Peter Schiff on Greece, Puerto Rico, and America's Looming Economic Crisis

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Peter Schiff on Greece, Puerto Rico, and America's Looming Economic Crisis

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"What's happening in Greece and what's happening in Puerto Rico is going to happen in the United States," says investment guru and radio host Peter Schiff, CEO of Euro Pacific Capital.

"Once the Greek creditors began to question the solvency of Greece they demanded higher interest rates," Schiff explained during a recent interview with Reason's Matt Welch. "The minute our creditors figure out we are in the same position as Greece or Puerto Rico, they're going to demand higher interest rate from us and we can't pay either."

About three and a half minutes.

Hosted by Matt Welch. Edited by Joshua Swain. Cameras by Meredith Bragg and Paul Detrick.

Watch the video above and scroll down for downloadable versions. Subscribe to Reason TV's YouTube Channel to get automatic updates when new stories go live.

Comments

[gordo53]

Schiff is right of course. What we don't know is how long it is going to take for the rest of the world to decide that we are not creditworthy. Could be decades or as soon as next year.

[Rufus J. Firefly]

Dangerously entering global warming Ehrlich alarmist territory if you ask me when you say in decades or one year from now.

If there's one economy that is dynamic, innovative and agile enough MORE than any nation on earth to fix itself it's the USA.

Just keep it out of the hands of the progs.

[GregMax]

"Just keep it out of the hands of the progs."

That's exactly where the parade is headed. Even the "conservatives" are progressive socialists/statists.

[San Diego]

And how will this "agility" manifest itself?

[Gene]

Through a cyborg, of course.

[Warren]

I have to agree. It's obvious to me, like it is to Peter, that it is impossible for the US to meet it's debt obligations. It's baffling to me that it's not obvious to our creditors. Then again aren't we buying our own debt now? I'm sure there's a limit on how far down the road we can kick this can. But yeah, it could well be decades.

Greece going under will be bad for the Greeks. I don't see any way we don't take half the world down with us. Unless of course the worlds central banks swap their dollars for gold and/or bitcoins.

[Rufus J. Firefly]

You don't think the Americans can reverse itself given its obvious resources?

Yes, Greece offers a cautionary tale and yes the entitlement/enabling state seems to be in run away mode, but to draw analogies based on their economy (if you can call it that) with the United States is absurd in my view.

Nor do I think a mighty economy can't fall. However, not entirely convinced with the USA.

But that's me.

[DarrenM]

It's a matter of will. Too many people want to continue as is as long as someone else bears the burden, courting "bad luck" with all the enthusiasm they can manage. We really are a bunch of selfish pricks. Nothing will be done about the debt and the burden it will place on future generations until we really really have to.

[JFree]

Yeesh - again with the gold and bitcoins crap.

ANYTHING can work as an international trade settlement (reserve) currency. ANYTHING can work as an internal (intra-market) currency.

NOTHING can EVER do both. It is mathematically impossible. And the second banks/govts etc try to make the bookkeeping work; then all they do is force different economies into harsh financial crises and bank-caused recessions.

[SteveDDD]

DEBT = ASSET. Exactly, to the penny. There are always two sides to every story. Especially when it comes to ACCOUNTING. Do you recall taking ANY accounting courses back at "school?"

Federal debt is simply deposits in the Federal Reserve Bank. This is not a burden on the U.S. economy. It is not a burden on future generations, who will not have to pay it.

Bank deposits do not burden anyone.

Future generations won't be involved in any way, with liquidating deposits in the Federal Reserve Bank or any other bank. Only banks "pay off" deposits ? by transferring dollars from savings deposit accounts to checking deposit accounts.

Federal debt is nothing more than the total of deposits in T-security accounts at the Federal Reserve Bank. If you (or any entity INCLUDING China, banks, the Fed or the federal government itself) own a T-security, you have a deposit in the Federal Reserve Bank. You can even pass that bank deposit on to your children, as an INTEREST PAYING ASSET.

To "pay off the debt," i.e. to cash in your deposit, the federal government transfer dollars from your T-security account at the Federal Reserve Bank to your local bank checking account. No new dollars needed and NO INFLATION.

