If Only Obama Picks Peter Schiff As Special Advisor
09:33:34 PM Tuesday Dec 16, 2008
Either this guy has too much brains or can see through money. He comes from a school (mad'hab and not actual college) of economics called the Austrian school. Peter Schiff is the CEO of Euro Pacific Capital, and the guy you want managing your wealth. By the way does anyone knows where to buy raw gold (not jewelry) for investment? he predicted it will be at 2000 next year. Right now it's at 852 and rising...
According to wikipedia:
"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 forecast that the U.S. housing market was a bubble that would soon burst. 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. 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."
Schiff also discusses 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 and production as "the engine of economic growth -- not consumption". Schiff has said on numerous occasions that the current economic crisis is not the problem; it is the solution. According to him, the transition from borrowing and spending to saving and producing cannot be accomplished without a severe recession, given the current imbalances of the US economy. But according to him, that transition needs to happen. He also thinks the government is doing no one a favor by trying to "ease the pain" with stimulus packages, bailouts and such. Schiff believes these actions will only make the situation worse and possibly result in hyperinflation if the government continues to "replace legitimate savings with a printing press." Schiff is a firm believer in reducing government regulation of the economy. Schiff worries that Barack Obama will increase such regulation."
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But if everyone saves more, then by construction, you're forcing total output lower! What is that 'optimal' level of consumption/saving that people should target? It is hard to tell when the cost of living is so high. A lot of people get a crack out of pointing out that people are taking lavish vacations and buying luxury items... that's just not correct. Most American do their shopping at Walmart and other discount store and are spending money to keep their kids in good schools and neighborhoods, provide them with adequate health care, etc.
It is not a failing of the consumer, rather wages have not risen as much as the cost of living. And who benefits from that? The producers. Enters the Austrian School with its emphasis of market self-correcting mechanism. The producer reacts by shipping production assets into other labor jurisdiction, forcing the wage to remain low, hence savings to remain low.
Mr. Schiff is still a much better commentator than most tv commentators put together. That being said, I bet my money on Volker, the only Fed chairman to tame the beast.