By Peter Schiff

In his latest weekly New York Times column, Nobel Prize-winning economist Paul Krugman put forward arguments that were so nonsensical that the award committee should ask for its medal back.

Recent rhetoric from Washington has put the economic relationship between the U.S. and China squarely on the front burner, and Krugman is demanding that we crank up the flame. This week 130 members of Congress sent a letter to Treasury Secretary Timothy Geithner demanding that the Obama administration designate China as a “currency manipulator”. Following that, a bipartisan group of senators introduced a bill that looks to force the Obama administration’s hand. For its own part, Beijing invites criticism by continuing to deny its utterly obvious currency agenda.

As these tensions escalate, most economists urge Washington to tread lightly because of the negative fallout for America if China were to begin selling its enormous cache of U.S. Treasury bonds. Krugman pushes back, asserting that the U.S. risks little by playing hardball, and that China has more to lose. He asserts that a Chinese decision to end its purchases of U.S. Treasury debt would make only a marginal impact on long-term interest rates. Did you hear that Stockholm?

According to Krugman, our secret weapon of economic invincibility is the Fed’s ability to print dollars endlessly. If China were to foolishly decide to attack us by selling our debt, the Fed could simply step in and buy the excess with newly printed greenbacks. (In other words, Krugman sees no difference between funding the debt and monetizing it. See my latest video blog on the subject.). For Krugman, China would gain little from such an attack, but would lose the ability to export to its best customer and suffer severe losses in the value of its dollar holdings. Krugman’s worldview is reassuring – but it has absolutely nothing to do with reality.

There is a huge difference between selling your debt to another and “selling” it to yourself. When China buys our debt, it uses its own savings. In order to purchase a trillion dollars of U.S. Treasuries, the Fed would have to expand our money supply by a corresponding amount. Even Krugman acknowledges that this would cause the dollar to lose value; however, he feels that a weaker dollar is good for America and bad for China.

Krugman does not believe that a tanking dollar will translate into higher interest rates or higher consumer prices at home. No matter how many dollars the Fed creates, or how much value those dollars lose relative to other currencies, he is confident that as long as unemployment remains high, rates will stay low and inflation will remain under control. This is absurd.

If the dollar were to nosedive, the Fed would normally look to protect the currency by raising interest rates, thereby increasing foreign demand for the currency. But with an economy currently on crutches, the Fed will ignore a weakening dollar and continue to try to boost employment with near-zero rates.

But keeping the Fed Funds rate low only holds rates down for U.S. government debt. If the dollar weakens substantially, other rates offered to other borrowers will rise as investors demand greater returns to compensate for inflation. To keep rates low for homeowners, credit card borrowers, corporations, municipalities, and state governments, the Fed would be forced to buy, or guarantee, all forms of dollar-denominated debt. The Fed would become the lender of only resort.

Once the Fed shows that its commitment to low rates is limitless (the value of the dollar be damned), private creditors will quit the game. Even average Americans would hit the Fed’s bid. It would be a race for the exits, with no one wanting to be left holding a bag of worthless paper dollars.

Most economists, Krugman included, see cheap money as a panacea for all ills. And while it’s true that a falling dollar, by lowering the real value of U.S. wages, would help make U.S. goods more competitive, it would also lead to skyrocketing consumer prices, rapidly rising interest rates, and a collapse in American living standards. Make no mistake: this is the end game of Krugman’s “get tough on China” policy.

This apocalyptic scenario can only be avoided if Washington jealously guards the status quo, avoiding confrontation with China at all costs. Yet, even that is an outcome that no one can rationally expect. Given exploding U.S. government deficits and the inability of U.S. citizens and corporations to repair their balance sheets, the United States faces financing needs that even China’s gargantuan savings stockpile will be unable to cover.

Krugman is right about one thing – China’s currency peg is destabilizing the global economy and must end. But he fails utterly to understand the implications for the U.S. and China. If China were to reverse its role in the U.S. Treasury market, both economies would be destabilized in the short-term. But in the medium- and long-term, China would clearly emerge as the winner.

