Peter Schiff on Why the American Economy Is Broken and What to Do About It
The Daily Bell is pleased to present an exclusive interview by Peter Schiff.
Introduction: Peter Schiff is CEO of Euro Pacific Capital, a full-service registered broker/dealer, member FINRA/SIPC, which specializes in foreign securities. He is recognized for his knowledge of the foreign securities markets as well as the currency and gold markets. Mr. Schiff delivers lectures at major economic and investment conferences, and is quoted often in the print media, including the Wall Street Journal, New York Times, L.A. Times, Barron's, BusinessWeek, Time, and Fortune. His broadcast credits include regular guest appearances on CNBC, Fox Business, CNN, MSNBC, and Fox News Channel, as well as hosting the daily Peter Schiff Show on radio. As an author, he has written five bestselling books, including the recent: "Crash Proof 2.0: How to Profit from the Economic Collapse" and "How an Economy Grows and Why It Crashes."
Daily Bell: Peter, we thank you for sitting down with us today. Tell us how you came to your libertarian, free-market convictions.
Peter Schiff: I had a father who was well versed in economics; he believed in free markets and the Constitution and was a free-market, "Austrian" economic thinker. He educated us in this light. I can remember back to elementary school and junior high school, arguing with some of my peers – whether it was in social studies, history, economics, or government. I have had these views as far back as I can remember, but they certainly evolved as I got older and learned more.
Daily Bell: Tells us a little more about your father, Irwin – who is now in jail as a tax protestor.
Peter Schiff: I think my dad had a big impact on me. He introduced me to economics and taught me from a free-market perspective. He educated me on understanding law and the role of the Constitution and the role of government. He supplied me with a great foundation and ideology in economics. I can look at an idea and assess it very quickly based on my education. When the government says it's going to do something, I know all the ways that measure will hurt the economy. I can see all the intended consequences very quickly and clearly in my mind.
For example, the US Postal Service today announced they are only going to sell forever stamps, which don't have a value printed on them. Immediately I know this is a scam – the post office is going to lose a fortune because they are selling all these stamps, collecting all this revenue, and spending it now on current expenditures like salaries and rent and their gasoline costs.
But their costs are going up because of inflation, and they are going to have to deliver all this mail and collect no money. Which means the post office is going to be bankrupt. Which means the post office is going to need a huge government bailout. And even if they get approval to raise postage prices, it won't matter because they have already sold the stamps. No one is going to buy the higher priced stamps because they have already bought them! So, I can see right away that here's a future disaster in the making. Many people won't think about it like that; they will think, "Oh, here's the post office selling these forever stamps. Isn't that convenient." They won't see the real problem down the road. So this is a free-market way of thinking.
Daily Bell: When did you found Euro Pacific Capital Inc. [a broker/dealer based in Westport, Connecticut], and why has it been so successful?
Peter Schiff: I bought it in 1996. It was a shell when I bought it: it had no customers and no assets. I transferred my book of business into it, which might have been about $10 or 20 million, not very much, and now we have about $3 billion worth of customer assets. It's still small compared to, say, Merrill Lynch, but it's competitive.
Daily Bell: What are The Peter Schiff Show and Wall Street Unspun?
Peter Schiff: Wall Street Unspun was a weekly show that I did on the Internet and on shortwave radio once a week. I have a lot of clients, so this was a way to speak to all of my clients once a week. I would speak about the markets and the economy, and then clients could call in and ask questions. What happened, though, was that the show started to get very popular and many people were listening who were not my clients. Then, I thought I should have a daily show and become syndicated. So I stopped Wall Street Unspun and started the Peter Schiff Show, which broadcasts on AM radio in my home state of Connecticut and online at schiffradio.com.
I'm now on five days a week for two hours, instead of one day a week for an hour. It's still a call in show, and it's still a way for me to share my thoughts with clients. Unfortunately, with all the government regulations, we are limited as to the types of things that I can say. I don't really have the First Amendment rights a normal person would have because I work in financial services. It's not as good for the clients, but I can still talk about economics and the market in broad generalities; I just can't give any specific investment advice. There are some people who have investment shows where people call in and they give advice, but they are not stockbrokers. Since I am a licensed stockbroker, I am not allowed to give advice on the radio. I think it is terrible and a violation of the constitution. Unfortunately, we now live in a country with very little individual liberties because we have a very powerful federal government.
