Skip to comments.Peter Schiff: "We're in the Early Stages of a Depression"
Posted on 08/25/2010 6:31:34 PM PDT by Lorianne
Jennifer Schonberger: What's your take on the state of the economy now?
Peter Schiff: We're in the early stages of a depression now. It's going to be a horrific experience for average Americans who are going to watch their standard of living plunge. The cost of living is going to escalate dramatically. We are going to see soaring prices for the basic necessities of life, like energy, clothing, and other things. Education and health-care costs are going to continue to spiral out of control. Millions of more Americans are going to lose their jobs, and all of us are going to lose our freedoms and our rights. As the government gets bigger, it tries to end the crisis; but its policies are creating, perpetuating, and making it worse.
The sad fact is these policies are going to wipe out the middle class. They're going to wipe out the poor; they're going to wipe out retirees. Accumulated savings is going to be blown.
There is no economic recovery. All we did is spend more borrowed money. We dug ourselves into a deeper hole, and now we're in even more trouble than before Obama ascended to the presidency.
Schonberger: You've got the new book out on how an economy grows and why it crashes, and as you noted, you feel that this recovery is "fake." Certainly, it's slowing down as the stimulus is beginning to fade. How do we revive the economy for real growth and create jobs?
Schiff: We have to stop stimulating. We have to shrink the government and cut government spending dramatically. The reason the economy is so screwed up is because government regulations and subsidies have created a slowing economy. They have prevented market forces from operating the way they need to be. They have prevented an efficient allocation of resources. We need to rebuild our manufacturing base. We need to reindustrialize. We can't do that without the resources, without the savings, without the investment.
They've created a nation of spenders, speculators, and consumers, and they've destroyed the savers, producers, and the investing class that built this country. We're moving from a market-based economy to essentially a planned economy. We're abandoning capitalism and embracing socialism. That's a recipe for disaster.
Schonberger: Sans fiscal stimulus and the Feds' intervention -- quantitative easing -- do you think we would even have GDP [gross domestic product] growth?
Schiff: We don't have economic growth. GDP is going up, but that's not a sign of any economic growth. All we're measuring is what we're consuming. But we are paying for it by going into debt. As a nation, we're in worse shape because of the GDP growth. The real economy is shrinking. All we're doing is borrowing money from economies that are growing, like China, and we're spending their money. But that's going to stop.
Schonberger: You mentioned that you think we're in the early stages of a depression. When do you think we begin to see a double dip back into a recession?
Schiff: We've already seen that. GDP is decelerating now as the stimulus is wearing off, and the hangover is setting in. By next year, I believe we'll be back in recession territory, as far as the GDP numbers.
Schonberger: If we continue on the current policy path, is there a chance the U.S. is facing a Japan scenario where we're in a slow-growth, deflationary malaise?
Schiff: No. There's no chance of us getting off as easy as Japan. Our situation is considerably worse. We're going to have runaway inflation and recession simultaneously. I call what we're going to have an inflationary depression, which is the worst possible depression you can have.
Schonberger: So even though you think we're in for a depression, you're not concerned about deflation?
Schiff: No. We're going to have falling stock prices and falling real estate prices. That's not deflation. Prices are rising. Oil is at $82 a barrel and rising. The Japanese yen is at a 15-year high against the dollar. The government is printing a bunch of money. These are signs of inflation. Deflation is healthy. That's what we need. Unfortunately, inflation is what we're going to get thanks to the Fed and government policy.
Schonberger: Then it's safe to say you think the Fed should not be following the zero-interest-rate policy right now?
Schiff: No. We need higher interest rates. Rates are much too low. Low interest rates are part of the problem; they're not part of the solution.
... We're repeating the same mistakes of the [Alan] Greenspan Fed except on a bigger scale. Obama is repeating Bush's mistakes. Bernanke is repeating Greenspan's mistakes. So their mistakes will do even more damage to our economy than the mistakes of their predecessors.