Absent Treasury-bond purchases, the value of the Chinese currency would rise sharply, causing goods prices to tumble in China. This long-delayed increase in purchasing power for everyday Chinese will unleash pent-up demand in what is already the largest middle class in the world. Chinese factories would retool in order to produce goods for their own citizens to consume. In RMB terms, commodity prices would plunge, making it easier for China to produce all kinds of stuff, such as automobiles, while also making it cheaper for the Chinese to buy gas. Millions will trade in bikes for cars, and Chinese oil imports will swell.

The opposite would occur in America, where an artificial, consumer-based economy, supported by Chinese lending, will come tumbling down. Without the ability to import cheap goods from overseas, Americans will pay more and get less. While gas and food become cheaper for the Chinese, they will simultaneously become much more expensive for Americans – so too will automobiles, consumer electronics, furniture, and just about every other product we want or need (even those few we still make ourselves).

Washington’s best option is to recognize that the current relationship is unsustainable and to plan, as best as possible, for a more viable future. We Americans also must be honest with ourselves and recognize that we have been living beyond our means and that our lifestyle has been largely financed by austerity in China. We must conceive of a plan that weans us from this dependence without provoking China to pull the rug out from under us before we have a firm footing. To construct a policy around Krugman’s ridiculous assumption that we benefit China more than they benefit us is to invite catastrophe on an unimaginable scale.

by Peter Schiff

Over the past three or four years a strange phenomenon has developed in the global investment markets. With some exceptions, many asset classes, in particular domestic and foreign equities, commodities, and foreign currencies have tended to move in the same direction on a day to day basis. The mega-correlation has lasted so long that most now take it for granted. This leaves investors with relatively simple choices: when to get in to the market in general and when to park assets in cash and U.S. Treasuries.

However, few recall that this pattern is relatively new in the annals of financial history. Fewer still realize the reason for the current anomaly. From my perspective the most logical explanation is fear, which has become global, pervasive, and persistent. Traditionally, when investors fear inflation they buy stocks, commodities, gold, and foreign currencies, and sell dollars and U.S. treasuries. When they fear deflation they sell stocks, commodities, gold, and foreign currencies, and buy dollars and U.S. treasuries. The problem is that right now, no one knows which one to fear. Depending on the news the pendulum swings from one extreme to another on a daily basis.

The natural consequence of an inflationary boom should be a deflationary bust. We’ve had the boom, but so far we have avoided the lion’s share of the bust, or at least the deflationary part. If the government were pursuing a sounder monetary policy, one that allowed markets to function properly, the deflationary scenario would be playing out. While in the long-run this is the correct approach, such a scenario would be very bearish for stocks, commodities and many foreign currencies. If on the other hand, the government fights the recession by putting the inflation pedal to the metal (which is the course they have chosen) investors should look to real assets and certain foreign currencies to protect their purchasing power. But for the most part, that is not happening.

The foreign exchange markets seem to be the center point for this inflation/deflation tug-of-war. After all, if asset prices are falling, cash is king. Since the dollar is still the reserve currency, it is the king of cash, and benefits most from the global deflation scenario. When the dollar rises, treasuries go along for the ride, as investors need a “safe” place to park them. But when the U.S. government reveals yet another staggering deficit forecast, inflationary fears come right back. Hence, a market without a clear direction.

Many look at this dynamic from the perspective of risk appetite rather than fear. They claim that when investors seek risk, they buy risky assets, such as stocks, but when they are risk adverse they seek the safety. But those who fear inflation sell dollars and treasuries not because they seek risk, but because they seek to avoid it.

Of course, if investors felt that the Fed would actually fight inflation with aggressive rate hikes then higher inflation would be perceived as detrimental to stock performance. However, just about everybody realizes that there is virtually no inflation scenario virulent enough to encourage Ben Bernanke and his cohorts to actually raise rates. In actuality, the most feared probabilities are that inflation runs out of control, or that deflation overwhelms the Fed’s efforts to prevent it.