Neither you, nor your children nor the government are burdened by this asset transfer between two of your bank accounts.

[Fairbanks]

Yes, claims on Federal debt (assets) are exactly equal to the debt (liabilities). So what? They still have to be paid off. They can't be paid off with dollars from T-security accounts at the Fed, as you posit, because those accounts don't have dollars in them. They have treasury securities in them. The Fed has to get those dollars from somewhere.

Your logic suggests that no country would ever be unable to pay off its central government debt.

[AD-RtR/OS!]

How do you go bankrupt?

Very slowly, then all at once!

[JFree]

Schiff is wrong. He's like every other gold bug out there. They have a model in their heads for what will break the current system and they just keep repeating it every time there's a crisis.

From that interview it is very clear that he doesn't have the slightest idea what has actually happened in Greece.

[John C. Randolph]

Your clever use of the derisive term "gold bug" has convinced me. I will no longer worry that the Fed is shitting out magic rubber inflatobucks in unlimited quantities.

-jcr

[JFree]

You should worry more about a Japan scenario because that's what we're in - and that's the best case scenario for the next few decades.

[SteveDDD]

Apparently JCR can't handle snark, purposeful or otherwise. Good comment on the long term prospects for the US (Japan scenario). Inflato bucks (cute), fed, asset exchange, guaranteed to eventually collapse stock market (bubble) , verifiable near zero inflation, lack of interest income for the economy... Appears JCR is clueless about what QE really was. (Simply a vehicle to lower long term interest rates and cut the federal deficit-nothing more. How on earth that is "inflationary" is beyond me. In no way was/is this money printing. $ 4 trillion monetary base NEVER enters the money supply. Oh my. He actually believes QE was "money printing.".Naive at best, cluelessly reactionary of course.

[Palin's Buttplug]

Schiff has never been right in his wretched fucking life. He lost money in 2008 for his clients as a Doomer.

His shitty predictions on the demise of the US Dollar and gold to $5000 are laughable.

Fuck this charlatan in him mealy fucking mouth.

[blondrealist]

Schiff's poor grasp of how our monetary system works, and how different it is than the flawed Euro system is astounding. Greece is a currency user. The United States federal government is a currency issuer. Apples and oranges. Greece certainly spends too much money, has a corrupt government, its citizens evade taxes, and its economy isn't very productive -- but even if all that was cleaned up -- they would still be a currency user - with no control over the currency. Germany has a current account surplus -- and Greece has a current account deficit. Greece has to export Euros to buy the goods and services it needs - that's what a current account deficit means. That means one of two things: debt, or reduced living standards. I'm not saying our system doesn't face risks -- but Schiff is an idiot when it comes to describing our monetary system. Truly -- it's laughable that Reason holds him out as an expert.

[Sevo]

^+1
Marketing for his firm disguised as commentary. Details; when and how much or it's BS.

[Warren]

I heard him say exactly that. Maybe you should watch the video again.

[DenverJ]

You know who else used German money?

[OneOut]

Me. When I was in Germany ?

*runs away crying and ashamed*

[AD-RtR/OS!]

If the Treasury held a bond auction tomorrow, and nobody placed a bid....Then What?

[OneOut]

This.

I suppose the sellers take that possibility into account before the auctions are announced.

[JFree]

It won't happen so it is pointless speculating. Money is very different than it was even 35 years ago. Government debt is the basis for 100% of all the leverage in the world.

http://www.realclearmarkets.co.....01739.html

[SteveDDD]

System is "rigged" so as to literally "force" banks to buy federal govt. debt. After all, it's an ASSET. Selling securities (federal debt) is nothing more than a reserve drain to control interest rates (FFR.) Borrowing is a relic of the gold standard days. Entirely unnecessary today for a currency sovereign.

[msimmons]

Puerto Rico?

[Longtorso, Johnny]

A Norwegian man who murdered 77 people is taking college courses while in solitary confinement
Norwegian mass murderer Anders Behring Breivik won a place on Friday to study at Oslo University from solitary confinement in prison, despite outrage at his massacre of 77 people four years ago....