Schonberger: So how should investors preserve their wealth in this environment?
Schiff: By getting out of U.S. assets entirely, by not owning any dollar-denominated debt. Don't own Treasuries or bonds. Invest in the economies that are doing it right. Invest in emerging markets -- Southeast Asia, China. Invest in natural resources economies like Australia, Norway, and Canada. I invest in commodities and precious metals. Just get out of dollars.
Schonberger: So you're still buying gold, which is currently trading around $1,200 an ounce. Where do you see gold going from these levels?
Schiff: There's no limit to how high gold prices will go. They will rise many times from here --thousands and thousands of dollars per ounce higher. People will be shocked.
It's surprising to me that gold is still as cheap as it is. I just know it's going higher, and eventually it's going to go ballistic. ...
Schonberger: Given your outlook for the U.S. economy, do you think the U.S. stock market is poised to crash?
Schiff: No. I don't think it's going to crash in nominal terms -- the way we think about it -- because the government has already created inflation. All that money creation will put a floor under nominal stock prices. But I do believe that the Dow Jones will fall down to about one ounce of gold, which is an 80% or so decline from where it is right now. In real terms, U.S. stocks are going to get killed. But in terms of dollars that we create out of thin air, no, I'm not looking for Dow 1,000 or Dow 2,000. But I am looking for the equivalent, loss of purchasing power, in terms of an ounce of gold.
Something lighter to read before bedtime bookmark.
“All we did is spend more borrowed money’
I disagree about investing in China. I think their numbers are phony, too.
Ummm, no, Mr. Schiff, apprently, you have not recieved that special Lie House memo yet: We are in a “Summer of Recovery” and BidenIdiot today said “we are on the right track”. Get with the program, kkthx. /s =.=
let me get a sharp razor and end it....ugh
He makes sense to me.
I’ve been depressed since January 20, 2009.
It’s about time the economy caught up.
What is the official definition of an economic “Depression”?
I think he is right, but boy, this guy is a bundle of laughs, ain’t he?
So according to Schiff, apparently the correct GDP number is total economic activity - new debt. I wonder what that number is for America.
That's been minor compared to the Great Depression.
Let's hope it doesn't happen for another year -- so that it is indubitably 0bama's fault.
Then a Republican President and Congress could clean up the mess and bring us out of a depression -- but that could take a decade depending on how badly 0bama and his partners in treason undermine much of this nation.
I’m not sure he’s right about recession. Instead I read quite a few who believe we are in for an extended run of - to 1% GDP growth, along with much greater volatility and continued adjustments as re-valuation has to occur in areas such as housing prices. If we are lucky we will run <5% inflation while the Fed monitizes debt and over a period of maybe 10 years we can start to see actual recovery, maybe sooner IF the right people win elections AND do the right things.
Welcome to the “new normal”. It’s not going to be the same as it was.
“I disagree about investing in China. I think their numbers are phony, too.”
I totally agree, however they’ll lie about their recovery too.
I’d say we’re in the middle of a depression. Assuming that we hold free and fair elections this November and again in two years, the economy should start improving around January 20, 2013.
David Rosenberg: We’re In A Depression, Not A Recession
The “current economic malaise” is a “depression, and not just some garden-variety recession,” said Rosenberg in a note to clients today, as reported by CNBC. Rosenberg, who’s been issuing warnings about a double-dip recession, was formerly the chief economist at Merrill Lynch.
Guess I’ll go to the market and load up on cereal now -— gotta eat and it lasts a long time -——————————
I’m not kidding!
[Something lighter to read before bedtime bookmark.]
I was feeling a little depressed until I read this. Now I know it’s just a little nightmare I’m having and I’ll wake up soon.
......We’re going to have runaway inflation and recession simultaneously.......
Sounds like Germany in the early 1920’s, and we know where that led to. Change in November is more crucial than ever, to avoid catastrophe.
They have prevented an efficient allocation of resources. We need to rebuild our manufacturing base. We need to reindustrialize.