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Peter Schiff: "We're in the Early Stages of a Depression"
The Motley Fool ^ | 09 August 2010 | Jennifer Schonberger

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.

(edited prologue)


TOPICS: Business/Economy; Government; Politics/Elections
KEYWORDS: depression; economy; godisincharge; peterschiff
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1 posted on 08/25/2010 6:31:36 PM PDT by Lorianne
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To: Lorianne

Something lighter to read before bedtime bookmark.


2 posted on 08/25/2010 6:34:39 PM PDT by IrishCatholic (No local Communist or Socialist Party Chapter? Join the Democrats, it's the same thing!)
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To: Lorianne

“All we did is spend more borrowed money’

Money quote.

I disagree about investing in China. I think their numbers are phony, too.


3 posted on 08/25/2010 6:34:48 PM PDT by dynachrome (Barack Hussein Obama yunikku khinaaziir!)
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To: Lorianne

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 =.=


4 posted on 08/25/2010 6:35:02 PM PDT by cranked
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To: Lorianne

let me get a sharp razor and end it....ugh


5 posted on 08/25/2010 6:35:55 PM PDT by panzerkamphwageneinz (HALLELUJAH)
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To: Lorianne

He makes sense to me.


6 posted on 08/25/2010 6:38:28 PM PDT by Big Horn (Rebuild the GOP to a conservative party)
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To: Lorianne

I’ve been depressed since January 20, 2009.
It’s about time the economy caught up.


7 posted on 08/25/2010 6:41:17 PM PDT by La.daddyrabbit (President Obama, those 2.5 million new jobs you created/ saved, are they hand or blow?)
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To: Lorianne

What is the official definition of an economic “Depression”?


8 posted on 08/25/2010 6:42:18 PM PDT by Husker24
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To: Lorianne

I think he is right, but boy, this guy is a bundle of laughs, ain’t he?


9 posted on 08/25/2010 6:44:07 PM PDT by ikka
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To: Lorianne

So according to Schiff, apparently the correct GDP number is total economic activity - new debt. I wonder what that number is for America.


10 posted on 08/25/2010 6:45:34 PM PDT by coloradan (The US has become a banana republic, except without the bananas - or the republic.)
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To: La.daddyrabbit
I’ve been depressed since January 20, 2009.

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.

11 posted on 08/25/2010 6:45:48 PM PDT by Solitar ("My aim is not to pass laws, but to repeal them." -- Barry Goldwater)
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To: Lorianne

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.


12 posted on 08/25/2010 6:46:38 PM PDT by bigbob
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To: dynachrome

“I disagree about investing in China. I think their numbers are phony, too.”

I totally agree, however they’ll lie about their recovery too.


13 posted on 08/25/2010 6:46:38 PM PDT by driftdiver (I could eat it raw, but why do that when I have a fire.)
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To: ikka
I think he is right, but boy, this guy is a bundle of laughs, ain’t he?

He's earned his nickname of "Doctor Doom".
14 posted on 08/25/2010 6:46:45 PM PDT by WackySam (To argue with a man who has renounced his reason is like giving medicine to the dead.)
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To: Lorianne

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.


15 posted on 08/25/2010 6:47:31 PM PDT by Pollster1 (Natural born citizen of the USA, with the birth certificate to prove it)
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To: Lorianne; All

David Rosenberg: We’re In A Depression, Not A Recession
http://www.huffingtonpost.com/2010/08/25/david-rosenberg-were-in-a-depression_n_694638.html

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.


16 posted on 08/25/2010 6:48:42 PM PDT by Lorianne (During times of universal deceit, telling the truth becomes a revolutionary act. ___ George Orwell)
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To: Lorianne

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!


17 posted on 08/25/2010 6:49:19 PM PDT by CaliforniaCon
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To: IrishCatholic

[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.


18 posted on 08/25/2010 6:50:52 PM PDT by DaxtonBrown (HARRY: Money Mob & Influence (See my Expose on Reid on amazon.com written by me!))
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To: Lorianne

......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.


19 posted on 08/25/2010 6:51:25 PM PDT by john drake (Roman military maxim; "oderint dum metuant," i.e., "let them hate, as long as they fear.")
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To: Lorianne

They have prevented an efficient allocation of resources. We need to rebuild our manufacturing base. We need to reindustrialize.


It will never happen with the current bunch in power. Every decision they make costs jobs.


