The US Economy is Toast By Peter Schiff

[Joanne98]

http://carolynbaker.net/site/content/view/82/
http://www.europac.net/news.asp#

"The beginning of the end"

He's one of the doomsayers having a day in the sun as the US stock market plummets. A regular on the business shows, Schiff is shouting from the rooftops that this is the beginning of the end for the US economy.

The disturbing thing is he's been right so far, making his clients at his Connecticut-based brokerage firm Euro Pacific Capital wealthy by having predicted years ago that the US dollar would start falling and tipping them into euro-denominated assets.

Among his predictions: a housing-led slump, even depression, with at least a 20 per cent US economic contraction. He says the US dollar will lose half its value.

Where once it was about saving, investment and production, now the US is more about massive consumption on borrowed money. "We have a very sick economy -- it's been papered over because everyone around the world has been willing to lend us money," Schiff tells The Australian. "Now they are finding we can't pay them back."

"Everyone thinks the US is the No1 economy in the world. We're not. All we've been doing is consuming stuff on borrowed money. There's no savings."

Schiff is scathing about the mortgage fallout that has caused the current global market shake-up. Sub-prime mortgages - money lent to low-creditworthy borrowers - were "crap", but packaged up and sold around the world.

Now that the loans are being called-in and borrowers can't pay-up, Schiff predicts dire repercussions for the US. "America is going to lose access to the world's credit markets. If someone here wants to borrow money now they are going to have to borrow from another American."

To many, these claims are fanciful and most economists, while predicting an economic slowdown, are not predicting a recession. "The US economy has its problems but fundamentally it is really strong," says Mark Zandi, chief economist at Moodys.com. "The US economy is enjoying six years of growth, unemployment is low and inflation is low."

Schiff says all this is a mirage. And in economic forecasting, timing is everything. Schiff's seemingly outlandish claims get traction, helped by a book he's written: Crash-Proof: How to Profit From the Coming Economic Collapse. It charts an almost conspiratorial tale of how the public have been fed lies over the state of the US economy for years. "The economic statistics put out by the US Government are propaganda, pure and simple," Schiff writes.

"Issued by government agencies, interpreted by spokespersons for the Government and the financial community ... the information we get has been manipulated to mould a public understanding favourable to the agenda of the powers that be." Schiff's prediction of economic doom has everything to do with the US mortgage and housing meltdown, a prophecy he made in the book before the latest market turmoil.

"The collapse of consumer spending, associated with higher mortgage payments and vanishing home equity, will plunge the economy into severe recession, further exacerbating the collapse in real estate prices, worsening the recession and continuing the vicious cycle," he says.

"The country will be a lot poorer as a result of the unprecedented dissipation of wealth and accumulation of consumer and mortgage debt that occurred during the bubble years. Before real estate prices can return to normal levels, they will first have to get dirt cheap."

He tells The Australian the latest market gyrations are evidence of the "beginning of the end of our economy".

"People call us the biggest economy in the world but it's false, we'll be lucky if our per capital GDP is still in the top 20 in two years' time."
Last Updated ( Wednesday, 15 August 2007 )
http://carolynbaker.net/site/content/view/82/

[GreenTea]

1. BushCo thought they could manipulate it all until after the 2008 elections....But

it's happening faster then they can use their mirrors, smokescreens, band-aids and propaganda!

However, BushCo will blame it on the Dem congress, that's an absolute!

[Joanne98]

2. He'll try but it won't work. Everybody knows it's him, even the freepers.

[screembloodymurder]

10. Why do you think he wanted to privatize SS.

He knew the props under our economy were starting to buckle.

[cliss]

3. Wow. Breath-taking article.

Thank you for posting. And of course, if the US topples like Mr. Schiff claims (I personally believe we're in for a MASSIVE crisis). If the US topples, then it will such in a lot of other countries with it. It's not like we will keel over, and everyone else will walk away unscathed.

But - I do believe he's right about the financial structure.

[Joanne98]

4. You're welcome cliss

[snappyturtle]

7. I think the "correction" will be massive too and I just base it on

what I see going on around me in my everyday world. I've noticed the Wal-Mart super store lot is not ever very crowded anymore. I HAD to go in two days ago for an old neighbor, I'm not a fan of Wal-Mart, and was amazed that there were only six lanes open (24 lanes in all) for check outs....2 for 20 items or fewer, 2 for 10 items or fewer and the other two for everyone else. Guess people are buying less. The three dollar stores' and resale shops' parking lots are jammed!


Also I awakened early this morning and watched a financial program at four a.m. They were talking about the world markets. The Far Eastern markets were adjusting or correcting at a higher percentage than we are! So it's definitely effecting the globe.

[Double T]

5. I agree with most of what Peter Schiff says.............

I'm afraid the last 17 months of bushco's reign will lead 'US' into a severe economic and financial depression. It will then take at least 10 years to begin to put the U.S. back on the correct course.

[redqueen]

6. Wow...

Amazing that freepers are all convinced that anything contradicting the WH spin is just hand-wringing and that everything's comin up roses.

Sad... but true.

[indepat]

8. Been on a soapbox for almost twenty years saying wholly irresponsible 'puke tax and fiscal policies

would come home to roost, the piper must be paid, and the day others would not buy our paper would be the day the party would over. Nobody listened, nobody cared, and most kept voting a straight 'puke ticket. The US won the Cold War mostly because no one would buy their paper. And if the US does lose its access to the world's capital markets, it will be unable to continue to spend more on the military than the rest of the world combined.

[On the Road]

9. That's a Pretty Astonishing Prediction:

Among his predictions: a housing-led slump, even depression, with at least a 20 per cent US economic contraction.

Japan in the 1990s had a stock market and real estate crash and a long period of extremely sluggish growth. Here is a long-term chart of the GDP:



The US could be beginning a Japan-like stagnation. But all the negative years put together on that 15-year chart do not even come close to -20%.

By comparison, during the last recession in 2001, the US had one quarter of negative growth which was less than a percent:



Now, you can never say never. But short of the destruction of the whole modern economic system, -20% growth is a completely unrealistic projection.

There are have been Peter Schiffs in the world predicting catastrophe since time immemorial. There is always a crisis at hand and always the possibility for a breakdown. But even the Great Depression did not live up to the warnings of super-bears like Schiff.

[Joanne98]

12. The Japanese are savers and they're country wasn't up to it's eyeballs in debt.

A totally different situtaion. Our economy is two thirds consumer spending. A deep recession could hurt us bad.

[screembloodymurder]

11. The world is pissed.

Many are accusing US banks of packaging our crap in pretty paper and selling it overseas. Think about how we feel about China shipping us bad toys and magnify it by a billion.

[3waygeek]

13. The credit crunch has already inflicted pain...

my company has been trying to get another round of financing, with no success. Today they laid off half the employees, myself included. At least in our layoffs, the executives got it too.