Daily Bell: Are you still bearish on the dollar and bullish on investment in tangible assets and well as foreign stocks and currencies?
Peter Schiff: Yes, very bearish on the dollar. Based on what the government is doing, there's no way to be bullish on the dollar. I still like hard assets and certain foreign markets as alternatives.
Daily Bell: How big is Euro Pacific Capital now?
Peter Schiff: Well, I have six regional offices and over a 100 employees. We offer retail brokerage services as well as investment banking. We have done a couple hundred million dollars in deals in the last year, so that's been very good. I also have Euro Pacific Asset Management, which started a little over a year ago and is now managing $400 million. I have a mutual fund family that's growing. We have four funds now and more funds that are going to be launched this year.
I also have a separate business called Euro Pacific Precious Metals, which we started last year and is very exciting. That company just sells gold and silver bullion coins at low markups. I have been selling precious metals through Euro Pacific Capital since 2001 through the Perth Mint program, but I decided the time was right to launch a separate company just for selling physical metals.
I opened a brokerage firm in Canada last month, called Euro Pacific Canada. It's a separate company, partially owned by me, which provides my philosophy and investment strategies to my followers in Canada. Because of the securities regulations, the only way to work with Canadian clients is at a Canadian firm. Before, we had to turn them away. Euro Pacific Canada is structured like a franchise, which finally gives them access to my investment approach.
Daily Bell: Tell us about your new book, Crash Proof 2.0. What is the thesis?
Peter Schiff: Crash Proof 2.0 is basically an updated version of the original book, Crash Proof. I decided to update it based on the events that followed the crash of 2008, which I accurately predicted in the original book. When I predicted it, I laid exactly what was going to happen and why. I described how the government created this huge problem, it was all described in detail and turned out to be 100% right.
The people who didn't see the crisis coming have blamed it on capitalism. This book was meant to clear up some of the misconceptions that were circulating around the media in the aftermath. Since then I have written another book called, How the Economy Grows and How it Crashes. An expanded version of a book my father wrote called, How an Economy Grows and Why It Doesn't. That came out in February. It's an illustrated form, like an allegory and it explains our problems in a fictional tale but the characters are modeled after America.
Daily Bell: How did your father know about Austrian Economics?
Peter Schiff: He just learned himself and came about it on his own. He grew up a Democrat, his father was a Roosevelt Democrat, so he started out as a liberal when he was in high school and a young kid. Eventually he saw the light.
Daily Bell: Can anything help the US economy at this point?
Peter Schiff: Of course, increased savings and production would help, but unfortunately we're not getting that. We aren't going to get that until we have less government spending and higher interest rates and until we have fewer regulations. Just like if you are obese and you want to get healthy, there is a way to do it – through exercise and diet. We have to stop buying things that we can't afford. We can't keep promising benefits to government workers that expect lucrative retirement and pay for health care. We can't provide all these goodies because we don't have the money.
There are a lot of government workers who are really being paid two or three times what they should and so if we have to cut the salary of government workers, that's an immediate loss to those government workers but it's an immediate gain to all the taxpayers who are footing the bill. But the politicians are afraid of doing that because the people who are going to lose are very organized and will express their displeasure at the ballot box.
Daily Bell: Is the US turning into an authoritarian state?
Peter Schiff: Well, certainly, the US government is gaining more and more power. Individuals are surrendering more and more of their freedoms and their liberties. You know, in my business my boss is the government. The government hasn't let me hire any brokers in two years. I say the government but it's the regulators acting with government authority. They haven't let me open any new offices in two years. They tell me how I have to monitor my customers; because of the government I have to impose minimum account sizes, all sorts of things I have to do.
The regulations cost me a fortune. I have maybe eight people that I employ, just to help me comply with rules and regulations. The number of regulations has increased so much in my industry I never could have started my business back in 1996 if we had the regulations we have today. I could not have started my own firm because I would not been able to afford the cost of the regulations.
Daily Bell: You predicted in a 2002 interview with Southland Today, an economic downturn triggered by the bursting of the stock market bubble that would lead to a bear market likely to last another 5 to 10 years. How did you know?
