June 1, 2009

Peter Schiff expects a two-year sugar high, followed by a hyperinflationary nightmare.


"My guess is that, at most, the Bernanke/Obama stimulus will buy two years before the hangover sets in. However, since this dose is so massive, the comedown will be equally horrific. My fear is that when the drug wears off, we will reach for that monetary syringe one last time. At that point, the dosage may be lethal, and the economy will die of hyperinflation."

-Peter Schiff, May 2009


(Enjoy the rush. But get ready for the come-down. Inflation then deflation then inflation. We've been saying it for years)


15 comments:

Mark said...

Schiff does not expect a "recovery" over the next two years. In fact, here says over and over that the U.S. economy is going to get worse. That quote that you're taking out of context refers to the stimulus (i.e., looting) buying us at most two years before a *final* capitulation (collapse). But during that time, the economy will worsen.

In fact, in the same article by Schiff he states:

"But the premature conclusion of their Lollipop Guild economists, that the crash of 2008/2009 is now a fading memory, is just as delusional as their failure to see it coming in the first place. Once again, the facts do not support the euphoria. Over the past few months, the government has literally blasted the economy with trillions of new dollars conjured from the ether. The fact that this “stimulus” has blown some air back into our deflating consumer-based bubble economy, and given a boost to an oversold stock market, is hardly evidence that the problems have been solved. It is simply an illusion, and not a very good one at that. By throwing money at the problem, all the government is creating is inflation. Although this can often look like growth, it is no more capable of creating wealth than a hall of mirrors is capable of creating people."

On May 29, 2009 on his VLOG, Schiff states:
"Looking at the momentum, I think that we're going to continue to get more dollar weakness from here. I think we're going to see further strength in commodities. I think the bond market is going to continue to get clobbered which means interest rates are going to keep rising despite the fact that the U.S. economy is going to continue to deterioate."

I'm an optomist and tend to think that the economy will worsen and the collapse will finally come over the next year, putting a permanent end to bank looting, out-of-control government taxing, spending, pillaging of foreign countries, endless government and corporate corruption, etc. Then we can develop a real economy based on real things and not money shuffling.

keith said...

Mark - you are correct, "recovery" may be too strong. At least not in the US

Schiff sees decoupling - China, Russia, India, Brazil doing fine. He's 50% invested in gold and gold miners. He's been recommending getting out of anything US for years and hasn't changed.

I see this sugar high giving us at least a W and possibly a V. But if it's a V it will then look like a VL down the road. But I see things improving even in the US over the next two to three years.

After that, all bets are off, as we monetize the debt, the dollar is destroyed, interest rates rise, and inflation roars.

Until that final day, enjoy the ride. We kicked the can down the road.

Anonymous said...

Still in the deflation mode right now Keith.

Food in L.A. is getting cheap again.

Milk (non-organic kind) $1.99 gallon. (Was up to $3.89)

OJ $1.50 1/2 gallon. (Was $3.00)

Butter $3.99 lb (Was $5.99)

Ben & Jerrys and many other high end ice creams constantly on sale for $3 pint 2 for $5 sometimes. (Was up to $4.89)

Stolichnaya Vodka. $16/bottle

I could go on and on.

It's actually a bit surreal.

yoski said...

Here's a nice article that looks at the big picture. Not sure if it has been posted before but it makes for some nice reading:
http://seekingalpha.com/article/139874-no-rest-for-the-economy-s-wicked-parties?ref=patrick.net
It's worth your time.

yoski said...

Keith:
"I see this sugar high giving us at least a W and possibly a V. But if it's a V it will then look like a VL down the road. But I see things improving even in the US over the next two to three years.

After that, all bets are off, as we monetize the debt, the dollar is destroyed, interest rates rise, and inflation roars."

As long as the US government can borrow trillions (versus printing it) things will improve or at least stabelize. I have no idea how long the Obama administration will be able to run to the capital markets and borrow at a reasonable rate. Maybe weeks, maybe years, but it can't go on forever. Just like GM or Chrysler couldn't keep on borrowing money forever. Once all traditional routes of credit are exhausted the addict will either default or print up the difference. Knowing how our politicians operate I would guess they'll chose the latter option. In either case, that will be the end of this wild ride and the end of the American Empire. I doubt "they" can hold it together until the 2012 election cycle but sometimes deadbeats are more innovative than I like to give them credit for.

