Monday, June 18, 2012

Peter Schiff on avoiding the brick wall

Peter Schiff, who was famously ridiculed for calling the crisis of 2008, steps up as a prognosticator again in his new book, The Real Crash: America’s Coming Bankruptcy - How to Save Yourself and Your Country. We had way too much government and cheap credit leading up to 2008, he says, and even more government and cheap credit since then, which is why the next crisis will be the real haymaker.

His book is divided into two main sections. Part I addresses the problems, while part II, which is by far the lion’s share of his discussion, presents solutions. In a nutshell, the problem is government, and the solution is to take an ax to it - again and again. Since this view is currently unacceptable to policymakers and the public at large, we can only hope reality will win out before calamity hits.

The Real Crash is encyclopedic in its coverage and highly readable in its presentation. Is there a government agency that truly serves the interests of all Americans? He finds few. What about services people actually want, such as K-12 education: Could they be done better at the state or local levels? Or better still by the free market? In most cases the answer is a profound “Yes!” to both.

Living on Bubbles

Our problems stem from a love of bubbles and the flawed economic theory that blesses them.

During Alan Greenspan’s reign at the federal reserve we had a savings and loan bubble, followed by a tech bubble, followed by a housing bubble. Now with Ben Bernanke at the Fed, we have a government bubble, meaning the Fed is creating money that the banks are then lending to the Treasury to expand government. “If you keep replacing one bubble with another, you eventually run out of suds. The government bubble is the final bubble.”

When the dot-com and housing bubbles burst we at least had something to show for them - “a few good Internet companies and some pretty nice McMansions, [but] no such benefits will remain when the government bubble pops.”

The Fed, Schiff says, should let interest rates rise so people can start saving again. The Fed’s low rates discourage savings, which are

the key to economic growth, as it finances capital investment, which leads to job creation and increased output of goods and services. A society that does not save cannot grow. It can fake it for a while, living off foreign savings and a printing press, but such “growth” is unsustainable— as we are only now in the process of finding out.
But for politicians and central bankers, rising interest rates are an abomination. The cost to service the national debt would go through the roof, while the economic contraction that would likely result would raise the deficit. The federal government would have to spend less, and many of the country’s biggest companies depend on government spending, through contracting, subsidies, or consumption.

But rising rates and the terrible pain it would cause is the good news; the bad news, if the Fed continues to hold rates low, is the economy will eventually go into hyperinflation. “Rising interest rates will be productive pain— like medicine,” he writes, “while hyperinflation will be destructive pain.” If we stay the course and pretend everything will somehow work out, we could be facing a crisis worse than the Great Depression.

Bernanke on the Great Depression

Chairman Bernanke, of course, is well-known as an “expert” on the Great Depression, and many people are betting the farm that he and his Keynesian staff have the skills to steer us back to sunny beaches and bikinis. Bernanke’s approach is to keep asset values from falling by any and all means. One of the reasons the depression of the 1930s became great, he believes, is because the Fed allowed the money supply to fall following the Crash. With less money in the economy, prices nosedived. People didn’t consume as much, consequently businesses didn’t profit as much, therefore employees got fired, and the economy headed south in a self-perpetuating spiral.

“Sustained deflation can be highly destructive to a modern economy and should be strongly resisted,” Bernanke said in a 2002 speech that inspired his nickname. And by deflation, he means “falling prices.”

Schiff explains what’s wrong with this analysis.

First, for 100 years prior to the 1929 Crash, bank deposits actually gained value each year. In other words, we had a century of deflation, that much-feared condition that Bernanke has vowed to avoid at all costs.

Second, from mid-1921 to mid-1929, the Fed increased the money supply by 55 percent, giving rise to a real estate and stock bubble. Most but not all economists missed the bubble and its inevitable consequences because rising productivity kept consumer prices fairly stable. Even as stock prices were falling only days before the Crash, Irving Fisher said stocks had reached a “permanently high plateau,” and he expected to see “the stock market a good deal higher than it is today within a few months.” In 1928, Ludwig von Mises had published a full critique of Fisher’s monetary theory, claiming that Fisher’s reliance on price indexes would bring about the Great Depression. Nonetheless, Fisher’s stable price theory carried the day, and when the sky fell the Fed, along with Hoover, “did something,” as Schiff explains:

Hoover’s Fed actually boosted the money supply by 10 percent in the two weeks following the 1929 crash. Repeatedly throughout Hoover’s term, the Fed created more money. But the money supply fell because people began hoarding cash, and banks stopped lending out their money.
Deposits went down by 30 percent, but most of that was due to people pulling their money out.

