US Has Been in Recession for Entirety of Obama Presidency (Video)

Peter Schiff appeared on MSNBC last week to talk about why gold is an essential asset for protecting your wealth from inflation and a failing US dollar. The conversation became a bit combative when Peter was asked to defend his claim that government inflation measures are inaccurate. Unsurprisingly, the MSNBC anchor took it for granted that government statistics are implicitly trustworthy.

Highlights from the interview:

Peter: First of all, a lot of people think quantitative easing is over. I think it’s just a pause, just like there was a pause between QE2 and QE3. So people think it’s over; they think the Fed is going to raise rates. I think they’re wrong. But also, gold prices didn’t start rising in the crisis of 2007. In 2000, gold was about $260 an ounce. So it had already tripled by 2007. Of course, at one time we were on the gold standard in this country, and the dollar was defined as a specific quantity of gold. Originally, if you had $20, you could buy one ounce of gold. As late as 1970, you needed $35 to buy an ounce of gold. When we went off the gold standard, the dollar collapsed in value over the years. Now, despite the recent decline, you still need $1100 to buy one ounce of gold. Gold has done a much better job of holding on to its value than paper dollars.

But I would agree that a lot of these pitchmen on cable news – you don’t want to buy gold from these companies, because their markups are horrific. In many cases, they markup 40-100% above the actual price of gold. So I think their advice to buy gold is sound. I think buying it from them is the wrong way to do it. Of course, you don’t want to buy gold to exclusion of all other assets. You still want to have other investments in things like stocks, or real estate. But you want to gold, rather than holding dollars, because with all he debt the US government has, there’s no place for the dollar to go over the long run, but down.

MSNBC: Is gold fundamentally a bet on inflation? The reason to invest in gold is if you believe the federal government is going to print a lot of money, causing the dollar to fall, or the dollar has taken out debts it can’t pay?

Peter: It’s not about believing they’re going to print a lot of money – they are printing a lot of money, and they will print a lot of money. We have about $18.5 trillion of funded debt. But that’s the tip of the iceberg. The government has guaranteed all the mortgages, all the bank accounts, all the brokerage accounts, all the student loans. The government stands behind unfunded liabilities to medicare, social security, government pensions. You’re talking about over $100 trillion in liabilities that are impossible to legitimately repay through taxation. So the government will have to print a lot of money, unless it wants to default on those commitments, and I don’t think they have the integrity to do that. So when they print all that money, the value of that money will collapse, and the price of gold is going to skyrocket. There’s no way around that. It’s going to happen. But certainly, over shorter windows of time, you can see the gold price declining. But over any longer time period, the price has no place to go but up.

MSNBC: How long is that time period? I feel this is the refrain we’ve been hearing from gold advocates for a long time, especially since 2008 – that inflation has to go up. But when we look at actual consumer prices, they’ve been very muted…

Peter: I don’t think inflation is around the corner. I think if you talk to most people who shop, most consumers who go to the grocery store, or pay their utility bills or cable bills or their insurance or their rents – prices are rising. They’re rising rather rapidly. It’s just that the CPI doesn’t capture those increases the way it used to, because the government has changed the methodology for calculating it. But the cost of living is going up, the standard of living is going down, people recognize that.

But one of the reasons prices haven’t risen faster is because we’ve exported a lot of our dollars. Foreign central banks and speculators are hoarding those dollars, but at some point they’re going to want to spend them, and a lot of that inflation that we exported to countries like China is going to come washing back on American shores, and it’s going to send the cost of living through the roof…

MSNBC: If the inflation rate is actually substantially higher than 1.5%, if it’s several points above that – that would mean the economy is actually shrinking. Not just shrinking now, but has been shrinking consistently for as long as you think inflation has been underreported. That means, effectively, we’ve been in recession for the last 15 years. Do you believe that? Do you believe the American economy is getting smaller?

Peter: I absolutely believe that. It makes a lot more sense with the anecdotal evidence. The labor force has collapsed. We have millions and millions of people that are no longer even participating in the economy. If you look at energy consumption, it’s way down. You look at all the people dependent on food stamps, dependent on disability. The economy is smaller. It is contracting. That is the lie. That is why this recovery doesn’t feel like a recovery for the vast majority of Americans, because it isn’t. It has been manufactured by statistics that understate inflation, and therefore overstate growth. This economy is smaller. We have been in a recession for the entirety of the Obama presidency. That is the truth.

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