There are not a lot of “experts” out there at the moment who are concerned that all the government actions to aid the ailing economy are only going to make the situation worse. Peter Schiff, Chief Global Strategist of Euro Pacific Capital is one in a very small group. Schiff says flooding the economy with money through government investment and spending is like putting “out a fire by pouring gasoline on it.”
He fears hyperinflation will be the result and says the only way to save the economy is for Americans to make a fundamental shift from spending to saving, to producing real goods which can be sold on the world markets and by buying only what can be paid for.
Easy money, he says, created the real estate bubble and more easy money will just create another bubble down the road.
Comments
Scott, this is a definite possibility. There are a lot of moving balls in this game, and it is impossible to determine the exact final outcome, but people should be aware of the following:
1. Budget deficits are ballooning and could be well over 2 trillion dollars next year and next. How this gets financed beyond the Federal Reserve start printing money to buy the required T-bill funding is a mystery to me.
2. The national debt is currently approaching 11 trillion dollars and will close to 15 trillion dollars by 2011. It may be approaching the point were tax revenues will barely cover 50% of our interest obligation if interest rates rise as a result of a lack of demand our debt obligations.
3. Currently the US dollar is the world’s reserve currency, if this changes the US will be forced to face its debt obligations far sooner than it desires and may be forced into bankruptcy like Iceland, or Argentina in the past unless it hyper inflates its currency.
The walls of the Empire are crumbling around us and our leadership's response is to borrow more money and go on a spending spree. This is madness! This consumption- and debt-based American ideal is driving us into the ash heap of history. Democratic or Republican at fault? A pox on both their houses!
It seems to me that your show rarely features people with the good common sense that Mr. Schiff has expressed. Bravo for this insertion of some fundamentally sound thinking.
There's no need to worry; government will fix everything. We just need to hang in there until Al Franken rides into town.
Guys like Peter Schiff, Ron Paul, and Jim Rogers have been proven right in light of recent economic events. The simple truth is that we are so far in debt there is really no coming out of it. We really don't need all of this junk we are buying. It will be interesting to see what the future holds.
Right on the money. Between congress and the banking and stock market speculators the US is nearly finished as a world leader.
Spending culture has been so deeply rooted in our culture that as soon as Americans are able to spend, they will spend. Therefore, the liquidity injections must be precisely targeted. Deflation, in this case, will not be problem when the economy starts to lift up.
I am not sure what could be an effective mechanism for 'removing the liquidity'..
Sounds like he doesn't trust the fed or other central banks to remove the liquidity later on. Admittedly it will be a much tougher job as evidenced in recent history. Periods of high inflation and anemic growth plus possible currency devaluation(depending on relative action by other central banks) is not a favorable environment for leaders serving at that time. One way or another there is pain to be endured.