In other words, the money supply shrank despite the Fed’s interventions, not because of its inactions.
Did a falling money supply promote massive unemployment?

Not by itself. Hoover insisted on keeping wages high, and during his re-election bid in 1932 boasted that the wages of U.S. workers were “now the highest real wages in the world.” They probably were, and by not allowing wages to fall along with other prices, unemployment soared.

Had Hoover simply allowed the free market to function, the recovery would have been so strong that he likely would have been elected to a second term, and Teddy would have been the last Roosevelt to occupy the White House. Instead he handed the Keynesian baton to Franklin Delano Roosevelt . . .
None of this, as we know, is even close to the standard view of the Depression. Instead, we’re told
that government needs to play a bigger role in battling downturns, and the Fed needs to pump in cash to jump-start the economy. This bad lesson stays with us today, and beginning in the early 1990s, this way of thinking started the cycle of bubbles that put us where we are now.
End Keep the Fed

The one puzzling part of Peter Schiff’s masterpiece is his view that the federal reserve, as originally conceived, was a good idea. He describes the Fed as “reckless,” the “biggest culprit in discouraging savings,” and insists “we never should have trusted the Fed to respect its boundaries.” But he also says:

The original intention of the Fed was something I might have supported had I been around back then. In theory, it was an agent of stability that could also promote economic growth. . . .

The Fed would increase the money supply as the economy expanded, and then reduce the money supply as the economy contracted. . . .

In theory the Fed was a good idea. It’s just that in practice it did not work, because politicians quickly abused it.
He argues that before 1913, banks were issuing their own currencies backed “by assets, such as gold, and by the banks’ loan portfolios.” If “you traveled to California, your bank note from Connecticut might not be honored by other merchants or the California banks.”

Thus, he concludes, it was natural “for bankers to hatch an idea of a “banks’ bank. Banks could deposit some of their assets— commercial paper or gold— with the Fed, and the Fed in return would issue its own bank notes to the individual bank.”

While this may sound plausible, questions arise as to (1) why the “banks’ bank” needed “guns and badges” (i.e., government cartelization) to make it work; (2) why loan portfolios or commercial paper can be assumed to be an acceptable substitute for gold coin; (3) why a central bank is needed to expand and contract the money supply - in other words, why assume the supply/demand relation of the free market fails when the good in question is commodity money; (4) why the historical record of central banks acting as an agent of stability and sustainable economic growth is short on examples; and (5) why did the Fed, at its creation, possess a massive inflationary structure if it was sold as a means to promote stability?

I believe central banking, by its nature, is a means of institutionalizing, centralizing, and cartelizing moral hazard. It is my view that the Fed was never a good idea, but one of the absolute worst ever brought to fruition.

These concerns notwithstanding, his critique of the Fed as it currently exists is emphatically on the money. Though he doesn’t support its abolition he does say, “In an ideal world, there would be no Fed, and I think the nation would be better off if the Fed had never been created.”

How we can save ourselves

Readers of his book don’t have to be swept up in the impending disaster. Unlike the crash of 2008 when investors flocked to the dollar as a safe haven, he believes the dollar and U.S. bonds will collapse before the U.S. economy goes under. He devotes a chapter to crisis investing based on the observation that since Americans have been living beyond their means, many others have been living beneath their means.

Elsewhere in the world there are more creditors than debtors, and there is pent-up demand and excess production. In the future, these economies will see a surge in demand, while ours will see demand fall. . . .