From this perspective regardless of the direction of the stock market, assets are simply being re-priced to reflect one of two very unpleasant outcomes. Those who look at rising stock prices as a harbinger of economic growth are therefore mistaken. These moves more than likely reflect investors growing fear that the U.S. debt levels will swamp the dollar.

Given the extent of the fundamental problems that underlie the American economy, and degree to which government policies are making these problems worse, there can be little conviction that our economy will return to sustainable growth anytime soon. Therefore, attributing stock market strength to inflation fears rather economic strength makes far more sense.

Also, if higher U.S. stock prices really did result from an improving U.S. economy, the dollar would be rising in tandem with stocks. However, every time stock prices rise the dollar falls. The best explanation for this dichotomy is that it is inflation not growth that drives both stocks and the dollar. So rising stock prices do not really indicate a bull market in stocks, but a bear market in the dollar. Those who cannot differentiate between the two will continue to misread the market and the economy.

by Peter Schiff

In this week’s much anticipated State of the Union address, President Obama again demonstrated his poor understanding of the fundamental problems that confront our nation. By following the advice of the same people who helped guide our economy to the precipice of total collapse, Obama now threatens to push it over the edge.

Notwithstanding his well crafted lip service regarding future spending restraint, the essence of his current program is for more government spending and larger deficits. For all his talk about job creation, his policies will further burden those who might otherwise create those jobs with higher taxes and more regulation. While he did call for tax cuts for the middle class and offered what amounts to bailouts for those struggling to repay student loans, such cuts do nothing to promote growth in the near term and will add to the deficits in the long term.

The President spoke optimistically about the future, but in reality there is little evidence to support such an upbeat outlook. He began his speech by assuring us that the worst of the storm had passed. General Custer may have said something similar when the first wave of Indian attacks ebbed at Little Big Horn.

While Obama did have some harsh words for Wall Street (not exactly a courageous political stance), he leveled no criticism at the Federal Reserve or other government agencies that had financed and guaranteed all the ridiculous real estate speculation that precipitated the crash. And while he at least conceded that the prosperity of the last decade was based on illusions, he continued to endorse the very policies that produced the mirage in the first place.

To lead us back to brighter days, he articulated a vision of a centrally planned recovery, where clean energy and a Soviet style five-year plan to double our exports would make our economy preeminent once more. He fails to understand that the only reason our economy rose to the top in the first place is that the government left it alone.

In the words of the Spanish philosopher George Santayana, “Those who cannot learn from history are doomed to repeat it.” Since our President cannot even learn from the mistakes of his immediate predecessor, to say nothing of those he made himself while in the Senate or during his first year as president, we are surely doomed to repeat them, perhaps more quickly than Santayana could have imagined.

Rather than tightening the reins on the reckless monetary policy that undermined our savings, diminished our industrial output, inflated asset bubbles, and led to reckless speculation on Wall Street and excess consumption on Main Street, we are loosing them further. Rather than repealing regulations that distort markets and create moral hazards, we are adding new ones that do more of the same. Rather than cutting government spending to reduce the burden it places on our economy, we are increasing both the amount of the spending and the size of the burden. Rather than making government smaller so that the private sector can grow, we are making government bigger and forcing the private sector to shrink. Rather than paying off our debts we are taking on even more. Rather than encouraging people to save we are enticing them to spend. Rather than creating jobs, we are merely creating unemployment benefits.

As a result, instead of seeding the soil for a real recovery we are setting the stage for a prolonged depression.

by Peter Schiff

Although Barack Obama has refrained, at least for now, from delivering triumphant speeches in a naval flight suit, there is nevertheless a strong tone of accomplishment emanating from the President and his deputies. Over the weekend, top White House economic adviser Lawrence Summers even pronounced that the recession is now over. Without hedging his bets, Summers declared that thanks to the Obama Administration’s wise stewardship, economic stimuli, and emergency bailouts, another Great Depression, set up by the prior Administration, had been narrowly averted. Summers saw no impediments to the return of sustainable growth. He may as well have delivered these remarks from the deck of an aircraft carrier.

