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By Pete Moore On August 7th, 2011

S&P – downgrades not enough – prospects – everyone wrong – both barrels – lose your dollars

Peter Schiff – whose credentials, as we know, bear scrutiny – is on fine form this weekend. Barely pausing for breath he lets everyone have it. Cracking  stuff and well worth watching, not only because of his rational, Austrian analysis to economic affairs but because of what he thinks is coming next.

I see Schiff had a chance to cheer everyone up on Newsnight a couple of days ago (do catch that one too). Not so long ago this would have been unthinkable, even if the BBC had heard of him (which I suspect is very unlikely). As the BBC/LSE impliedly acknowledged with the recent Keynes vs Hayek debate, orthodoxy is not the only option anymore and that Austria is the emerging alternative.

To think, Connecticut Republicans had the opportunity to pack him off Washington but voted instead for a showbiz type.

5 Responses to “SCHIFF ON A ROLL”

  1. Interesting stuff – thank you for the two links, which I watched closely. Although this Peter Schiff is somewhat bombastic he does seem to have a good understanding of the economic forces at work.

    The problem, it seems to me, is that we have a clash between the forces of economics and the forces of politics. Talk of letting banks fail maybe fine on paper but ignores political reality.

    Had Lloyds and TSB collapsed that would have left close to 50% of the UK population without access to cash. Recent events have shown us how close to anarchy society can be – imagine the political and social consequences if half of the country could no longer pay for food. That would make the Tottenham riot seem like nothing.

    Whatever theoretical economists may call for there is political reality. A country in which 50% of the population cannot access cash is a country that will collapse remarkably quickly.

    A lot cleverer people than me will have to reconcile these two antagonistic forces. What is absolutely clear is that there are no simple solutions. What is also clear is that we are all in for a pretty rough ride.

  2. I don’t know schiff from shinola but what is said in this video is very accurate

  3. Geoff

    You say that it was a choice between a state-funded bailout (financed by state borrowings) or anarchy. But there is / was a third choice, namely an orderly liquidation. Cash machines would have continued to operate and small savers would have been fully protected. But the bond-holders who had leant large sums to those banks would have taken heavy losses, which is the correct penalty for imprudent lending.

    It is conceivable that there will be another bank melt-down in the not too distant future. I hope lessons have been learnt.

  4. nothing is to big to fail, and when they reach that point they must be allowed to die

  5. Geoff Watts –

    Although I’d take a Schiff economic lecure ahead of most, he’s an investment broker and not a theoretical economist.

    As Peter says, bankruptcies would have been orderly. Small savers are protected and there would have been no shortage of cash. With continuing decline and volatility there will be more of these scare stories at opportune times a la Paulson’s claim that unless his Wall Street pals received trillions in bail outs the financial system would have collapsed.

    All that would have collapsed were his old firm (Goldman Sachs) and others like them. With these bail outs it is now whole states which are facing the music. One point of bankruptcy is to stop shovelling good money after bad. It’s a process which actually frees up capital and unblocks gears. We (particularly now) need bankruptcies to help markets arrive at values, settle things down and regain some certainty.