Bottom line: purchasing power is shifting. You should try to invest in companies that will benefit from this shift. These will primarily be foreign companies. Of course, many foreign companies sell to the United States. These aren’t the businesses I’m talking about.
He describes his investment strategy as
a stool with three solid legs: (1) quality dividend-paying foreign stocks in the right sectors; (2) liquidity, and less volatile investments, such as cash and foreign bonds; and (3) gold and gold mining stocks.
Of particular interest to this reader was his section on the poor man’s investment strategy. If consumer prices head for the moon the government will likely impose price controls, thereby creating shortages. Solution: buy in bulk now and stock up. One advantage is that
any returns are tax free. For example, if you buy a box of cornflakes today and eat it two years from now when the price of a new box is 40 percent higher, that’s a 40 percent tax-free return.
His writing is full of fresh and sometimes bold insights on long-standing issues. Readers will find his discussions on drug prohibition, marriage, abortion, guns, health care, and prostitution especially engaging, I believe. His detailed historical and legal discussion of the income tax is the best I’ve ever read, nor does he pull punches in describing it:
It’s hard to imagine a tax more destructive of productivity, more destructive of entrepreneurship, more destructive of our lives, more difficult and costly to comply with, more subject to gaming, or more absurd in its logical consequences. Congress should immediately, fully, and permanently abolish the income tax, and the Internal Revenue Service (IRS) along with it.
He would replace the tax with a revenue-raising tariff on imports.
Yes, tariffs suck. But they suck less than income tax. In fact, they might be preferable to a national sales tax.

Peter Schiff has written a riveting guide on what to do about our snowballing social, financial, and economic problems. Inasmuch as he recommends freeing people from government, his solutions are far from pain-free and consequently will not be popular with the political class or their dependents. Well, it’s time they got over it. As Schiff writes in his introduction, it’s as if we’re headed down an icy hill with politicians in the driver’s seat accelerating toward the bottom.

We need a grown-up to grab the wheel and steer us into the ditch on the side of the road. That won’t be pretty, but it’s better to go into the ditch at 80 miles an hour than crash into a brick wall at the bottom of the hill at 120.

Peter Schiff: Damn the Torpedoes

 By Peter Schiff

Last week in an interview on CBS Network News, Economist Mark Zandi, the chief economist for Moody’s, unwittingly revealed a central error of the global economic establishment. Zandi has made a career out of finding the middle ground between republican and democrat economic talking points. As a result of this skill, he has been rewarded with large quantities of airtime from media outlets that want to appear non-partisan, despite the fact that his supposedly neutral analysis often leaves listeners frustrated.
When asked about the recent deterioration in the global economy, Zandi said that “the worst possible scenario” at present would occur if Greece were to leave the Eurozone. He claimed that the economic gyrations and liquidations of bad debt that would result from such an exit would be sufficient to create a vicious cycle that could drag the global economy back into recession. As a result, he urged policy makers to take whatever steps necessary to maintain the current integrity of the 17 nation Eurozone.
Given what most economists now know, few would actively argue that Greece’s entrance into the Eurozone back in 2001 was a good idea. In fact most concede it was a terrible idea based on bad forecasting and outright fraud. There is little disagreement over the fact that Greece grossly misrepresented its financial position in order to gain initial entry into the monetary union. It is also widely agreed upon that in the ensuing decade Greece exploited its monetary advantages to borrow irresponsibly.
Much has been written about how the fundamental misfit between Greece’s economy and currency gave birth to a deeply flawed system that was destined to run off the rails. Most also agree that the countries like Greece and Germany are too economically and culturally disparate to exist under the same monetary umbrella. But despite all this, Zandi wants to maintain the status quo. In his opinion, it is so imperative to prevent the deflationary consequences of an economic restructuring that it is preferable to prop up a failed system, perhaps indefinitely, rather than allow a newer, healthier system to replace it.  In the process, the moral hazard created not only assures that Greece will become an even greater burden on Europe, but so too will other nations whose leaders will be emboldened in their profligacy by the anticipation of similar help.
From Zandi’s perspective (and he is certainly in the majority on this point) the goal of economic policy is to keep GDP growing. It follows then that he will oppose large-scale debt liquidations which drag down GDP in the short term. But sometimes debt needs to be liquidated. Bad ideas need to be abandoned. Once economies stop throwing good money after bad, capital is freed up to flow into more economically viable purposes. But economists and politicians never look at the long term. Their job seems to be to manage the economy for the next election.
The same “damn the torpedoes” mentality dominates economic thinking with respect to the U.S. economy as well. Years of artificially low interest rates, and government subsidies that direct capital towards certain sectors and away from others, has created an economy with too little savings and production, and too much borrowing and consumption. The ultra-low interest rates currently supplied by the Fed serve to perpetuate this unsustainable artificial economy. Higher rates would work quickly to redirect capital to the more productive sectors. But high rates could bring deflation and liquidation, which few economists are prepared to risk.
We have too many shopping malls selling stuff, but not enough factories making stuff. We have too many kids in college studying liberal arts, and not enough in the workforce acquiring skills that will actually increase their productivity. Banks are loaning too much money to individuals to buy houses, and not enough money to entrepreneurs to buy equipment. We have too many tax-takers riding in the wagon, and not enough taxpayers pulling it.  The list is long, but the solutions are short.
We need to let interest rates rise to market levels, and allow the economy to restructure without government interference. We need to stop beating a dead horse and hitch our wagon to an animal that can really pull. The process will be painful for many, but like ripping off a band-aid, the pain will be over relatively quickly.  However, since a painful restructuring means recession, politicians resist the cure with every fiber of their beings. So instead of a genuine recovery, one that will provide productive jobs and rising living standards, we get a phony recovery that produces neither.
Preserving a broken system merely to avoid the pain necessary to fix it only makes the situation worse. Propping up sectors that should be contracting prevents resources from flowing to other sectors that should be expanding.  eeping workers employed in nonproductive jobs prevents them from gaining productive employment elsewhere. Encouraging activity or behavior the market would otherwise punish discourages alternatives that it would otherwise reward.
Unfortunately, leaders on both sides of the Atlantic put politics above economics, and economists like Mark Zandi provide the cover they need to get away with it.