20 posted on 08/25/2010 6:52:14 PM PDT by rbg81 (When you see Obama, shout: "DO YOUR JOB!!")
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To: CaliforniaCon

We bought a lot of rice.
Congee can be made with many different ingredients.


21 posted on 08/25/2010 6:53:34 PM PDT by netmilsmom (I am inyenzi on the Religion Forum)
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To: Pollster1
No way...We've just reached the "new normal" as in living paycheck to paycheck.

The next little ride is the wiping out of the middle class.

Just because "Republicans" get in doesn't mean we are automatically out of the $hit. They don't have the balls to conduct the type of Federal budget and agency cuts that are required.

We'll get tax cut extensions (nothing permanent) and the looters in D.C. will push this all off until the next couple elections away.

22 posted on 08/25/2010 6:54:49 PM PDT by Michael Barnes (Call me when the bullets start flying.)
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To: john drake

He may not have it exactly right but I know of no one except a few numbskull democrats who say things are going to get better before they get a lot worse. We are in for a rough ride and it is time to be prepared for it.


23 posted on 08/25/2010 6:57:36 PM PDT by screaminsunshine (m)
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To: Lorianne

Isn’t Schiff the guy who predicted the recession on Fox business in 2006 and they all laughed at him? I mean he predicted just about everything correctly.


24 posted on 08/25/2010 6:58:47 PM PDT by chad_in_georgia
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To: netmilsmom

I have been buying 10 lb sacks of rice for several months.


25 posted on 08/25/2010 6:59:01 PM PDT by mylife (Opinions $1 Halfbaked 50c)
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To: Lorianne
Sure am glad I invested in pure 100% USA-made genuine ammunition.

Ammo: It'll get you what's fer supper.


Frowning takes 68 muscles.
Smiling takes 6.
Pulling this trigger takes 2.
I'm lazy.

26 posted on 08/25/2010 6:59:23 PM PDT by The Comedian (Evil can only succeed if good men don't point at it and laugh.)
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To: Lorianne
Wayyyyy too optimistic.

We will scavange a radioactive landscape for bent tin cans that we will sell to buy a single bullet so we can end our lives, before the zombies get us first.


27 posted on 08/25/2010 6:59:50 PM PDT by Lazamataz ("We beat the Soviet Union, then we became them." Lazamataz, 2005)
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To: Lorianne
Hell....Greenspan understood this way back in ‘66

http://www.321gold.com/fed/greenspan/1966.html

But like Keynes....he thought the inevitable collapse could be postponed till “in the long run, we're all dead”

28 posted on 08/25/2010 7:01:46 PM PDT by M-cubed
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To: mylife

I have too. We buy Basmati rice and have been storing it in those big airtight dog food containers. Kept outside in the winter, we haven’t seen any bugs yet!

I’m waiting for my electric rice cooker to come in. My girls love it for breakfast with raisins, cinnamon, sugar and milk.

I can eat it any time.


29 posted on 08/25/2010 7:03:48 PM PDT by netmilsmom (I am inyenzi on the Religion Forum)
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To: Lazamataz
We will scavange a radioactive landscape for bent tin cans that we will sell to buy a single bullet so we can end our lives, before the zombies get us first.

Oh BS. I'll be paying 2 bullets for each zombie scalp.

The Comedian's Trading Post
Zombie scalps bought
Corn liquor served
Female company provided
20 roentgens cooler inside


Frowning takes 68 muscles.
Smiling takes 6.
Pulling this trigger takes 2.
I'm lazy.

30 posted on 08/25/2010 7:07:20 PM PDT by The Comedian (Evil can only succeed if good men don't point at it and laugh.)
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To: netmilsmom

I’ve heard if you freeze rice (drid beans, pasta, etc) for a week they won’t get weavils.

I’ve got an Indian pantry moth invasion right now and I can’t get rid of them. Someone suggested bringing in spiders to live in the pantry, but I hate spiders.


31 posted on 08/25/2010 7:07:47 PM PDT by Lorianne (During times of universal deceit, telling the truth becomes a revolutionary act. ___ George Orwell)
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To: Lorianne

“Contained Depression”- Mish


32 posted on 08/25/2010 7:08:34 PM PDT by griswold3 ('Regulation and law without enforcement is no law at all)
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To: netmilsmom

I have been laying in lots of canned goods too.
Chicken, Beef, Tuna, and of course veggies.


