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Peter Schiff: Out of the Frying Pan and into the Fire

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Turkey has been in the headlines over the last few weeks as a currency crisis has rocked that country. But as Peter Schiff pointed out in his most recent podcast, all of the things commentators are frying Turkey over are happening in the US as well.

All of the criticism that is being leveled against Turkey – that their deficits are too big, that they have a current account deficit, they’re keeping interest rates artificially low,  they’re keeping interest rates below the rate of inflation – all of that criticism can be applied to the United States.”

As Peter put it, America is the real Turkey.

All the people who are willing to skewer Turkey because it’s doing exactly what the United States is doing yet they don’t recognize the same problems that are building in the US.”

And America’s creditors don’t seem to realize it either.

The irony of it is people who are worried about large deficits, unsustainable current account deficits, and interest rates being artificially low, and stoking runaway inflation, the people who are worried about those things and who are selling lira are buying US dollars. Well, that is jumping out of the frying pan into the fire, because whatever people are worried about happening in Turkey, it’s going to happen in spades in the United States.”

So, if people are worried about the lira, what should they be buying?

They should be buying gold.

And that’s the one thing they’re not buying. Gold made a new low yesterday. We plunged about $17, $18, back below $1,200 per ounce.”

Peter said one of the reasons the gold market is being sold off is that the shorts are pressing their bets. They’re being emboldened by the fact that we’re in the midst of a crisis in Tukey that should be good for gold. Gold isn’t getting the safe-haven bid. The dollar is.  Since gold is not rising on events that would normally drive it up, well, that must mean it’s going to keep going down. So, they’re not buying gold, they’re buying dollars. The question is when will they realize what they are doing?

When will they connect the dots to understand the similarities between the United States and Turkey, and the fact that we are ultimately in an even worse position – an even more vulnerable position?”

Peter said Turkey could solve its problems by cutting government and allowing interest rates to rise. It would likely cause a recession, but the country could manage it. The US, on the other hand, is too far down the road. He said we shouldn’t be worried about an emerging market crisis. We should be worried about a dollar crisis and a US sovereign debt crisis. That’s what’s coming down the road.

Peter went on to explain the dangers of populism and how it is driving events in both Turkey and the US. Make sure you listen to the whole podcast.

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