Thursday, June 7, 2012

Peter Schiff’s Latest Comments About Gold and Gold Stocks (GLD, IAU, SLV, GDX, GDXJ, GG, ABX, KGC, AUY)

Dominique de Kevelioc de Bailleul: With the dismal performance of gold stocks testing the patience of even hardcore gold bugs, Euro Pacific Capital CEO Peter Schiff believes investors should not panic and sell, but hold on, the bottom in the gold mining stocks is probably in.
And if the bottom is not in, hold on anyway.
“We could see another 10% pop in a week or two in the mining shares,” Schiff told King World News on May 23.  “There’s a very good chance that the bottom is in, especially if we can get a rally in gold.”
At this time, it may be worth repeating a famous quote from economist John Maynard Keynes: “The market can stay irrational longer than you can stay solvent.”  On the way up and on the way down, markets can mis-price assets to ridiculous levels for longer periods of time than appears rational.  Today, it’s the U.S. dollar, U.S. Treasury market and gold, which have been mis-priced for so long.
“Right now the U.S. dollar has been rising because of worries about Europe, but the dollar is sicker than the euro,” Schiff said.  “So both currencies should be falling against gold and gold should be taking off here.”
To put into better context how “sick” the U.S. dollar really is, consider an article penned by USA Today journalist Dennis Cauchon, who outlined in his May 23rd piece the horrific fiscal shortfalls in Washington—a fiscal debacle so large that economist John Williams of expects hyperinflation in America some time in 2014 as global investors might eventually witness 100 percent Fed monetization of fresh U.S. Treasury debt.
Under the Generally Accepted Accounting Principles (GAAP) rules of reporting financial disclosures, “the [U.S. budget] deficit was $5 trillion last year under those rules,” stated Cauchon.  “The official number was $1.3 trillion. Liabilities for Social Security, Medicare and other retirement programs rose by $3.7 trillion in 2011, according to government actuaries, but the amount was not registered on the government’s books.”
Whether investors are aware of the fraudulent U.S. Office of Management and Budget (OMB) accounting, or not, the reality of millions of baby boomers retiring each year and the growing budget deficits that come with an aging population will reach an inflection point, whereby investors of all stripes come to expect money printing as a way of life and begin trotting, then running, to gold and the gold shares in an effort to protect from a Greece-like financial collapse.
And the quick-fix to Washington deficits through Fed ‘stimulus’ and the higher tax receipts that result from a U.S. “bubble economy” has finally reached that ‘Minsky Moment’, according to Schiff.  After trillions of dollars of Fed stimulus since 2009, the economy just isn’t responding like it had for nearly 70 years of Fed intervention—a prediction made by 20th century economists Hyman Minsky and Ludwig von Mises, among others, of the ramifications of chronic central bank money supply injections.
“The market is just rolling over, as it’s coming to grips with the fact that the fantasy they believed in is just that: fantasy,” Schiff said in an earlier KWN interview of May 18th, referring to the recently reported poor economic numbers from Washington and private sources.  “It’s not reality.”
Schiff went on to say that gold—and by extension gold shares—will rise “as investors realize that QE3 [quantitative easing] is coming, because the Fed has already said that.  If the economy needs it, it’s going to get it.  And the economy is addicted to it [stimulus].  I mean, this economy needs QE like a heroin addict needs another fix.”
Back to the May 23rd interview:  Schiff suggested that the relative strength of the HUI index of mining shares to the gold price so far this week indicates to him a bottom is in and a buying opportunity is at hand.   As far as the gold mining shares, “we could have a pretty serious up-move in the gold stocks in a very short period of time.”
Related Tickers: SPDR Gold Trust (NYSEARCA:GLD), iShares Silver Trust (NYSEARCA:IAU), Market Vectors Gold Miners ETF (NYSEARCA:GDX), iShares Silver Trust (NYSEARCA:SLV), Market Vectors Junior Gold Miners ETF (NYSEARCA:GDX), Goldcorp Inc. (NYSE:GG), Barrick Gold Corporation (NYSE:ABX), Kinross Gold (NYSE:KGC), Yamana Gold (NYSE:AUY).