Daphne64 said...

I'll have to admit, you don't sound quite as crazy now, as when you are proclaiming that the recession is over without giving any details.

However, there will be no recovery. 95% of Bush's and Obama's trillions are going to banks. They may save a couple of dozen CEO jobs at $100 million a year each, but do little else. In fact, that money going to banks is allowing them to consolidate (and eliminate average bank jobs) rather than break up.

Obama's stimulus plan was estimated to create 3 million jobs. That's 3 million job-years of course. Our economy is losing that many jobs on a permanent basis every 5-6 months.

And there are still lots of people employeed - for now - in "industries" that are largely doomed - like restaurants. That's because a lot of people are still putting it on their credit cards.

Our family, for example, has seen it's total credit slashed - from $141K to $120K. By any measures the credit card people could see, we should be red flagged and cut off by now.

The credit card crunch is yet to come, and the mortgage resets are just taking a breather. It's well documented half of it is yet to come - and it will be worse than the first half because so many people don't have jobs.

Anonymous said...

"Until that final day, enjoy the ride. We kicked the can down the road."

---

But, is that really cause to celebrate? Is that what "Hope" is all about?

Mammoth said...

Yoski,
Thanks for the link to this good article.

One poignant tidbit:
"The McMansions, fancy cars, HDTVs, jewelry, and other “essential” gadgets were not bought with earned income. The Federal Reserve and their banking brotherhood lent billions to delusional Americans, convincing them to live for today and not worry about tomorrow. But now tomorrow has arrived."

The bitter truth!

-Mammoth

gutless and lazy said...

GET OUT OF USD. Sell into the rally your retirement money, sell everything you have based on USD. Move your assets into key commodities. Move your cash into a diversified portfolio of a few strong Pacific rim currencies.

NOW is the time to sell out of every asset you have based upon USD. Sell your homes. Rent. Get totally out of USD.

This rising market is a sell into market. Don't get caught long. You've been warned. It's later than you think.

SeattleMoose said...

Great article Yoski...I especially like this quote:

"We are in our current predicament because we have allowed evil men to gain control of our government and financial institutions. These men have enriched themselves at the expense of taxpaying citizens. Trillions have been stolen from the American people and no one goes to jail, no one is punished, and no responsibility is taken by the culprits. If we stand by silently while criminal bankers are bailed out and policies are put into place that increases our crushing debt, the Hangman’s scaffold will loom ever larger."

Pretty much sums it up....

Eric said...

Don't forget about all of the dollars held by foreign reserves. As those dollars come flooding back as they are spent, the number of dollars in circulation will be immense. My dollars will be competing with Chinese dollars for the same goods.

Paul E. Math said...

With my buddies at work I've been promoting Jim Roger's expression: "Inflationary holocaust".

It always gets a laugh. Most people don't realize that I'm actually serious.

Anybody notice that DAG went up almost 10% today? Agricultural commodities may be inflation that our government approves of. The US is the world's largest supplier of soybeans and China is the largest buyer.

Paul E. Math said...

Perhaps this quote can provide an adequate summary:

""There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crises should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved." - Ludwig von Mises

Obama, Geithner and Bernanke have chosen 'later', the 'final and total catastrophe'.

Cheese Whiz said...

RE: "But the premature conclusion of their Lollipop Guild economists, that the crash of 2008/2009 is now a fading memory, is just as delusional as their failure to see it coming in the first place. Once again, the facts do not support the euphoria."

*******************************

It's just the continued world of the Bush and Cheney regime: Facts dont matter anymore!

So, enjoy the Free Cheese!!!!!

And, snack-on!...

I'm going for the colby-jack on a few house crackers.

Anonymous said...

Gutless and Lazy---

I think you nailed it, my friend.

Scary, but true.

(Drop a frog into a pot of boiling water, and it will jump out....but place him in a pot of cool water, and slowly turn up the heat, and he will boil to death.


AMERICA!! Cant you SEE????

This is what is happening to you NOWWWWWWWW Turn off the TV, and educate yourselves before it is tooo late!