Peter Schiff forecasts a depression

Buzzed · Aug 11, 2010

From http://www.fool.com/investing/gener...ff-were-in-the-early-stages-of-a-depress.aspx

Peter Schiff: We're in the early stages of a depression now. It's going to be a horrific experience for average Americans who are going to watch their standard of living plunge. The cost of living is going to escalate dramatically. We are going to see soaring prices for the basic necessities of life, like energy, clothing, and other things. Education and health-care costs are going to continue to spiral out of control. Millions of more Americans are going to lose their jobs, and all of us are going to lose our freedoms and our rights. As the government gets bigger, it tries to end the crisis; but its policies are creating, perpetuating, and making it worse.

The sad fact is these policies are going to wipe out the middle class. They're going to wipe out the poor; they're going to wipe out retirees. Accumulated savings is going to be blown.

There is no economic recovery. All we did is spend more borrowed money. We dug ourselves into a deeper hole, and now we're in even more trouble than before Obama ascended to the presidency.

We have to stop stimulating. We have to shrink the government and cut government spending dramatically. The reason the economy is so screwed up is because government regulations and subsidies have created a slowing economy. They have prevented market forces from operating the way they need to be. They have prevented an efficient allocation of resources. We need to rebuild our manufacturing base. We need to reindustrialize. We can't do that without the resources, without the savings, without the investment.

They've created a nation of spenders, speculators, and consumers, and they've destroyed the savers, producers, and the investing class that built this country. We're moving from a market-based economy to essentially a planned economy. We're abandoning capitalism and embracing socialism. That's a recipe for disaster.

We don't have economic growth. GDP is going up, but that's not a sign of any economic growth. All we're measuring is what we're consuming. But we are paying for it by going into debt. As a nation, we're in worse shape because of the GDP growth. The real economy is shrinking. All we're doing is borrowing money from economies that are growing, like China, and we're spending their money. But that's going to stop.

GDP is decelerating now as the stimulus is wearing off, and the hangover is setting in. By next year, I believe we'll be back in recession territory, as far as the GDP numbers.

We're going to have runaway inflation and recession simultaneously. I call what we're going to have an inflationary depression, which is the worst possible depression you can have.

We're going to have falling stock prices and falling real estate prices. That's not deflation. Prices are rising. Oil is at $82 a barrel and rising. The Japanese yen is at a 15-year high against the dollar. The government is printing a bunch of money. These are signs of inflation. Deflation is healthy. That's what we need. Unfortunately, inflation is what we're going to get thanks to the Fed and government policy.

We need higher interest rates. Rates are much too low. Low interest rates are part of the problem; they're not part of the solution.

We're repeating the same mistakes of the [Alan] Greenspan Fed except on a bigger scale. Obama is repeating Bush's mistakes. Bernanke is repeating Greenspan's mistakes. So their mistakes will do even more damage to our economy than the mistakes of their predecessors.

Don't own Treasuries or bonds. Invest in the economies that are doing it right. Invest in emerging markets -- Southeast Asia, China. Invest in natural resources economies like Australia, Norway, and Canada. I invest in commodities and precious metals. Just get out of dollars.

There's no limit to how high gold prices will go. They will rise many times from here --thousands and thousands of dollars per ounce higher. People will be shocked.

It's surprising to me that gold is still as cheap as it is. I just know it's going higher, and eventually it's going to go ballistic.
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Normally, I would pass this off as another crackpot conspiracy theory. Unfortunately, this is coming from the man who predicted the credit crisis.

pspr · Aug 11, 2010

Wolf!

MohdSalleh · Aug 11, 2010

He has been predicting a depression since god knows when.

having said that, for traders, we are already in a depression, not many opportunities available. good R/r ones anyway

cstfx · Aug 11, 2010

Why a depression? Because he lost the primary?

LEAPup · Aug 11, 2010

"We have to stop stimulating. We have to shrink the government and cut government spending dramatically."

Agreed!!!!!!!!!!!

hoodooman · Aug 11, 2010

He said that it was going to wipe out the poor. Where are they going. To the upper class?

failed_trad3r · Aug 11, 2010

soaring prices? in a depression? WTH?

BondTrader50 · Aug 11, 2010

Quote from cstfx:

Why a depression? Because he lost the primary?
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I think so Oil is getting hammered.

krazykarl · Aug 11, 2010

Quote from Buzzed:

From http://www.fool.com/investing/gener...ff-were-in-the-early-stages-of-a-depress.aspx

Normally, I would pass this off as another crackpot conspiracy theory. Unfortunately, this is coming from the man who predicted the credit crisis.
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he's successfully predicted 14 of the last 6 recessions.

S2007S · Aug 11, 2010

Peter Schiff is one I like to follow, everyone laughed and laughed and laughed at him when a few short years ago he predicted the housing collapse, I agreed with everything he was saying then and believe everything he is saying now is a certain possibility of becoming true today.