Peter Schiff: Economic Reality Bites

Many people became convinced that data releases earlier this year indicated that “recovery” in the U.S. was imminent. But as I have been saying for months, this evidence would ultimately be shown to be as reliable as sightings of Bigfoot. Lots of people claim to say they have seen it, some even produce plaster footprints, but in the end all we have is a guy in an ape suit. The economic recovery, that has been discussed so loudly and often in recent months, will be shown to be similarly mythical.
A torrent of recent economic data now reveals weakness, and investors are beginning to take notice. Friday’s release of the May jobs report showed a paltry 69,000 jobs created during the month, far below consensus estimates. Not only did the current month disappoint, but the June numbers were also revised down by 49,000. This release follows yesterday’s downward revisions of first quarter GDP growth from 2.2% to 1.9%. Also lost in the headlines was that the savings rate dropped to 3.4% in April, the lowest rate since December 2007. This shows that Americans may need to deplete their already meager savings just to keep their heads above water as the U.S. economy sinks back into recession.
The bad news sent stocks swooning. The latest sell off brings the S&P 500 down close to 10% from its levels in early April. On the other hand, bonds have reached record highs as investors seek safety in treasuries. However, I believe that treasuries will turn out to be the Facebook of safe havens. Before Facebook (NASDAQ:FB) went public everyone wanted a piece of the action. But once the allure wore off, and people realized they owned shares of an overhyped company with unreliable earnings and a sky high valuation, the shares quickly lost a good deal of their appeal. Despite the best efforts of the media to declare the end of gold’s appeal, the metal continues to shine. Friday’s report also sent gold up nearly 4 per cent. Gold is now down just 3 per cent from May 1, a period that has been horrific for other asset classes.
Oil prices continue to slide as traders brace for a fall-off in global demand that will come from the return of a global recession. What these traders fail to understand is that the recession will likely be resisted by central banks around the world with massive money printing. Such action will be much more likely to push oil prices back up to levels higher than those seen before the recent downturn. Yes recession means consumers will use a lot less oil, but inflation created by the central banks means that they will likely pay a lot more to purchase it.
In recent months as turmoil bubbled across the debt markets of Europe, the United States had beckoned as a safe haven. But in truth, the problems are as bad, if not worse, on this side of the Atlantic. Ironically, America has not had to deal with its day of reckoning because lesser problems surfaced first in Europe. But when Europe comes to some modest resolution of its problems, or when bond investors realize they have jumped from the frying pan into the fire, there will be no hiding from the unresolved problems here.
As the intoxicating effects of Fed stimulus wear off, the hangover is setting in. To delay the pain, I believe that there can be little doubt that the Fed will unleash its next round of stimulus, in the form of QE3. My guess is the Fed has always known more QE was needed but it has been waiting for the most politically palatable time to announce it. That “stunner” can’t be far off with the data so bad and the elections so near.
Eventually more people will figure out just how precarious America’s fiscal position truly remains. That’s when interest rates will finally rise in the U.S. There is no way to justify record low interest rates in this country given our atrocious fiscal position. I believe interest rates here should approach levels comparable to the more indebted European countries. Once it becomes obvious just how many dollars the Fed is prepared to print to stave off recession, people running into treasuries today will likely suffer buyer’s remorse. When they rethink their assumptions, as buyers of the Facebook IPO clearly have, the Fed will then become not just the buyer of last resort, but the buyer of only resort. Then the Real Crash may finally be upon us.

