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The Beginning of the End
October 10, 2008

Peter Schiff, President and Chief Global Strategist

While I have warned for years that the United States was headed into the eye of an economic hurricane, nearly every other "expert" from Washington, Wall Street, the press and academia saw nothing ahead but sunny skies. Now, suddenly, there is an overwhelming consensus that absent the Federal mortgage bailout, my dire forecast would have come to pass. While I'm glad that rose colored glasses have finally been removed from so many eyes, the vast majority of these observers are still blind. In truth, the bailout plan substantially increases the threats to the U.S. economy.

When I wrote my book "Crash Proof", I not only predicted that our consumer/mortgage credit-based economy would fall apart, but that the government would ineptly try to repair it. The magnitude of those potential policies formed the basis of my worst case scenario. My fears have now been confirmed, and the U.S. Government is now set to destroy all hope of economic recovery.

Make no mistake; had the government resisted the political pressure to interfere with the markets, we would now be experiencing a very deep recession. But by refusing to let the markets work, policy makers are resisting the only medicine capable of curing the economic disease that afflicts us. The same mistakes were made in the early 1930's, causing a severe financial crisis to morph into the decade-long Great Depression.

The government will now attempt to keep bad loans from failing and real estate prices from falling. Rather then allowing market forces to rein in excess borrowing and replenish savings, it will encourage even more borrowing and drain what is left of our savings pool. Rather than allowing our economy to return to one based on legitimate production, it will continue to encourage reckless consumption.

In the end, by refusing to allow market forces to work their cure, our economy will inevitably die from the disease. Our economy will now face death by hyperinflation, which will cause a complete loss of confidence in the dollar and result in prices and interest rates skyrocketing out of sight. The evaporation of our national wealth will lead to civil unrest, food and energy shortages, and the possible imposition of martial law. If such a scenario unfolds, what is left of our Constitution will surely be completely shredded.

Although this reality looms as large as anything I have ever seen, investors still do not see the forest for the trees. Convinced that the bailout will actually work, and that foreign governments are derelict for not launching similar plans, global investors are fleeing other currencies in favor of the dollar. Soon investors will discover that foreign politicians and central bankers have acted responsibly. When they do, the current gains seen by the dollar will reverse violently.

Investors seem to be bracing themselves for a global depression that will not occur. Foreign stocks, particularly those exposed to China or natural resources, are trading at the lowest valuations I have seen in my entire career. Fears of a global meltdown are based on the misconception that the U.S. economy is the tent pole for economic activity around the world. The premise of my entire argument is that the U.S. economy, by consuming so much of the world's resources and manufactured goods, and borrowing so much of the world's savings, has in fact been a drag on the global economy.

The enormous global vendor financing scheme is finally coming to an end as the vendors discover that their biggest customer is flat broke. In the short run, our creditors are experiencing some pain because they finally realize that they will never get their money back.

Once the foreign stock markets take this hit, they will be far better poised to grow than their American counterpart. Foreigners will reclaim their productivity and savings for themselves, and will subsequently experience the biggest global economic boom in history. America on the other hand will fare much worse, as we will be left with a hollowed out manufacturing base, dilapidated infrastructure, no savings, and a gigantic Federal Government that will regulate, spend, borrow and print our economy into ruin.
http://www.newmogul.com/item?id=1002


This is from over a week ago, so if it's a repost sorry about that. Thought some might find it an interesting read.
 

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not a nut
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A very smart man, but beware he is all about gold and is
betting against the dollar.....imo...

They call him Mr.doom and gloom..... Peter Schiff, he and Ron Paul are the ones that woke me up to what is going on in the economy and government.

I believe he has good insight into what is going on.

Yes, he has been saying get your money out of US money and stocks for over a year now.

Look where the stock market is?
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Convinced that the bailout will actually work, and that foreign governments are derelict for not launching similar plans, global investors are fleeing other currencies in favor of the dollar. Soon investors will discover that foreign politicians and central bankers have acted responsibly. When they do, the current gains seen by the dollar will reverse violently.
Except that foreign governments did launch similar plans...
 

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not a nut
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Except that foreign governments did launch similar plans...
Very true.... they followed in the US footsteps a few days after Schiff made the statement.

I wonder how much his market forecast has changed and in which direction.

Adding: I just checked out the link of the dukes ^^^
there's an update, don't look good.
 

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I love this *****
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If the last Great Depression lasted for nearly a decade and this depression is predicted to be even worse, it may be a good time to look at just how ready us preppers are for the looming calamity. I have about 2 years of food saved up. Is that enough???
 
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American fearmaker
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Where I see trouble happening is that our government is only trying to bailout the upper part of the financial pyramid. The bailout should be larger or spread out over more levels of the pyramid to have a positive effect over all. Too little, too late and given to too few. In a year or so, we'll probably need to bailout the upper level of the pyramid again....
 

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Wild Edibles Expert
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He's very inaccurate... this was predicted/warned years ago. I was writing about it two years ago. He's blowing his own horn when in fact he was in an entire brass band saying the same thing.
 

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Lone Wolf
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Very inaccurate? Tell me how the following, starting in '06 is inaccurate...

In an August 2006 interview Schiff generated much controversy when he repeated his long-held investment thesis: "The United States economy is like the Titanic and I am here with the lifeboat trying to get people to leave the ship ...I see a real financial crisis coming for the United States." On May 16, 2006 in debate on Fox News, Schiff accurately had forecast that the U.S. housing market was a bubble that would soon come to bust.[3] On December 13, 2007 in a Bloomberg interview on the show Open Exchange, Schiff further added that he felt that the crisis would extend to the credit card lending industry.[4] Following this observation, it was soon reported on December 23, 2007 by the Associated Press that "The value of credit card accounts at least 30 days late jumped 26 percent to $17.3 billion in October from a year earlier at 17 large credit card trusts examined by the AP... At the same time, defaults -- when lenders essentially give up hope of ever being repaid and write off the debt -- rose 18 percent to almost $961 million in October, according to filings made by the trusts with the Securities and Exchange Commission."[5]

Schiff also references the role of the US consumer in the world, saying that the US consumer thinks he's doing the world a favor by consuming what the rest of the world produces. He is quick to point-out that this relationship will come to an end, in his view, much sooner than people imagine, and with negative consequences for the US. Schiff has been quoted as saying: "Consumption is its own reward for Production" -- meaning that without production, the US cannot indefinitely sustain its ongoing consumption. Schiff, and other adherents of Austrian economics, promote "savings" as "the engine of economic growth -- not consumption."
 

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The end is near.
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The man was right in his past statements and I think he's right about what's coming our way in the future.

He's betting against the dollar because the dollar is in big trouble right now. He's saying to invest in gold or to get your money out of the dollar because the dollar isn't going to be worth much in the future.

Where, exactly, is he wrong?
 

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He's very inaccurate... this was predicted/warned years ago. I was writing about it two years ago. He's blowing his own horn when in fact he was in an entire brass band saying the same thing.
If you were were writing about it 2 years ago then your just as inaccurate as him. So what is the point ???
 

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I've been reading Robert Chapman's newsletters and I've found it very prophetic. Scary too.
 

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He's not betting against the US dollar,he's betting against the Federal Reserve Note ,One Dollar...take one out and look at it.
 

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The end is near.
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Yes, you're correct, FredLee. We still refer to it as a dollar in our day-to-day lives but it is certainly not one dollar anymore. Pretty soon it'll be cheaper to wipe with Federal Reserve Notes than to waste many dollars purchasing a lesser amount of paper in the form of toilet paper.
 
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