I hate to shoot down these high-flying expectations, but the economy is not improving. All that has changed is that we are now more indebted to foreign creditors, with even less to show for it. Washington’s current policies have once again deferred the fundamental, market-driven reforms needed to redirect us onto a sustainable path. Instead, through aggressive monetary and fiscal stimuli, we are trying to re-inflate a balloon that is full of holes. This was the Bush Administration’s exact response to the 2002 recession. It’s shocking how few observers note the repeating pattern, especially the fact that each crash is worse than the last.

Obama’s claim of success largely derives from the slowing tally of job losses, the seemingly renewed strength in the financial system, the pickup in home sales and home prices, and the positive GDP figures. But these ‘achievements’ fall apart under close examination.

First, a closer look at the jobs numbers shows that employment improved in sectors that benefited most directly from monetary or fiscal stimulus: government, healthcare, financial services, education and retail sales. Meanwhile, sectors such as manufacturing continued to shed jobs at an alarming rate. These dynamics actually exacerbate our economic imbalances. Recent trade deficit figures (in which the deficit-reduction trend of early 2009 has sharply reversed) show how this employment growth is preventing needed rebalancing. Essentially, the Administration is nurturing firms that cannot survive without subsidies and support.

Once stimulus is removed, the “saved” jobs will be among the first to go. If the President has not figured this out yet, I am sure Fed Chairman Bernanke has. As a result, the market should discount as pure bluff any claims from the Fed about an eventual “exit strategy” from current stimuli. Such an “exit” would bring about Bernanke’s greatest fear – spiking unemployment.

Second, major investment and commercial banks are not back on their feet, but remain fundamentally insolvent. Their current business model of risk-free speculation depends upon the maintenance of government backstops, the continued availability of cheap money from the Fed, and the use of accounting gimmicks that allow them to conceal losses behind phony assumptions.

Third, while it is true that home prices have stopped falling, this represents failure, not victory. True success would be a drop in home prices to a level that homebuyers could actually afford. Instead, we have maintained artificially high prices with tax credits, subsidized mortgage rates, low down payments, and foreclosure relief. With 96% of new mortgages now insured by federal agencies, market forces have been completely removed from the housing equation. With so many government programs specifically designed to maintain artificially high home prices, devastating long-term consequences for our economy are inevitable.

Finally, it is true that the GDP yardstick shows an economy returning to growth. However, as I have often repeated, this measure has deep flaws that render it almost useless for judging the soundness of an economy. Currently, the figures are merely reporting increasing indebtedness as growth. Using GDP as the main financial indicator is equivalent to judging a man’s success by the cost of his house, car, and wristwatch. Rather than gauging income, these figures merely indicate a level of spending and have nothing to do with earning power.

Paul Volcker, the only independent voice in the Administration, has not been deceived by his colleagues’ sunny claims. He recently noted that our economy still evidences “too much consumption, too much spending relative to our capacity to invest and export” and that the problem is “involved with the financial crisis but in a way [is] more difficult than the financial crisis because it reflects the basic structure of the economy.” Yet, President Obama has chosen not to address these concerns.

As Summers and Obama like to point out, the vast majority of economists take it on faith that, with the right finesse, the stimulus can be withdrawn without pushing the economy back into recession. But based on the distortive effects of stimuli and bailouts, our economy has adapted to a climate where cheap credit is not only plentiful but critical.

Eventually, the cheap credit will dry up. Not because the Fed decides it should, but because our foreign creditors stop lending. When that happens, this Administration will look as clueless about economics as the last one was about the pitfalls of nation-building.

But for now, the chattering classes believe strong government action has delivered us from calamity. For them, at least, it’s “mission accomplished!”

by Peter Schiff

“When Obama took office we were not on the verge of a great depression, we were on the verge of a great recession. Because of the policies that he has been pursuing we are now on the verge of a real great depression.”