Schiff: Beginning of the Real Market Crash

If you thought the financial collapse of 2008 was bad, you haven’t seen anything yet.
So says Peter Schiff, a financial investor and author who lives in Weston who unsuccesffuly sought the U.S. Senate nomination from the Republican Party in 2010. Schiff, who predicted the financial collapse in 2008, recently released a new book, The Real Crash: America's Coming Bankruptcy, wherein he makes his case that an impending financial collapse will leave Americans from all walks of life struggling—and will be much worse than the one that plagued the country in 2008.
On Friday, Schiff posted a video to his YouTube channel following the 275-point skid the Dow Jones industrial average saw after a lackluster May jobs report which broadcast 69,000 new jobs for Americans, fewer than half of the 150,000 new jobs which were estimated to be created last month.
Adding insult to injury, Schiff said, the report also included 49,000 downward revisions to jobs for March and April.
In the report, unemployment rose to 8.2 percent, while when factoring in those who are discouraged workers not seeking jobs and part-time workers who'd prefer full-time employment, the rate rose to 14.8 percent.
"I think that's the start of a trend," Schiff said of the increasing unemployment numbers.
Those numbers, Schiff said, speak of a larger problem.
“I think it’s all part of an ongoing depression, where we have a series of recessions punctuated by artificial growth caused by stimulus," Schiff said. "That’s really what is happening now—the stimulus is wearing off and the hangover is setting in. And of course, the bigger the stimulus, the bigger the hangover. As the economy builds up a tolerance for stimulus, you need more and more of it to get any effect. We’ve had record doses of stimulus and we’ve barely had any kind of phony growth.”
With these record injections of cash into the economy, interest rates are still at zero at the end of the recovery, Schiff said.
"We're starting a recession from the levels that normally characterize the bottom of a recession," he said. "All this economy can produce with record amounts of stimulus is 8.2 [percent] unemployment. That’s the best we can do. I think this next round of stimulus is going to be the one we overdose on if we don’t go cold turkey before that happens. This is the beginning of the real crash."
The U.S. dollar
Schiff said that traders are beginning to realize that the dollar is not as sound an investment as it's been in the past.
"A lot of people thought that the problems were in Europe and that the salvation lie in U.S. in the dollar," he said. "Now more people are starting to come to terms with the fact that we're in trouble, too. You know, America's problems are not made in Europe. They're one of the few things that are still made in America."
Investors have been shying away from the Euro because of Europe's debt problems, Schiff said, which means it makes no sense that people would buy the dollar, which carries with it even more debt.
The fact gold rallied on Friday is proof that investors want "real money," Schiff said.
"When people realized they jumped out of the frying pan, into the fire, they're going to try to dump their treasuries," he said. "They're going to find out what they really want is ... gold. As gold gains its appeal, that will take the luster off the dollar even further and off the Treasury market even further."
Schiff said America's facing bigger problems than Europe. Across the pond, interest rates are already rising, whereas they're still at zero in America and we're borrowing for next to nothing, he said.
"As bad as their [problems] are, ours are worse," he said. "Few people really perceive the gravity of the threat to the U.S. economy and how precarious a position we are really in and how bad this crash is going to be."
U.S. consumers will be hit hard, Schiff said, as banks will print more money and prices will continue to rise.
"If you see the bond market going down, the dollar going down and the stocks going down simultaneously, and gold really going up, you'll know the end is near ... and the real crash I've been writing about is underway," he said.
Schiff said that Obama, trying to put a nice spin on the jobs report, said he'd like to make it easier for veterans to get jobs by eliminating some barriers such as licensing requirements, certifications and expensive degrees being prerequisites to employment. Obama said that since veterans were doing these types of jobs in the army, they're obviously qualified to do them in the private sector and should be fast-tracked to employment.
"What Obama doesn't seem to understand is where these barriers came from in the first place," he said. "They came from government. They came from politicians who were just as well-intentioned as Obama. All these obstacles were placed in the path of everybody, not just veterans. Obama is admitting that the way to create jobs is to get rid of the government impediments to jobs."
Schiff said the federal government is doing all sorts of things to "legislate jobs out of existence."
"Why stop with veterans," he said. "Why not get rid of [the barriers] for everybody. Why not make it easier for everybody to get jobs."
Schiff said that while some people argue people who are unemployed are looking for "the perfect job," many people are not working because they have an alternative to working in extended unemployment.
"I think people who are collecting unemployment in many cases already have the perfect job," he said. "They get paid for doing nothing, and they don't want to quit that job."
That mentality is understandable, Schiff said, as people want to retire eventually, which is part of human nature.
"Unfortunately a lot of people in government don't understand human nature, don't understand the unintended consequences of their well-meaning legislation," he said.
The presidential election 
Schiff said capitalism will come under fire during the presidential election, especially when the crash he foresees occurs.
"Guys like Obama are just waiting to blame this thing on capitalism," he said. "Obama likes it I think when he sees failure in the economy—not that he's rooting for it—but what it does is it ratifies his own perceptions that capitalism doesn't work, that freedom is not a good idea, that what we really need is more government control and government regulation, because in his heart he's a socialist.
"He doesn't really feel that capitalism is the way to go," he said. "He is looking for an opportunity to recreate and redesign America in this socialist Utopian fantasy that resides in his mind, and he's just arrogant enough to think he can do it."
Schiff said that while presumptive Republican nominee Mitt Romney might not understand the economy as well as U.S. Rep. Ron Paul (R-Texas), he's a believer in capitalism and can learn on the job.
"It frightens me to have [Obama] at the helm when the ship hits the iceberg," he said. "I think we've got a chance with Romney. We don't have a chance at all with Obama."
And the good news about America's struggling economy?
"The only good news about the bad news for the economy is the worse the economy gets, the worse the chances of Obama's reelection get, which I guess is the only silver lining in a very, very dark cloud."

