We had better listen to Peter Schiff. He predicted the stock market crash of 2008 and the real estate bubble bursting. Here are his predictions for the immediate future, including 2009-2012:
“So, the question is, what are going to be the consequences of what we’re doing now?
“And what I think is going to happen is that, ultimately, people like the Chinese and the rest of the world — the Saudis and the Japanese and everybody else — they’re going to figure this out, and they’re not going to want to play this game any more. We’ve got them conned right now.
“In my book, in Crash Proof, I compared it to Tom Sawyer. You know, there was that passage in Tom Sawyer where Tom gets everybody, all the kids in the neighborhood, to whitewash his fence. And he gets them to pay for the privilege of doing his chores.
“And when Mark Twain wrote that passage, he probably had no idea that it would one day form the basis for the entire global economy. But we’ve got the world painting our fences. Like they don’t have their own fences that need painting.
“But the world is not going to accept this, this economy. You had Hillary Clinton from when she went over to China, a couple weeks ago, to get them, to beg them to buy our bonds.
“She’d tell them, “We’re all in this together.” And basically this is what she tells the Chinese: “You need to take money away from your citizens and loan it to us, so we can give it to our citizens so they can use it to buy products made in your company to keep your people employed.” That’s the deal that we’re making with them.
“Now, what the Chinese should say to Clinton is, “You know what, I got a better idea. Why don’t we just leave our money with our own people and then they can use the money to buy their own products. That way we get to keep our stuff.”
“The way it is now, we get all the stuff and all they get is the jobs. Well, what good are jobs without stuff? That’s slavery.
“So they’re going to figure it out. And what’s going to happen is they’re not going to buy our bonds, and the Fed’s going to start buying all the bonds, and the dollar’s going to plunge. And this crisis is going to end up being a currency crisis. And when it becomes a currency crisis, then you’re going to have higher consumer prices and you’re going to have higher interest rates.
“Right now, we’re creating a lot of inflation. A lot of people are talking about, “Oh, there’s not inflation, it’s deflation.” That’s all nonsense. Real-estate prices are falling because they’re too high. Stock prices are falling. But that’s not deflation. That’s just falling prices. There is no contraction of the money supply, it’s growing like crazy.
“And this crisis is going to end up being a currency crisis.
“But the expansion of the money supply is not immediately showing up in rising prices for commodities or consumer goods, because there are other temporary factors that are pushing prices down at the same time inflation is pushing prices up. You’ve got deleveraging; you’ve got bankruptcies, going-out-of-business sales; you’ve got a lot of companies liquidating their inventory; and you have the dollar strong.
“And what happened was, paradoxically, when this crisis began, money flowed into America instead of fleeing America, which it will do ultimately. Can you imagine there’s a giant explosion and everybody’s running towards the blast? That’s what’s going on.
“And when people look around the world and they say, “Well, people are coming to America because as bad as it is every place else, it’s so much worse here.” That’s nonsense. That’s just what they’re saying to explain it. Just like they tried to justify the real-estate bubble or the Internet bubble. That’s all nonsense.
“The reason it’s so bad in the rest of the world is because they loaned us so much money and we can’t pay them back, and now they’re losing, based on their bad loans.
“And what’s really causing the global credit crunch is that we’re borrowing so much money right now, we’re crowding out everybody else. The fact that people are loaning us so much money means that private businesses around the world can’t get capital. Why? Because it’s all going to the US government, that’s why.
“So the world is suffering, not because our economy is collapsing, but because they’re foolishly trying to prop it up.
“And when they figure this out, then we’re going to get a real economic crisis. Because when the dollar starts to plunge — and it will — then we’re going to see prices rising, sharply, for consumer goods, and interest rates rising.
“And if we think we have problems now, wait till we see how much worse they get when we throw rising consumer prices and rising interest rates into the mix. And there’s nothing the government’s going to be able to do about it.
“Right now, unemployed people are getting the benefit of lower prices. Imagine when you’re out of work and your prices are going up, because that’s what’s going to happen. And then this is going to be a real economic crisis and then we’re going to be in for very, very difficult choices.
“And, unfortunately, the worst-case scenario is one that is looking increasingly more likely, which is hyperinflation. And if we get that, that’s where nobody will lend us money.
“And, so, the Fed buys all the bonds in order to keep interest rates down and to maintain deficit spending. And, then, the velocity money really starts to pick up. Nobody is going to want our money — not even American citizens will want our money and they will try to spend it as quickly as they can.
“The government might try to keep it together a little bit longer, with regulation. Maybe we’ll have capital controls. Maybe they’ll make it illegal for American citizens to do what I’m doing with my clients right now — buying foreign currencies, foreign stocks. Maybe they’ll make it illegal to buy gold.
“As prices really start to contract, to escalate, private parties will try to make contracts with payment in gold or other currencies. Maybe the government will make that illegal. There might be stores or people that actually don’t want to accept dollars because their value is dropping too rapidly. The government will make that illegal.
“And that means that we’ll have a black market. That means if you want to buy something, you’ll have to buy it on the black market, just like they did in the Soviet Union. The only reason you could buy anything there was because you bought it illegally.
‘A lot of these things are going to happen. I think early on, probably even in Barack Obama’s first term of office, I think we’re going to have price controls.
‘I think prices will be rising so rapidly, maybe even by next year, that they’re going to impose price controls on a number of products; probably energy, probably gasoline, probably milk, bread. And we’re repeating all the mistakes of the 1930s. We might as well repeat the mistakes of the 1970s.
‘And, so, when they put on price controls, what’s that going to mean? Shortages, power blackouts, long lines for gas, long lines for food. A lot of things are going to happen, I just mention that. Everybody now, of course, is talking about the 1930s and saying, “Oh, no, we can’t repeat the mistakes of the ’30s.” Well, that’s exactly what we’re doing.” ***
Most will not heed Peter Schiff’s advice; they will continue to go headlong over the cliff, following the other sheeple. We have been warned. There will be a few who will study out the warnings and make appropriate moves to not only preserve their wealth, but also prosper. “My people are destroyed for lack of knowledge,” said Yahweh through his prophet for that hour. And it is through this economic knowledge that we can make it through the hard times. Kenneth Wayne Hancock
***From his speech at the Autrian Scholars’ Conference, March 13, 2009