“All that his policies have done is buy incumbent politicians more time in office. We’ve borrowed more money, we are deeper in debt, the dollar is lower, and the economy is worsening all due to this administrations policies.”

“Yes, a lot of the businesses that should have failed are still in business because they were bailed out. But the losses that were going to drive them out of business still exist, except in a large part they exist on the books of our federal reserve.”

“There’s been a lot in the news today about sovereign debt risk. Sovereign risk is basically the risk that a sovereign government would actually default on its debt. Recently in Greece they had to come out and deny rumors that there was going to be a default. Certainly there is a risk that a sovereign nation could default, but its rare. Other the course of history it has happened many times, especially when you have nations borrowing in currencies they cannot print.”

“However there are countries that do default even in their own currency. In some cases, a legitimate default is more honest and preferable to the kind of default that is likely to happen in the United States. We have borrowed too much money, and we’ve spent it all. There’s no way we can pay back the money. There’s no question about the “risk” of a US default, because its a 100% certainty we are going to default.”

“The question is what is the form of the default is going take. Obviously the U.S. government is not going to be honest enough to acknowledge that it can’t pay its debts. So its simply going to default through inflation. The creditors are going to get their dollars but they won’t be able to buy anything with them.”

Connecticut Senate Race Polling Data

2001 Senate (trends)

Schiff 40%, Dodd 39% (chart)
Simmons 48%, Dodd 35% (chart)
McMahon 44%, Dodd 38%

Favorable / Unfavorable

Peter Schiff: 35 / 31
Chris Dodd: 40 / 58 (chart)
Chris Simmons: 48 / 30
Linda McMahon: 45 / 35

By Peter Schiff

During President Obama’s high profile visit to China this week, the most frequently discussed, yet least understood, topic was how currency valuations are affecting the economic relationship between the United States and China. The focal problem is the Chinese government’s policy of fixing the value of the renminbi against the U.S. dollar. While many correctly perceive that this ‘peg’ has contributed greatly to the current global imbalances, few fully comprehend the ramifications should that peg be discarded.

The common understanding is both incomplete and naive. Most analysts simply see the peg as China’s principal weapon in an economic struggle for global ascendancy. The peg, they argue, offers China a competitive advantage by making its products cheaper in U.S. markets, thus allowing Chinese firms to gobble up market share and steal jobs from U.S. manufacturers. The thought is that were China to allow its currency to rise, American manufactures would regain their lost edge, and both manufacturing firms and the jobs formerly associated with them would return. In this narrative, the struggle centers on the United States’ diminishing leverage in persuading the Chinese to lay down their unfair weaponry. It’s a sympathetic picture, but it tells the wrong story.

While the peg certainly is responsible for much of the world’s problems, its abandonment would cause severe hardship in the United States. In fact, for the U.S., de-pegging would cause the economic equivalent of cardiac arrest. Our economy is currently on life support provided by an endless flow of debt financing from China. These purchases are the means by which China maintains the relative value of its currency against the dollar. As the dollar comes under even more downward pressure, China’s purchases must increase to keep the renminbi from rising. By maintaining the peg, China enables our politicians and citizens to continue spending more than they have and avoiding the hard choices necessary to restore our long-term economic health.

Contrary to the conventional wisdom, when China drops the peg, the immediate benefits will flow to the Chinese, not to Americans. Yes, prices for Chinese goods will rise in the United States – but so will prices for domestic goods. As a corollary, the Chinese will see falling prices across the board. As anyone who has ever been shopping can explain, low prices are a good thing.

In addition, credit will expand in China while it contracts here. When China abandons the peg, it will no longer need to swell its currency reserves by buying Treasuries or other dollar-denominated debt instruments. Other nations will no longer feel the pressure to keep their currencies from rising, so they too could throttle down on their onerous dollar purchases.

