Peter Schiff has been credited as being one of the few financial analysts to predict the collapse of the housing and financial markets in 2008 and the subsequent financial recession. He is also the author of several popular books on our financial state as well as a stockbroker and the founder of schiffgold.com and Euro Pacific Capital.
This week, on Joe Miller’s radio show, Peter Schiff had a strong warning for all Americans, especially investors. He is predicting an imminent recession that will last longer and be more painful than the Great Depression of the 1930’s. Due to past policies and current issues, he contends there is no way the US can avoid this catastrophe.
He blames the Federal Reserve as the primary cause of this imminent recession. He points to the Fed’s seven years of zero percent interest rates and three rounds of quantitative easing. Now that the Federal Reserve is trying to ease up on the monetary stimulus, the terrible financial state the U.S. is really in will be revealed.
Schiff also maintains that we are in a far worse position because we currently hold much more debt than we did seven years ago. He analogizes U.S. financial strategy in accruing debt with countries like China and Russia to a huge Ponzi scheme. Our foreign creditors are on to the fact that it may be impossible for us to make good on that debt and have no desire to be part of a free-money-to-the-US scheme.
Schiff contends another major problem is that the US dollar is currently overvalued. Many countries are taking advantage of this high valuation by making moves to get rid of their United States dollars. As the world’s reserve currency, this overvaluation also creates instability internationally.
The only reason the U.S. hasn’t collided with economic disaster yet is, in Schiff’s opinion, the currency speculators. However, no matter what the speculators do, the dollar will eventually fall, as much as 30%. In a worst case scenario, the end result could be hyperinflation, wiping out most of the value of the dollar.
Schiff also reminded listeners that the dollar itself does not hold any intrinsic value. Its value is entirely contingent upon people’s confidence in it. Once people lose confidence in the dollar, its value will evaporate and will be worthless to purchase anything with, so political leaders do what they can to reinforce faith in it. A case in point is Obama’s State of the Union address where he falsely claimed that the economy had recovered. According to Schiff, these false reports that the economy has recovered are being used to prop up confidence in the dollar.
There are numerous indicators that the US economy is in serious trouble. At the beginning of this year several companies (Walmart, Macy’s, and Finish Line) all reported numerous store closures and massive layoffs. Walmart alone is expected to layoff 10,000 people. Other companies that do not have physical stores such as Yahoo and Johnson and Johnson have also announced layoffs that will affect thousands of more people. Finally, the percentage of adults in the labor force is at the lowest level in 40 years while wage gains for most workers has been a nonexistent. These are all indicators that the U.S. economy is in troubled waters.
What is Peter Schiff’s advice for U.S. investors? To protect against the imminent collapse, they should immediately divest themselves from the U.S. stock market and sink their money in international markets, gold and silver stocks, and other commodities.
Only time will tell whether Schiff has accurately predicted yet another financial catastrophe for the United States. One thing is sure: if he’s right about an imminent Second Great Depression, this nation – and probably the world at large – will experience an era of unprecedented political instability.