Friday, April 24, 2009

Peter Schiff on Our Economic Future

Podcast on The Lew Rockwell Show. It's about 10 minutes long. Following is my quick summary.

About the current stock market rally:
It's not a new bull market. We've been in an on-going bear market since 2000. During the bear market we do have sharp rallies creating opportunities to make money [going long]. But corporate earnings will continue to go down, as interest rate will eventually go up which will bring the present value down. It is like the 70's, only worse.

Effect of increase in money supply:
Prices would have fallen much further, but the government prevented the downward adjustment. It is more likely a wishful thinking on Bernanke's part that he can absorb liquidity later, even though he is a smart guy.

World market:
US is more dependent on consumer spending, borrowing, and asset price than any other large, developed economy in the world. EU and Japan are still creditor nations [with the exception of Great Britain], so they have more fear of inflation and they want to be responsible.

Gold will go up. How high depends on US$ devaluation. US$ is the same as Zimbabwe $; neither has any intrinsic value.

Austrian economics:
Macro-economics Schiff was made to learn at Berkeley is Keynesian nonsense, a brainwash that teach people how free market does not work and how government can fix things.

If the government invites Schiff to Washington D.C., what would he tell them?:
There is no easy, quick fix. What can government do? - Answer, "Nothing". We got into this mess by borrowing and spending. And we can't get out by borrowing and spending more. We have to spend less, save more, produce more, export more, and allow the market to work. The problem is the government wants to do "something" because elections are coming all the time..


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