Peter Schiff was Wrong

[muldoon]

Interesting article out this morning from Mish Shedlock, whom I read from time to time. 

http://globaleconomicanalysis.blogspot.com/2009/01/peter-schiff-was-wrong.html

Some interesting points, and I agree with him on most of them but not necessarily all of them.  Those who follow our economy troubles may want to consider the viewpoint, especially those who see the inflation/dollar crash scenario playing out. 

Also, keep in mind he is biased and he does have a sales pitch towards the end of it for his investment services.  You should consider his motivation in writing it as you evaluate how valid his points are.  That said I think he makes sense in many areas. I'm interested in hearing what you others think of his views? 

[ScottA]

I don't think anyone knows what's going to happen in the short term. It's so crazy right now that anything is possible. However in the long term say the next 5-10 years I think we'll see an economy more like the 1970's. The US standard of living is going to decline overall. The value of the dollar will slowly decline. Oil will begin to creep back up. Food will creep up. The price of goods (stuff) will bottom out and start back up as well. Houses will continue to fall until the prices are back to reality with regard to what people can afford to pay.  At some point the government will run out of ink and be forced to downsize or change into a dictatorship. If that happens we'll get WW3. At that point I think we'll see a civil war and the break up of the US as it now exists. It could reunite at some point in the style of the european union. I'd get out of dollars and diversify my assets in several other countries. I don't trust the US banks. If you have money in a US bank you could get cleaned out over the next couple of years. But hey what do I know. 

[muldoon]

I don't think anyone knows what's going to happen in the short term. It's so crazy right now that anything is possible. However in the long term say the next 5-10 years I think we'll see an economy more like the 1970's. The US standard of living is going to decline overall.

agree with all of that. 

The value of the dollar will slowly decline.

Where will the money go to?  Thats the problem I see, if dollars flee from the US, where exactly will they go?  China, Europe, Latin America, India, Russia, .. all doing worse than us.  Even Dubia and Saudi Arabia are nearly in flames these days. 

Oil will begin to creep back up. Food will creep up. The price of goods (stuff) will bottom out and start back up as well. Houses will continue to fall until the prices are back to reality with regard to what people can afford to pay. 

Different things affect prices, supply and demand being a big one.  As companies go out of business and scale back now I do believe this will manifest as shortages.  That will cause prices to increase. 

At some point the government will run out of ink and be forced to downsize or change into a dictatorship. If that happens we'll get WW3. At that point I think we'll see a civil war and the break up of the US as it now exists. It could reunite at some point in the style of the european union.

This scenario scares me too, it is possible. 

I'd get out of dollars and diversify my assets in several other countries.

But where to go, theres nowhere to hide.  From a common man perspective I'm not sure it matters.  However what if you have 1million to put somewhere, or 50billion?  Those large money flows are what are keeping us up - in fact they are running from every corner of the planet into us dollars. 

I don't trust the US banks. If you have money in a US bank you could get cleaned out over the next couple of years.

But the same is true around the entire planet.  I am not particularly saying I trust US banks, nothing could be further.  What I am saying is that the decoupling theory has failed.  The idea that the US will crash and burn while the rest of the world simply disassociates themselves from us has not played out. 

But hey what do I know. 

seems like you have a decent handle on this to me.  Nobody knows how this works out; I just find myself thinking through the pieces and trying to put them together.  Were all in the same boat on this, trying to stay one step ahead of the herd and protect ourselves and our families. 

[ScottA]

Don't worry. When the crap hits the fan the nations will strart turning their backs on each other and each others money. That's why I say don't put it all in one place. Europe and Canada are the best bets at the moment to remain somewhat stable IMO. If I had alot of money I'd by comodities. Not on some phoney market but the real deal. A voldka distilery would be a good investment or farms or mines. Stuff like that. For the average paycheck to paycheck guy it won't make much difference.

[Bishopknight]

I like Peter Schiff.

And while no one has a Crystal Ball, I believe fundamentally he has a realistic view of where we're at. The simple fact is our economy has been on steroids for several years, helped by lax loan standards which inflated housing prices driving growth far past its normal boundaries.  Our government is trying to cure our recession the same way a drunk has another beer in the morning to postpone their hangover.

Nothing is off the table, dictatorship, WW3, hyperinflation, breadlines, riots, you name it.

[peternap]

Tough call Muldoon.
I'm not smart enough to try to give long term or ultimate answers.
I'm good at predicting tomorrow, moderate at next week, poor at next month and not worth a damn at next year.

I think Scott's idea about the 70's (Early 70's) may be right. I have a couple of blank areas about housing. The people who own and have mortgages for their 250000,00 house that's now worth 200000. and in a year will be worth 120000.00 is a total blank. What will the government bailouts and the mortgage takeovers that I think are coming, do to the big picture.

How will the idiotic credit scoring system that we are now using and is about to blow up, change the big picture.

Lots of other blanks. I spend most of my time this time of year with politicians and rich folks. I communicate better with working people. This year, they all have one thing in common. They're scared because they don't know how to redirect the economy.

I spent the whole day watching and talking to...blind people who are begging the state to not cut benefits, watermen pleading for the state to not destroy their livelihood,  half the Sheriffs in the state saying their Deputies can't take a 7% cut in pay, farmers pleading for subsidies....on and on.

Every tradsman I know is dead in the water.

My guess???

This will be the summer from Hell and it will shape the future economy a lot. I've said this before, Hide and Waatch.