We are headed for Armageddon in a financial collapse in America that will make every other panic or crisis that we have had historically look easy. We’re talking about low production, high inflation combined with a total lack of confidence in the dollar. The man who called the housing crisis and the 2008 financial crisis is CEO of Euro Pacific Capital Peter Schiff. He says that the U.S. economy is heading for an economic crash that will make 2008 look like a walk in the park. Stimulus programs can delay this day of reckoning, but only for so long and only at the expense of making the eventual meltdown much, much worse. In fact he says the actual effect that stimulus programs will have is to forestall the impending day of reckoning.
Peter Schiff warned investors about the housing and financial crisis in his 2007 book Crash Proof, says the Fed’s efforts during the housing meltdown have made the next crisis inevitable. The coming collapse he indicates maybe sometime in the next three or four years and will be much larger than the crash of 2008.
“We’ve got a much bigger collapse coming, and not just of the markets but of the economy,” Schiff says in the attached clip. “It’s like what you’re seeing in Europe right now, only worse.”
In his horrifying scenario written about in The Real Crash: America’s Coming Bankruptcy, the current economic stress is actually the beginning of a massive slowdown or recession into year-end. Then the Federal Reserve will issue a third round of Quantitative Easing — weakening the dollar without jump-starting the economy. As a result of dollar weakness, import prices rise, pressing the margins of corporate America. All will lead to heavy layoffs; send millions of workers into unemployment worse than the 2008 scenario. Banks will fail, housing collapses will reemerge and taxes will be raised in a futile effort by government to raise the capital to try yet more stimulus. That’s when things are going to get insane as the economy hits a fiscal cliff, when we’re going to have to slash government spending to the bone.
Those cuts will not be at all unlike the draconian austerity measures in Greece that we see, with programs like Social Security and Medicare being dramatically cut or even disappearing all together. The best way to say it is to think of the worst and that’s what will happen. Remember this is when we can no longer pretend we can print our way out of the crisis and we have runaway hyper-inflation. This wild inflation is going to be far worse than anything that we in this country have ever known.
The U.S. dollar is going to get trashed in Schiff’s scenario. When inflation ticks up to even 5%, a level much lower than seen in the early 1980s. Bond sellers will find no takers and sell the bond at a much lower price than what they paid. Resulting in loss of principle that is unprecedented in this country.
With bonds and the dollar bearing the brunt of the pain Schiff says stocks will outperform dramatically, provided you own the right ones. Exporters and multi-national corporations will benefit from a weak dollar. Better still would be to buy foreign stocks and avoid the U.S. entirely. This is also unprecedented in our financial history as we begin to understand what third world nations experience in combating their economies. Most of those on Main Street haven’t taken positions yet in gold or silver. Once they start dropping bonds and looking for a place to hide, the price of these metals will soar. The only real wealth will be in precious metals like gold, silver, platinum and possibly mining stocks in these areas.