Peter Schiff: When the stock market bubble burst, at the time when I did that interview, I did not know the government was going to act so recklessly. I later modified my forecast because I saw we were going to have a worse collapse. The Fed began inflating a larger bubble than the one that had just burst, thus sowing seeds for a much greater economic collapse. I really started warning about that collapse in 2004/2005 when it appeared obvious to me that the Fed had created a monster and it was going to turn on us, which ultimately it did. And then we saw a bigger collapse in 2008 and once again the Fed did the wrong thing and postponed the pain yet again until maybe 2011 or 2012. Now a far greater collapse is coming because of the continual reflation and quantitative easing.
Daily Bell: Why are you so critical of the Fed?
Peter Schiff: I am critical because there is much to criticize; they are doing a lot of bad things. They blew up the stock market bubble; they blew up the housing bubble, which brought the US economy to its knees. It has enabled the government to grow like a cancer. Instead of taking away the punch bowl, the Fed has been spiking it. The Fed has betrayed American citizens and those that run it should be put on trial. They have damaged the country more than any WikiLeaks cable. This is serious stuff what they are doing.
Daily Bell: Will there be hyperinflation?
Peter Schiff: I hope not, but there is going to be high inflation because of what the Fed has done. Hyperinflation will depend on whether the Fed continues to do what it is doing – pumping more paper money into the economy – or whether it ultimately admits it's errors and changes policy. The longer it takes, the worse it will be.
Daily Bell: Should the US get rid of the Fed? How would it be possible?
Peter Schiff: Well depends on what replaces it. We can go back to the pre-Fed monetary system, and that would be best. But if we replace it with something worse – then no.
Daily Bell: Should the world go back on a gold standard?
Peter Schiff: Absolutely. It will anyway. The question is whether the governments adopt the gold standard voluntarily or whether the public forces them into it. It definitely would be better if the government would do it on their own rather than waiting for crisis but you know how it goes.
Daily Bell: Do you believe in free-banking and private fractional reserve – letting the market itself decide on the kind and style of banking available?
Peter Schiff: Sure.
Daily Bell: Should the Fed's functions be taken over by the Treasury? Would that work better?
Peter Schiff: No. I would like to strip the Fed of their powers but not transfer them to the Treasury.
Daily Bell: You received criticism due to the performance of some of client's accounts in 2008, as well as controversies over the predictions themselves. Was this fair?
Peter Schiff: In most cases, no. I don't think the people criticizing were being fair at all. They were taking one portion of my investment strategy and examining it for a brief period of time. (Q4, 2008). My strategy and investment recommendations have been in the works for a decade, and you can't selectively pull out one quarter and then only look at part of my portfolio.
I recommended that investors do three things: keep some money in foreign dividend-paying stocks, keep some money in physical precious metals, and keep some money in cash, which would be in dollars and foreign currencies. And one of the reasons that I specifically suggest cash is so you can take advantage of any declines that you might get in stocks or precious metals – and you certainly had that opportunity in 2008. We had substantial declines in foreign stocks and those of my clients who didn't sell during those declines had the opportunity to benefit from those declines.
Daily Bell: How have your clients fared in the 2009 and 2010?
Peter Schiff: Well again, I can't really say because of the regulations, I can't even talk about averages, but I can tell you that 2009 was the best year that we had in the history of the brokerage firm. So 2009 was our best year and 2008 was our worst year.
I didn't get credit for a hedge fund we put together in 2007 that shorted sub-prime mortgages. The Wall Street Journal did a story about clients of mine who lost money. They deliberately skewed the sample. So at the end of 2009 I called them and said 2009 was our best year ever – do you want to do an article on how fantastic 2009 was and what a difference a year makes? Back came the answer, "No, we don't want to write that story." The WSJ never wants to write a story giving me credit, because I have had many, many good years but they only wanted to write about me in Q4:08.
The regulators don't make it any easier to talk about your business either. They don't want you comparing your results to, say, Merrill Lynch's – because if you know what you are doing and respect the free-market, you are probably doing better. They make it illegal to advertise that your clients are doing well, so no one realizes the alternatives to Wall Street. All the rules are written to protect the large firms from competition from the small firms. Every other industry can have testimonials, you can go to the website and have clients taking about this is a great firm, I made a lot of money, you can't do that in this business. No one can say ‘I like this firm' because it's illegal to do that.
Daily Bell: Is gold going to US $5,000?