33 posted on 08/25/2010 7:10:26 PM PDT by mylife (Opinions $1 Halfbaked 50c)
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To: dynachrome

Harry Dent (”The Great Depression Ahead”) also bearish on China because of demographics

Thanks to their abortion debacle, Chinese population will age with not enough workers to support them all

“emerging markets” = countries with high fertility rates - mainly India and Southeast Asia, maybe some countries in South America

Given what is happening, Dent is pretty close on track with his predictions. For 2011/12- Katy bar the door


34 posted on 08/25/2010 7:14:39 PM PDT by silverleaf (Those who can make you believe absurdities can make you commit atrocities.)
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To: panzerkamphwageneinz
I'm sorry, we've sold all of our sharp razors, we only have a few dull ones left.
35 posted on 08/25/2010 7:15:24 PM PDT by JPG (How much taxpayer $ did Mookie blow today?)
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To: Lorianne

>>Someone suggested bringing in spiders to live in the pantry,<<

My daughter would LOVE it!


36 posted on 08/25/2010 7:19:41 PM PDT by netmilsmom (I am inyenzi on the Religion Forum)
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To: mylife

Make sure to also have a reliable source of water and heat to prepare the rice with.

I’ve purchased rice, and beans. But also *cans* of beans, which are already ready to eat, and include liquid. Make sure to have spices as well — rice can get boring after a couple of weeks.

Your preparation is prudent.


37 posted on 08/25/2010 7:19:52 PM PDT by Theo (May Rome decrease and Christ increase.)
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To: The Comedian

LOL,so true.


38 posted on 08/25/2010 7:20:22 PM PDT by HANG THE EXPENSE (Life is tough.It's tougher when you're stupid.)
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To: mylife

That’s a really good idea.


39 posted on 08/25/2010 7:21:23 PM PDT by netmilsmom (I am inyenzi on the Religion Forum)
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To: Lazamataz
Prediction: Take-offs and landings for domestic flights will become more dicey than they currently are...


40 posted on 08/25/2010 7:23:11 PM PDT by wolf24
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To: Theo

I really wish I had a well.


41 posted on 08/25/2010 7:24:14 PM PDT by mylife (Opinions $1 Halfbaked 50c)
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To: chad_in_georgia
Isn’t Schiff the guy who predicted the recession on Fox business in 2006 and they all laughed at him? <<

Yup!...Check out his previous writings and videos on Youtube http://www.youtube.com/watch?v=lYkFYdLTTw8&feature=related

42 posted on 08/25/2010 7:27:04 PM PDT by M-cubed
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To: Lorianne

We aren’t in a full fledged Depression yet. History shows us that first we need a leftist President to enact a few Socialist ideas that are supposed to help to bring the big on the “D”. Fortunately Imam Obama has already started doing that so it’s only a matter of time. So we’ve got that going for us, which is nice.


43 posted on 08/25/2010 7:31:32 PM PDT by Republic of Texas (Socialism Always Fails)
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To: mylife

Rain barrels - 2 55gal plastic barrels (connected by balance hose) at each downspout. Potentially 400 gallons. (Don’t forget filters & purification.)


44 posted on 08/25/2010 7:33:08 PM PDT by Tagurit (Are your pigs fed, watered and ready to fly?)
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To: sneakers

bttt


45 posted on 08/25/2010 7:33:12 PM PDT by sneakers
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To: Tagurit

Thanks!


46 posted on 08/25/2010 7:36:25 PM PDT by mylife (Opinions $1 Halfbaked 50c)
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To: Lorianne

I’ve been depressed since 2006.


47 posted on 08/25/2010 7:36:47 PM PDT by floozy22 (Don't confuse a Democrat with someone who believes in democracy.)
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To: Lorianne
I'm almost afraid to ask if I should go ahead and apply for my Social Security in October?

The way things were going, I thought I'd get it earlier rather than later...and hopefully get a few checks before it ran out of money.

48 posted on 08/25/2010 7:37:42 PM PDT by moondoggie
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To: Lazamataz; The Comedian

What a Pollyanna!

Most of us will mutter about the lucky buggers who were able to go scavenge cans!


49 posted on 08/25/2010 7:38:46 PM PDT by RKBA Democrat (Amateurs study tactics, professionals study logistics, and victors study demographics.)
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To: Las Vegas Ron

BFL


50 posted on 08/25/2010 7:38:54 PM PDT by Las Vegas Ron (People I know have papers for their mongrels.)
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