Peter Schiff: The Only Way To Fix The Economy Is To Let It Fail

Peter Schiff is no stranger to voicing his opinion. Whether it is his prediction of gold hitting $5,000 per ounce, or urging the U.S. to return to a gold standard, Schiff has no problem with the spotlight and his somewhat bold opinions. In a recent article, Schiff continued the trend by making a few strong statements on the state of the U.S. economy. Schiff stated that our economy’s growth has been sluggish at best since the recession began, and that current policies and plans to help put it on the right track are actually hurting us in the long run [for more economic news and analysis subscribe to our free newsletter].

All of the money printing and quantitative easing is doing more harm than good according to the investing expert. “There is an ongoing three way debate between those who believe the Fed should do more to strengthen the recovery, those who believe that the recovery is strong enough to continue on its own, and those who believe that the economy has been so fundamentally altered by the recession that no amount of stimulus can succeed in pushing unemployment down to pre-crash levels. As usual, they all have it wrong (although some are more wrong than others)” says Schiff.

He debunks the theory that the recovery is on the way or the least bit sustainable, and also combats the idea that the Fed is able to do anything more with its asset purchasing programs and printing. “The simple truth however, is that our economy has a disease that all the quantitative easing in the world can’t cure. And while the wrong medicine may make us appear healthier in the short term, we will continue to deteriorate beneath the surface” he says. Schiff then suggests that rather than continue with QE programs, the Fed should not only not implement a third round, but it should remove whatever actions are already in place [see also Why Bill Gross Thinks The Fed is Ruining The Economy].

Of course, this would mean a big dip in the economy and likely a sizable drop in stock markets, but Schiff feels that the market needs to naturally recover from the misallocations that have been made in an effort to keep our country afloat. He acknowledges that the road will be a very difficult one and will likely be more painful than the 2008 recession given our high debt levels and the amount of borrowing that consumers have been encouraged to participate in via zero interest rates.

While monetary stimuli may create jobs or wealth in the short term, Schiff points out that “any jobs created as a result of cheap monetary stimulus are jobs that won’t be able to survive absent that support”. He compares the Fed actions to a construction crew continually building skyscrapers on bad supports. All in all, his theory depends on a rise from the ashes while we essentially let the fire burn out and run its course. Of course, it would be political suicide for whatever administration is at the reign next year to blatantly allow the economy to fail, but it may be necessary to stimulate some real and sustainable growth.

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Disclosure: No positions at time of writing.

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24 Responses to “Peter Schiff: The Only Way To Fix The Economy Is To Let It Fail”

  1. [...] The iShares MSCI Brazil Index Fund (EWZ) was one of the worst performers, losing 2.15% on the day. Equity markets overseas drifted lower as analysts voiced their expectations for Brazil’s central bank to cut interest rates in October. Such a move would suggest that economic growth in Brazil remains sluggish at best, seeing as how this rate cut would mark the bank’s tenth attempt at revitalizing the slowing economy [see also Peter Schiff: The Only Way To Fix The Economy Is To Let It Fail]. [...]

  2. [...] Wall Street kicked off the week on a sour note as investors were quick to change gears into profit-taking mode following last week’s broad-based rally. With the ECB pushing forth its bond-buying program, the pressure is now on the Fed to act; given last Friday’s worse-than-expected U.S. employment report, investors are now more hopeful than ever that Chairman Bernanke will announce some sort of stimulus measures in this week’s FOMC press conference [see also Peter Schiff: The Only Way To Fix The Economy Is To Let It Fail]. [...]

  3. [...] drinking water to the middle third of the country, and any kind of contamination could lead to catastrophic results. The proposed extension has actually done something that once seemed impossible in our country [...]

  4. [...] find a way out of this spiral without causing too much damage, but others like Peter Schiff are not so sure that it’s possible. What do you all think, is QE a false crutch for markets or does it stimulate real growth? Let us [...]

  5. [...] that alternative energy investors are asking is whether or not a Mitt Romney presidency will mean troubled times for this green [...]

  6. [...] that alternative energy investors are asking is whether or not a Mitt Romney presidency will mean troubled times for this green [...]