[John C. Randolph]

Why hasn't that asshole been carved into 77 pieces? Don't his fellow prisoners care about their country?

-jcr

[Win Bear]

Which part of "from solitary confinement" do you not understand?

[Longtorso, Johnny]

We are going to become Greece, IMHO, when 40% of the population decides the progs have rigged the game and the result is illegitimate. No riots, not armed insurrection, just passive aggressive noncompliance.

[JPyrate]

Agorism.

[Longtorso, Johnny]

Scientists Develop Nutritious Seaweed That Tastes Like Bacon

[Longtorso, Johnny]

My cat has a terminal illness. Should I cancel my two-week European tour to stay by his side?

[fish]

I suggest feeding him the bacon flavored seaweed/

[dan'o, waster of ammo]

He made that distinction, but argued that the only real remedy resulting from the issuance of currency is to print more of it which will result in inflation.
I suspect that the dollar's favored position of being the reserve currency of choice is what props it up more than anything. If one of the alternative "basket of currencies" wins out for the international purchase of oil (or something similar,) I think we're in serious trouble.

[SteveDDD]

Inflation = Rising Prices = (Demand/Supply). Gold bugs, libertarians, hard money SCHIFF types purposely? confusedly? intentionally? always LEAVE OUT the demand/supply portion of the equation.Reserve currency is simply a trading convenience. Once the British pound was the reserve currency. Before that the Dutch gilder and so on...How come those nations "still exist?"... A basket of currencies would be just fine. However, the hegemony of the US will not allow the dollar to "diminish" in status. There is also a whole bunch of oil right here, within OUR grasp.Folks like you I'm inclined to believe, WANT the USA to fail. DO YOU want the USA to fail?

[Jackand Ace]

Just search looming financial crisis at Reason and you will see numerous articles, maybe yearly. Here is just one, 4 yrs ago:

http://reason.com/archives/201.....ebt-bubble

But I agree it could happen. Put another Bush in the White House. Y'all thought Obama would create one. Oops. He solved Bush's. But keep guessing.

[Sevo]

Jackand Ace|7.17.15 @ 4:44PM|#
"...Y'all thought Obama would create one. Oops. He solved Bush's."

You're a lying sack of shit, Jack. Fuck off.

[JPyrate]

Sevo I made a promise that I would not respond to Jackass until he at least did some homework on what he thinks he is talking about. This however makes a great response to his asshattery.

https://www.youtube.com/watch?v=je-M675ZTK4

[Hank Phillips]

Actually it was Geithner and cronies who realized that prohibition was a tax loophole as in the 1920s, and that asset forfeiture as enforcement caused money to flee banks, brokerages and real estate. But a falling tide strands all boats. So by deliberately exporting the same problem to Europe and elsewhere and using financial markets to cash in on the resulting collapse, the Fed and Treasury were--according to Geithner--able to turn a profit on the debacle of their own design. Of course Geithner never owns up to the nature of the mechanism. Look at maps of the onset of collapse. The blighted areas are all havens for smuggling--like Florida in 1927, and again in 2007.

[jjjjj]

Schiff has accurately predicted 12 of the last 3 recessions.

[Jackand Ace]

Schiff in 2012 predicting a market crushing Treasury collapse in 2013. Off a tad.

http://www.forbes.com/sites/af.....ound-2013/

Reason always rails about doom and gloomers yet they are the always predicting financial doom an gloom.

[Sevo]

"Reason always rails about doom and gloomers yet they are the always predicting financial doom an gloom."

You're a lying sack of shit, Jack. Fuck off.

[Jackand Ace]

On an interview in 2010 schiff said this.

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.

5 years ago. Still waiting. But I agree. A broken clock is right twice. But it's broken.

[Jackand Ace]

http://m.fool.com/investing/ge.....-a-depress

Interview with Jen Schonberger.

[Als? als? wik]

what exactly was incorrect about that prediction?

[Jackand Ace]

Lets just take jobs. We have been adding jobs since 2009. He was predicting depression. Are we in one?

