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Peter Schiff: The Fed Is Going to Sacrifice the Dollar (Video)

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Debt in the US is the mother of all bubbles.

The US government is more than $20 trillion in debt, with actual unfunded liabilities pushing far higher. Meanwhile, American families have amassed more than $1 trillion in credit card debt alone.

During a speech at Cambridge House IMWC earlier this summer, Peter Schiff discussed the massive levels of government, corporate, and personal debt in the US and how it will eventually take the air out of America’s bubble economy.

Peter starts the speech by showing the economy isn’t nearly as great as the mainstream pundits claim. He highlights the massive levels of debt, how the government manipulates employment numbers, and the very real problem of inflation. Then he shows how Federal Reserve policy has gotten us into this predicament and the choice it will ultimately be forced to make. Peter says in the end, the Fed will sacrifice the dollar.

So, what’s going to happen as we go to QE – I don’t think foreign central banks are going to be financing it again … When they stop propping up the dollar, it’s going to collapse, and I think that ultimately the Federal Reserve sacrifices the dollar. It’s the one thing they don’t care about because they want to keep the bond bubble inflated, they want to keep the real estate bubble inflated, they want to keep the stock market bubble inflated. And the only way they can do that is by printing money and trying to postpone the pain. But by doing that they just make the pain that much worse. All these bubbles are going to deflate, because eventually the Federal Reserve is going to have to chose between turning the dollar into monopoly money – having hyper-inflation – or reluctantly, and much too late, letting interest rates go up.”

HIGHLIGHTS FROM THE SPEECH

“Do American households have any savings? No. They’re loaded up with debt … If you look at US household debt, it has now eclipsed the levels it was at just before the 2008 financial crisis. So, we had a crisis that was brought about by excess debt, and now we have more debt today then we had then.”

“Production is a sign of affluence. Debt and consumption are not. So, America is a prosperous economy and that’s why we’re going into debt? A sign of prosperity is getting yourself out of debt, when you’re paying off your liabilities and your accumulating assets. That shows that a nation is advancing.”

“I think if we had a more accurate – a more honest measure of inflation – the result would reveal the United States has pretty much been in recession for the entirety of this recovery … This is the first recovery that is actually weaker than the recession that we recovered from. It’s the first recovery where people are poorer at the end than at the beginning.”

“I think we are now headed for a complete collapse of this system. I don’t think there’s much more air that can be put into this bubble. The 2008 financial crisis was a sign that the end is near. That was the beginning of a process.”

“The government’s are trying to justify inflation by trying to claim that it’s good for us. It’s not good for us. It’s good for governments. It’s good for debtors.”

“What should the Federal Reserve have done in the aftermath of 2008? They should have recognized that their policies caused the problem – that it was keeping the interest rates too low. They caused the speculative excesses and the economic imbalances, and they should have allowed free market forces to correct the problems that they created. Instead, they made all those problems bigger, and they bought us another phony recovery.”

“If we already have budget deficits of close to a trillion dollars a year during the recovery, where are they going to go in the next recession?”

“What would happen if interest rates went up to 5%? What would the interest be on a $20 trillion national debt? A trillion dollars a year. That’s about four times what we spend right now. Where does the US government get the extra money to pay the higher interest? What would happen to the housing bubble if mortgage rates went up? What would happen to corporations if interest rates went up? What would happen to commercial real estate in the Unites States? It would all implode. The whole house of cards is being held up by these artificially low interest rates.”

“So, what’s going to happen as we go to QE – I don’t think foreign central banks are going to be financing it again … When they stop propping up the dollar, it’s going to collapse, and I think that ultimately the Federal Reserve sacrifices the dollar. It’s the one thing they don’t care about because they want to keep the bond bubble inflated, they want to keep the real estate bubble inflated, they want to keep the stock market bubble inflated. And the only way they can do that is by printing money and trying to postpone the pain. But by doing that they just make the pain that much worse. All these bubbles are going to deflate, because eventually the Federal Reserve is going to have to chose between turning the dollar into monopoly money – having hyper-inflation – or reluctantly and much too late, letting interest rates go up.”

“I don’t think this is something that is going to happen off in the distance. I mean, this is something that is going to happen soon as far as the scheme of your portfolio and your investments.”

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