  7. [...] Since the beginning of the 20th century timber has outpaced the S&P 500 and has risen by approximately 15% each year since 1987 (save one bad year during the U.S. housing crash). During the Great Depression, when stocks fell roughly 70%, timber investments soared by more than 200%. Moving forward to the most recent recession, the S&P dipped more than 35% in 2008 while the wooden commodity actually gained 9.5%. At a time when investors are starting to lose faith in stocks in general, those numbers are very enticing [see also Peter Schiff: The Only Way To Fix The Economy Is To Let It Fail]. [...]

  8. [...] that alternative energy investors are asking is whether or not a Mitt Romney presidency will mean troubled times for this green sector [for more alternative energy news and analysis subscribe to our free [...]

  9. [...] that alternative energy investors are asking is whether or not a Mitt Romney presidency will mean troubled times for this green sector [for more alternative energy news and analysis subscribe to our free [...]

  10. [...] issues that will need to be dealt with soon. As it currently stands, the agriculture industry is doomed unless something changes. Rogers feels that if more people do not turn to farming, prices will [...]

  11. [...] systematically devaluing currencies against real money. The only effective way to respond to this global epidemic of wealth destruction is to buy and hold precious [...]

  12. JDanaH says:

    I don’t buy that it would necessarily be political suicide to let the economy fall into recession to set the stage for recovery. This is exactly what happened in the first 2 years of the Reagan presidency as Volcker’s ruthless assault on inflation took hold. Reagan was then re-elected in a landslide in 1984. If a halt to the Fed’s easy money policy is combined with massive deregulation (a gutting of the EPA would be a good start), this will make the recovery all the faster.

  13. [...] as Schiff was asked about his views on the economy. His reasoning for feeling that we are in another recession stems from a few different metrics. First, he points out that government data shows we are growing [...]

  14. [...] For every success story that you can send find about leveraged commodity funds, you will find five failures that ravaged a portfolio. Yes, there are those individuals lucky enough to get into one of these funds at the right time and turn quite a profit, but the truth is that roughly 90% of all commodity investors lose money and those losses are only magnified by a leveraged product. Funds like AQG, UGAZ, and UGLD have had their runs, but they have also chalked up some abysmal losses. Over the long-term the volatility of the commodity world almost always works its way in. These funds are fantastic for traders looking to lever up their holdings, but in the long-term leveraged commodity funds are bad news. [...]

  15. [...] as Schiff was asked about his views on the economy. His reasoning for feeling that we are in another recession stems from a few different metrics. First, he points out that government data shows we are growing [...]

  16. [...] adds the caveat that a large number of these were part-time employment. Mr. Schiff goes on to rather bluntly hypothesize that the massive jump in part-time work came from those who have finally used up unemployment and [...]

  17. [...] of modern discussion of hyperinflation suggests that stocks will be devastated on the resulting collapse of the U.S. economy; the facts don’t back that up. Stocks have actually done quite well in many countries during [...]

  18. [...] the dollar is forced to feel the negative impact. That, coupled with inflation, could lead to an economic crisis in the U.S., but not for precious metals and their producers. Mr. Paul is clearly counting on [...]

  19. [...] the dollar is forced to feel the negative impact. That, coupled with inflation, could lead to an economic crisis in the U.S., but not for precious metals and their producers. Mr. Paul is clearly counting on [...]

  20. [...] NG had been a very popular short for many investors since 2008, as its price cratered following the recession. Abundant resources and improved technology were among the culprits that turned natural gas into [...]

  21. [...] You could almost say that the only thing QE benefits is the stock market, creating a false sense of security for investors everywhere. Expert analysts have been predicting bone-crushing recessions on the horizon, as they feel that the QE crutch will eventually be removed and bottom out stocks. For those who believe that our current stock market is a bit overvalued, we outline five ETFs to hedge against a possible fallout or economic downturn. [...]

  22. nevropatholog says:

    all presidents have learned to take a recession at the beginning of their term. But the President better be darn certain that the economy is growing in 2 years or he will be looking at a hostile congress. and if it takes 4 years, he will be looking for work.

  23. [...] lower. They happen to be the worst performers so far this year, which could be due in good part to negative sentiment because in a number of cases the price is well below what the fundamentals appear to support [for [...]

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