Do you know Peter Schiff?

This is a tough blog for me to write. I focus on politics, and attempt to encourage Republicans to return to smaller government, less taxes, and allow free markets to work. Today I'm focusing on the man who worked on Ron Paul's campaign. I ignored Ron Paul for the most part because I didn't think he was electable. I wish I had paid more attention.
Peter Schiff is an Economist who founded Euro Pacific Capital He spent 2006 and 2007 being laughed at by other economists (as you can see on these clips) as he predicted the evaporation of wealth, due to inflated home prices brought on by the Fed keeping interest rates low which led to aggressive lending. The home price collapse would lead to a banking collapse which leads to a stock market collapse leading to a total economic recession that will last for years.

Well the collapse has arrived. 5.8 Trillion dollars evaporated in October. 11 consecutive months of rising unemployment. November we lost another half million jobs. Close to a million jobs are gone from last year. Peter called all of this, and may not have been alone in doing so, but very few gave him weight. Even today some suggest he doesn't know what he's talking about. But not me. His theory makes sense and his past statements have come true.

What does Peter say about the future? More importantly what should you do? First thing is get out of the dollar.


He suggest buying gold, silver, foreign bonds & foreign currency. Now if you're not in the stock market, what about our economy in general. Basically we have to pay the price of borrowing from foreign countries for decades to live the lifestyle we've all lived. We need to produce and save more. We need to spend less. Which is the exact opposite thing the Government is saying. Bush/Obama and all their followers are announcing that this is a confidence issue. Once consumers feel confident again, they'll buy more houses, and cars, and clothes, and trips. So the government is printing money to spread to banks, and big companies, so they can stay in business, which will slow unemployment, and hope that people will go buy stuff to keep these companies afloat. The problem is everyone is drowning in debt. After years of 2nd mortgages on artificially inflated home prices to pay for renovations to make our houses more valuable, we now find out that the kitchen/bathroom renovation that cost 30 grand is worth zero. There's no one left to prop up our economy. The more we print money the deeper the hole is getting. Te best thing we can do now is tighten our belts for a 3 to 10 year recovery, and beg our government to stop bailing things out. In other words let's stop digging the hole.
Just to illustrate this point. Japan had amazing growth in it's economy from 1950-1990. When a market correction began, the government chose to stop it. Their infusion of cash kept things sort of stable but market pressure demanded correction and with that their recession began. Their government still kept printing yen and creating jobs till around 1995. From 1990 till 2001 their stock market had dropped almost continuously. Even after a 7 year "recovery" the Nikkei is worth about 75% of what it was 18 years ago. Now that a worldwide recession has begun Japan is really in trouble because inflation will begin to rise. Watch billionaire Jim Rogers try to explain this to some arrogant reporters.

We're a lot bigger economy, and we're considerably more over extended than Japan was.But we're only at about the 1991 point of the Japanese time line. We can take our medicine in a couple of nasty gulps and be back to prosperity in a few years or drag it out for decades like the Japanese. We need to educate our friends and neighbors as to what this bailout will do. Together as a nation we need to let our Reps in Washington know that we understand tough times are coming but if they try to put it off further to win another election we will vote them out.

I'm going to be filling in for Keven Cohen right after Rush Limbaugh on 560 WVOC Monday and Tuesday (12/15 & 12/16). Peter Schiff's assistant says Peter will start the show Tuesday at 3 with me via phone. If you have any questions you'd like me to ask him please post them here.