Thursday, June 7, 2012

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.
Jobs
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.

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