Read Peter Schiff's Biography here.

Friday, June 1, 2012

Peter Schiff: America is Already Bankrupt (QQQ, SPY, DIA)

Peter Schiff: ‘We’re Already Bankrupt’

U.S. financial affairs have fallen into extreme disrepair, says Peter Schiff, CEO of Euro Pacific Capital.

"We're already bankrupt,” he tells Yahoo. “It’s better to acknowledge that than to pretend we're not."

The fact that our country is “so broke” has led the Federal Reserve to push interest rates to record lows, Schiff says. The 10-year Treasury yield hit a new trough of 1.61 percent Wednesday.

“If interest rates were allowed to rise, the federal government would have no choice but to restructure debt,” he says.

“A lot of our banks would fail. We’d have a bigger drop in our real estate mark. We’d be right back in recession.”

But the Fed’s insistence on keeping interest rates near zero is “creating even bigger problems,” Schiff says. Monetary policy is making us save too little, invest too little, produce too little, borrow too much, and spend too much.

"We can't have real economic growth until interest rates go up," he says.

"If we admit we're bankrupt and at least restructure, we can start repairing the damage and preparing the economy for real growth."

Schiff will undoubtedly be pleased to learn that New York Fed President William Dudley and Dallas Fed President Richard Fisher recommended against further easing Wednesday.

"My argument has been that we have done enough, in fact, we've done too much," Fisher told reporters, according to Reuters. “I don't see what we would accomplish with further accommodation."