[Demian64]

There are jobs and there are jobs. Millenia have a TERRIBLE jobs records. Underemployment is rampant and the average number of hours worked per job is down . Add to that the ballooning cost of education and the poor ROI it has and no the US is not a rosy picture. Only a demagogue would think otherwise.

[Lanceman]

We have been adding jobs since 2009. Sure we have. We're still at a negative job gain because clowns like you don't understand jobs are also lost.

Are we in a depression? Not yet. This is simply stagnation. Just as soon as the fed stops pumping fake dollars into the market, then you'll see a depression. But by that time, a Republican will be in office to have to deal with the mess. And idiots like you will believe it's their fault. Similar to the mindless asshole at the Hill the other day opining on who was President in 2006 when the NORKS started their nucular sabre rattling. I forgot how they got the technology...

[Jackand Ace]

Very funny. The last Republican we had in office put us in the mess we WERE in, but are now out of. Try keeping up.

[Jackand Ace]

By the way, any negative figure you want to mention in jobs all because of the 3M jobs we shed under Bush, one of your Republican darlings. Go look it up...but then that would take effort, and you lack that.

[San Diego]

Jackand,

Do you believe the link between productive effort and reward in our country is getting stronger or weaker under Obama? And do you think that link matters?

[Als? als? wik]

i wouldn't say we're in a depression but it's getting there. while jobs, nominally, have been added, they've never matched population growth so it's a net decline. and the quality and wages of those jobs suck. they're all in the service industry - bartenders, waiters, retail clerks, etc. and our workforce participation is at historic lows, beating out stats from an age when women were barely a part of the workforce.

also, as to timing, Schiff never set an exact date, nor would he be foolish enough to do so. it's like predicting a 50 yr old 400lb man is going to soon die of a heart attack - you're not an idiot just because he somehow makes it to 56.

[GregMax]

I gather that's why nobody really pays attention to His/Her silly comments (Jackand Ace).
The four D's of liberal discourse-
Denial
Declaration
Deflection
Denigration

That's all they do no logic based argument - appeal to "authority" and emotion.

[Jackand Ace]

Come on. I can predict a downturn every year, and he does, and eventually be right. But so far, he has been wrong. He is just another Alex Jones, where he is at times a guest.

[Als? als? wik]

and of course you ignored his other predictions. was/is he correct that the cost of living was going to escalate dramatically?

[Jackand Ace]

No, it has not gone up dramatically. If it had, we would be in a depression, rather than the recovery we are in. But he said we were in a depression in 2010. Wrong.

[Als? als? wik]

he said the "early stages" of a depression. and you seem to have a pretty lax definition of 'dramatically' if you think he wasn't correct as to food, rent, education, and healthcare. he was arguably correct about energy too, if you back out gasoline (which is stable only because of the fracking revolution).

and all that in a time of stagnant/falling wages. there's a reason 1/6th of America is on food stamps.

[Jackand Ace]

He said early stages FIVE years ago! 5! So tell me, how many more years do you want to give it before you get even one indicator that we are in a depression...one that HE said we already were in 5 years ago. In aggregate, economic indicators say we are far from it. I'll let business tell you

http://www.bloomberg.com/news/.....0-7-in-may

[Jackand Ace]

And, by the way, most consumers don't share the pessimism that you, Schiff, and Reason engage in.

http://www.chicagotribune.com/.....story.html

[sasob]

Most consumers don't know their ass from a hole in the ground when it comes to economics either.

[fish]

Have them get back to us after the Chicago Public Schools implode.....we can discuss revisions to their positions!

I am the 8%

[AD-RtR/OS!]

Nothing like being late to the party.

[Palin's Buttplug]

Reason editors: Please quit supporting this dumbass (Schiff). He is an embarrassment for your organization.

Goldbugs are proven idiots.

Signed,

A concerned classic liberal.

[JPyrate]

"A concerned classic liberal."

HAHAHAHAHAHAHAHA

/inhale

HAHAHAHAHAHAHAHAHAHAHAHAHA !!!!!!!!!!