As demand falls for both dollars and Treasuries, prices and interest rates in the United States will rise. Rising rates will restrict the flow of credit that is currently financing government and consumer spending. This change will finally force a long overdue decline in borrowing. So, not only will Americans lose access to the consumer credit that funds their current spending, but the things they buy will also get more expensive.

Our short-term loss will be in sharp contrast to the gain felt by foreigners, who will be rewarded with falling consumer prices and a more abundant supply of investment capital. In other words, the American standard of living will fall while that of our trading partners will rise.

However, this does not mean that I want the Chinese to maintain the status quo. In the long run, the U.S. economy will benefit from the abandonment of a system that guarantees our dependency and inevitable downfall. De-pegging will force the hand of U.S. politicians toward pursuing realistic policies. The Chinese will come to their senses eventually because it is in their interest to do so. Meanwhile, the longer the peg is maintained, the more indebted we become, the more out of balance our economy grows, and the more our industrial base shrivels. In short, the longer they wait, the steeper our fall.

A weaker dollar will price many imported products beyond the reach of most Americas, giving our hollowed out manufacturing sector the opportunity to rebound. However, if our industry has any chance of getting off the mat, we must reduce taxes, repeal regulations, reform our cumbersome legal system, and, most importantly, replenish our savings to finance the necessary capital investment.

If we position ourselves to deal with the consequences, tough love from China will provide a path back to genuine economic growth. However, if our politicians continue to misread the problem and push us deeper in the red, the inevitable ‘rebalancing’ could be truly ruinous.

For More Peter Schiff Visit: Euro Pacific Capital

Health Care reform will lead to a complete collapse of the health care industry….the only way it will survive is through government subsidies.

“Liberty, when it begins to take root, is a plant of rapid growth” – George Washington

People can be growing poorer as their stock acounts are rising higher. Gold prices are raising faster than stock prices, dollars are actually losing value. In terms of purchasing power the dow is really losing money.

“The sooner we stop pretending that spending borrowed money constitutes a legitimate economy. The sooner we can get to the root causes of our economic imbalances and of our problems and start working to solve them”

As the unemployment rate crossed the double digit barrier for the first time since Michael Jackson learned to moonwalk, President Obama announced that he will convene a “jobs summit” to finally bring the problem under control. Using all the analytic skill that his administration can muster, the President is determined to figure out why so many people are losing their jobs and then formulate a solution. That’s a relief; for a while there, I thought we were in real trouble! In fact, the absolute last thing our economy needs is more federal government interference. If Obama really wants to know what’s behind entrenched joblessness, he should start by looking at the man in the mirror.

Obama is pursuing, with unprecedented vigor, the same policies that have for decades undermined our industrial base and yoked us to an unsustainable consumer/credit driven economy. This doubling down on Washington’s past failures is destroying jobs at an alarming rate. Today we learned that the September trade deficit surged by 18.2%, the largest gain in ten years. Much of the deficit resulted from Americans spending Cash-for-Clunkers stimulus money on imported cars – or “American” cars loaded to the sunroof with imported parts. In exchange for more domestic debt, we have succeeded only in creating foreign jobs.

An article in this week’s New York Times by veteran writer Louis Uchitelle confirmed a fact that I have been alleging for years. Uchitelle pointed out that foreign outsourcing of component manufacturing has led to consistent overstatement of U.S. GDP and productivity. The connection goes a long way to explain why we keep losing jobs even as GDP is apparently expanding.

As our economy becomes less competitive due to higher taxes, burdensome and uncertain regulations, and capital flight, more manufacturing and services will be outsourced to foreign firms. However, the flaw in GDP calculation allows the output of those foreign workers to be included in our domestic tally. Since we count the output but not the worker responsible for it, government statisticians attribute the gains to rising labor productivity. To them, it looks like companies are producing more goods with fewer workers.

The reality is that we are producing less with fewer workers. The added “productivity” comes from higher unemployment and larger trade deficits. This is a toxic formula that will have lethal economic consequences.

