I would not be surprised to see [gold] at $5,000 over the next several years" and that the 2009 stock market rally was a "bear market rally".

Diluting the value of the dollar to pay the debt is commonly called "monetizing" the debt, and I see no other way for us to payoff our debts either, given our current shortsighted debt-advocating government leadership. Unfortunately, monetization means the value of every asset of every citizen in the country becomes worth substantially less. Whatever method of debt repayment is ultimately used, there is no way to payoff the debt that will not extract tens of trillions of dollars from the citizens of this country. We will most likely be substantially poorer in the future. That's why this massive debt runup is a phenomenally bad idea that will harm this country for a generation or more, and that's why Schiff is recommending a gold investment. Gold, unlike our fiat currency, has a tangible value. The price of gold has risen by around 200% over the last 5 years, so Schiff is not the only person who sees the writing on the economic wall.

And as always, anyone who thinks we can fix our economic woes by imposing exorbitant new taxes on corporations and the rich, or by sending ever more of our hard-earned dollars to the government, should have his/her head examined. The biggest effect of those wrongheaded strategies will be more job losses and the further impoverishment of our citizens, exactly what we don't want.



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