/passes out do to lack of oxygen.

[fish]

Yeah reason.com....8% of the people know that!

[Libertarius]

Yeah, "gold bugs" are idiots, because only an idiot would value a real asset over the debt paper of a profligate government.

[JPyrate]

Honestly I am not afraid of currency collapse. Common salt at one time was used as currency. So was tobacco. Government did not invent roads, nor did it invent currency. People adapt, and continue to make a living.

[MSimon]

China.

[msimmons]

Jun 29, 2012:
"We're the best-looking horse in the glue factory."
- Richard Fisher, president of the Dallas Federal Reserve

[J2Hess]

He's just another snake-oil salesman; ignore his nonsense.

[Alan Vanneman]

Reason embarrasses itself by running this drivel. You no longer have the nerve to say "the US is Greece" yourselves, so you find some eightball to do it for you.

[Hank Phillips]

A Puerto-Rican replies: Correct. Herbert Hoover tried to force Puerto Rico to enforce national prohibition in 1930 and insular courts refused. Hoover then used the federal income tax to leverage state income tax bureaucracies into seizing assets of prohibition scofflaws--exactly as the George War-on-Drugs Bush Adminstration did in 2007-9. Bush then used the UN to spread the contagion to Europe and South America via treaties. The leper's bell of approaching looter prohibitionism causes money to flee banks and brokerages lest it fall into the hands of the very robbers and murderers Lysander Spooner warned us against. When Hoover made his move to stop prohibition violators from avoiding the new income tax, every bank in the USA and colonies closed down until after FDR was sworn in on a legalize-it platform.

[Hank Phillips]

Puerto Rican voters can save themselves if they get out and vote. There is a Libertarian Party in Puerto Rico that to this day, as in 1930, seeks to put an end to nanny-state prohibition laws:

http://libertarianpr.tumblr.com/

From the platform anyone can see this is a genuine LP and not a gang of mystical conservative cross-dressers and impostors.

[BulletGibson]

The comments on Reason all seem to come from government employees, neo-cons and progressives nowadays....yeah I suppose all three of those are all the same thing. They're the regulars now. Did the government win this in some secret law suit against Reason or something?

I mean really....THIS many dumbass knowitalls? Yeah....dats gubmint fer sure.

[SteveDDD]

A "perpetual state of high inflation" apparently does not help gold, which has dropped from nearly $1900/oz. to just over $1100 per ounce in just the past few years. That's a 45% drop. What's up with that?

Schiff is spouting NONSENSE regarding inflation. See: St Louis Fed DATA : cpi index. (The URL is TOO LONG to list here. Thanks "Reason"). Over the past 5 years the range has NEVER exceeded 3% Yoy and has averaged 2.1% yearly, EXACTLY in the range that the FED desires. Schiff is smoking I do not know what. (Don't give me back any of those ridiculous "Shadow Stats" bull statistics, either.)

Common sense and the ability to "reason" seems to not apply to this site, nor to Peter Schiff. Never invest with this charlatan.

[Win Bear]

Schiff is a charlatan. But the people cooking up the CPI are also charlatans.

(Finally, for posting long URLs, use tinyurl.com or a similar service.)

[Win Bear]

Unlike Greece, the US can devalue its currency, and since our debt is denoted in dollars, that makes a big difference. It would put a crimp on future borrowing, but that's perhaps not such a bad thing.

[joshsea]

Love the main point here that we aren't in the exact same boat as Puerto Rico and Greece because we control the currency and the interest rates and what our credit limit is.

We can spend and spend and never have to be accountable because our government will essentially increase our spending limit, print money to pay off pensioners, continue to make promises at the expense of tax payers and keep interest rates low enough to make it all 'work'.

That is until some form of conservative comes into power where they can raise interest rates and make unpopular changes but blame everything on said conservative and then launch 8 more years of 'hope' government spending and regulatory expansion-the next conservative leader will be the *Ellen Pao* of the US. Interest rates will inevitably rise and then our dollars will be worthless-and no amount of Keynesian hacking GDP through increased government expenditures will save the US from the billion dollar bill.