Don’t expect the brain trust at the President’s job summit to fret much about these details. That public relations stunt will likely ignore the root cause of the economic imbalances and instead stress the need for government spending on training and education, i.e. more public debt. The unemployed do not need government theatrics, they need actual jobs. But as long as the government props up failed companies, soaks up all available investment capital, discourages savings, punishes employers, and chases capital out of the country, jobs will continue to be lost.

To really fix the unemployment problem, the President must look past his peers in government and academia to understand how jobs are actually created. In the private sector, all individuals have a choice to either work for themselves or someone else. Since labor is far more productive when combined with capital (office equipment, machinery, business models, and intellectual capital), those who lack these assets themselves often choose to work for others who have sacrificed to accumulate them. This increased productivity is shared between the worker and the owner of capital, and both are better off.

However, for one person or company to choose to offer a job to another, there must be an incentive to do so, and they must have the necessary capital. In the first place, employers must commit to paying wages and benefits, comply with government mandates and regulations, and subject themselves to potential lawsuits from disgruntled employees. All of these costs must be measured against the extra profits an employer hopes to earn by hiring an additional worker.

If profit opportunities exist, jobs will be created. Otherwise, they will not. Of course, anything the government does to raise the cost of employment, such as a higher minimum wage, mandated heath care, or greater regulatory burdens, not only prevents new jobs from being created but also causes many that already exist to be destroyed. Anything that diminishes the profit potential of extra hiring will diminish the number of job opportunities that are created. Also, since it is after-tax profits against which employers measure risk, the higher the marginal rate of income tax, the less likely employers will be able to hire.

Finally, in order to hire workers, employers must have access to capital to expand operations. Anything the government does to discourage capital formation automatically diminishes job creation. By running the largest federal deficits in history, Barack Obama is diverting all available capital to the Treasury, and is in effect waging a war against private capital formation.

If the President’s summit truly intends to find the root cause of unemployment, his advisers don’t need Bureau of Labor statistics or complex modeling software, just the courage to drop their dogmatic belief in central planning and embrace the laws of economics.

Peter Schiff on Fox Business says Gold could hit $5000 and a lot higher

Peter Schiff: “Gold is not getting more expensive, the dollar is just getting weaker.”

Fox: “Peter have you sold any of the gold that you’ve bought at 300 or less?”

Peter: ” No way! I’m still buying gold, I’m buying lots more. When you earn money, what are you going to do with it? You have to put it someplace, you cant’ leave it in cash.”

Analyst: “Peter is right. If we ever get our act together, if the fed starts raising interest rates, or at least shows some concern, we’re gunna see a correction in a big way, but thats just not happening”

Fox: “Theres alot of people who are betting on a higher dollar, what do you say to them?”

Peter Schiff: “They are going to be disappointed. Everything we are doing is weakening the dollar, and the fundamentals for the us economy are horrible. Everything that this government has done since this crisis began has actually worsened those fundamentals.

We’re in a much deeper hole than we were a year ago and so the dollar is gonna lose a lot of value
even if we do the right thing its gonna lose a lot of value, but if we keep doing the wrong thing. It’s gonna lose most of its value and it might even lose all of its value and people have to understand, that risk and that threat is very very real.

Fox: “Hold on a second, Peter I can’t let that last comment go. How is it possible for the dollar to lose 100 percent of its value?”

Peter Schiff: “Remember it has no intrinsic value, its just a piece of paper so it only has value to the extent that people have confidence in it and if the confidence goes the value goes.

And if they keep printing them, if Ben Bernanke drops em out of helicopters…and we’re trying to encourage Americans who are already broke to keep spending money they don’t have.

If the government keeps running deficits and try to borrow and spend our way out of this recession, the dollar is going to have no value, because nobody is going to want them.

More Peter Schiff: Schiff For Senate

Hackers, Housing, and How government loans ruined the college education.

YouTube Comments:

ibuylow09
Your right about education. I have a law degree and an economics degree and I still can’t find work. I am “overqualified” for the positions I apply for or I don’t have enough work experience… (its hard to get work experience when you are in school for years on end as a full time student).