Expert rings warning bell for the US economy
9 July 2012 1:12 PM GMT
American investors need to prepare for an upcoming stock market crash that will be worse than 2008, a noted US economist has warned.
The stock market collapse we experienced in 2008 ‘wasn't the real crash. The real crash is coming,’ American businessman, investment broker, author and financial commentator Peter Schiff said.
Schiff, the CEO of Euro Pacific Capital, said that Federal stimulus, or quantitative easing, never works and that it just makes the economy sicker in the end.
Schiff's solution is to raise interest rates, but he acknowledges that it would bring a huge downside risk with it.
‘In America, the problem is that interest rates are too low. They have to go up. We can't have an economy with interest rates at zero. If the Fed lets interest rates go up, we have to realize that we will have a deeper recession, we have to realise that banks are going to fail.'
He points out that today's ‘safe haven’ investments – the US dollar and Treasuries – are anything but safe.
‘There are a lot of people who don't understand what is going on. Look at how many people are buying the dollar. Look at people buying Treasuries. That makes no sense either. The risk lies in the dollar. The risk lies in Treasuries and other currencies being printed into oblivion.’
The US economy is in the middle of a ‘phony’ recovery according to one economist, and the government printing more money isn't going to help get it healthy.
Comparing the economy to a drug addict, Peter Schiff, said that all of the money the government is printing to boost the economy is ‘like you are trying to keep a drug addict high’.
And every time the drug wears off, if you want him to stay high, you have to give him more. But he's not going to get healthy if you keep him on drugs.
What the economy needs, according to Schiff, is to swallow some ‘real bitter-tasting medicine’ in the form of higher interest rates.
The stock market collapse we experienced in 2008 ‘wasn't the real crash. The real crash is coming,’ American businessman, investment broker, author and financial commentator Peter Schiff said.
Schiff, the CEO of Euro Pacific Capital, said that Federal stimulus, or quantitative easing, never works and that it just makes the economy sicker in the end.
Schiff's solution is to raise interest rates, but he acknowledges that it would bring a huge downside risk with it.
‘In America, the problem is that interest rates are too low. They have to go up. We can't have an economy with interest rates at zero. If the Fed lets interest rates go up, we have to realize that we will have a deeper recession, we have to realise that banks are going to fail.'
He points out that today's ‘safe haven’ investments – the US dollar and Treasuries – are anything but safe.
‘There are a lot of people who don't understand what is going on. Look at how many people are buying the dollar. Look at people buying Treasuries. That makes no sense either. The risk lies in the dollar. The risk lies in Treasuries and other currencies being printed into oblivion.’
The US economy is in the middle of a ‘phony’ recovery according to one economist, and the government printing more money isn't going to help get it healthy.
Comparing the economy to a drug addict, Peter Schiff, said that all of the money the government is printing to boost the economy is ‘like you are trying to keep a drug addict high’.
And every time the drug wears off, if you want him to stay high, you have to give him more. But he's not going to get healthy if you keep him on drugs.
What the economy needs, according to Schiff, is to swallow some ‘real bitter-tasting medicine’ in the form of higher interest rates.
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