Well, I think Peter Schiff’s reputation is on a tear. He’s got two new books coming out. His latest book got a thumbs-up recommendation from Jim Rogers. He’s getting 2-3 speaking requests per day from around the world.
I used to read Schiff and the Doom and Gloom crowd quite a bit before the last year since the initial August 2007 subprime mess. For a while, and especially in the last few months post-Lehman, the global economic territory has not looked much like the gold-bug, USD collapse scenario that they (Jim Rogers, Ron Paul, etc.) have been espousing for so long.
But now that near hyper-inflation is in the cards again with all the coming Stimulus (and so many other countries blindly following the US’s lead in order to remain competitive), the gold-bug scenario doesn’t sound so far off again.
It’s pretty simple. The US is growing its debts and deficits. It doesn’t want to take care of the problem in the present by spending less, raising interest rates and, for example, cutting back on military expenditures like Iraq (one of the biggest leaks in the economic boat). Instead it is effectively ordering a home makeover in order to keep the show on the road and basically “save face” - bring that magical consumer confidence back.
Pretty soon you have to pay back your debt. You will one way or another. You can do it using your own income (from goods you produce) or with others’ income (the money that the rest of the world lends to the US.). But if you depend on the rest of the world for your income, you’re really dependent. They might choose to not lend to you anymore. It’s already begun with China cutting back on its US treasuries purchases.
I just think the US government is really asking for it when they ignore the basics of fiscal common sense. If you’ve lost your job and your situation looks bleak, do you think it would be a good idea to go out and put a bunch of stuff on your credit card in hopes that it might help you find a job again? Unless you need to buy a new pair of shoes for a job interview, it doesn’t really make sense. Yet that’s what all these shovel-projects are going to amount to.
I just hope Canada doesn’t make the same mistakes. Canada needs to improve its own manufacturing sectors - ie., move out of cars and oil and diversify into other sectors. I hope Harper doesn’t cave in and set off more stimulus than Obama relative to our population size.
Come January 27th-ish, we’re going to have a lot more information about where the economy will be headed. Until then there is a lot of wishful thinking in the air on both sides of the border.
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{ 2 comments… read them below or add one }
Schiff is great, because he is willing to say what everyone is thinking. He has a large enough stage for it to be heard.
Ultimately everything we do has to make sense. If it doesn’t, theres probably a reason someone is hiding the truth.
Keep the good posts coming
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The US gov’t solution to the credit problem is to borrow more. Very odd, unless you take the view that they are hoping to generate inflation and pay back the debt in future with devalued dollars. Regarding gold, did you see the comment from Merrill CIO last week that predicts a record price for gold this year (not inflation adjusted)?