Peter Schiff: I think it's going to $5,000 before the bull market ends but I don't know when exactly that will be. Timing is a very difficult thing.
Daily Bell: Is China's inflation out of control?
Peter Schiff: Well, it's not out of control, but it's getting worse. All the leadership has to do is stop printing money. But they don't want to do that because they want to keep their currency even more debased than the dollar in order to make exports cheaper – so they print money. They have to decide what they want. Do they want a debased currency and price-inflation or do they want lower price-inflation and less debased currency? You can't have both.
Daily Bell: Jumping over to Europe, Is the EU going to split? What will happen to the euro?
Peter Schiff: I don't know. I don't think it will survive in its current form, but I don't know how many years will pass before there's a major change with the euro. I don't think the euro is viable given the politics, but I do think the European politicians will be able to placate the markets for a while longer and convince people that the euro is viable.
Daily Bell: Are you still a supporter of Ron Paul?
Peter Schiff: Yes, I support him as a Congressman, and I supported his son in his election to the US Senate. If Ron Paul decides to run for President, I would likely support him, although there are some other candidates that are potentially running I would like to support as well. I don't know whether he will run in 2012.
Daily Bell: Ron Paul of course is anti-regulation and pro free-market. Is the US financial industry overregulated? Is it overbanked? Does regulation work?
Peter Schiff: Of course it's over regulated, dramatically so. If the government wasn't in there regulating, we would have a much healthier, more competitive market. I think the financial services sector overall would be a smaller part of our economy. The resources that used to grow manufacturing are now being diverted to grow the financial business.
Daily Bell: You say that the current economic crisis provides an opportunity to transition from borrowing and spending to saving and producing. Can you explain more?
Peter Schiff: Well, that is what ultimately has to happen in America but is not happening now, nor will it happen as long as the current monetary fiscal policies are maintained. Right now you have to be an idiot to save money in US dollars, so nobody is going to do it. Therefore, we're not going to get the capital that we need to rebuild our economy. Production will continue to lag and jobs will continue to disappear.
Daily Bell: Compelling points. In fact, you received over 10,000 donations and much e-mail from around the world during your run for Senate. Were you unhappy with the way your candidacy turned out?
Peter Schiff: I think I got donations from 20,000 people, which was great, but I wasn't happy the way it turned out. I lost, and the whole idea is to win. I was disappointed that I didn't get more media coverage for my campaign, I didn't get more donations from any kind of conservative organizations; I didn't get any other support in the news. I had hoped FOX News would have covered my campaign, but they completely ignored me. I couldn't get on O'Reilly or Hannity or any of these shows, and couldn't get them to even discuss my campaign with me even though they talked about the Tea Party and the Tea Party endorsed me. I had no press coverage; I think that really undermined my campaign because people decided I wasn't a viable candidate. When the press decides not to cover you, it's really hard to overcome.
Daily Bell: OK, you lost the Republican primary. Should you have run as a libertarian?
Peter Schiff: I definitely would not have run as a libertarian, I would have had no press coverage there either. I don't think I choose the wrong party. I just didn't have the money to run a successful campaign. In the primary Linda McMahon spent $30M; we only spent about $3M. She outspent me 10-1 but she only got twice as many votes as me, it's not like she got 10-times as many votes as me. My votes were a lot less expensive than hers.
Daily Bell: Will you run again?
Peter Schiff: I will probably run again for something in the future. Will I run in 2012? Probably not.
Daily Bell: You've raised your profile tremendously by using the Internet to spread your views. Is the Internet generally an important force in spreading the word about free-market thinking?
Peter Schiff: I think without the Internet I would not have as large an audience. People can easily search for me or any other subject. Social media is huge and it's so easy to get the word out through these platforms.
Daily Bell: Is there a small group of banking families behind a lot of the growing authoritarianism in the world? Is the Internet exposing them?
Peter Schiff: I doubt that. I don't think there's any kind of banking conspiracy but bankers certainly act in their own self-interest. They make a lot of money based on the status quo and they donate a lot of money to politicians who help them make money – but I don't think there is a conspiracy. I think it's corruption in government and the way politics work and that is the problem.
Daily Bell: Where do you go from here?
Peter Schiff: Right now, I'm going to continue with my business and expand overseas. I'm working on a new book. I will try to spread the word and encourage more people to protect their wealth through the proper, free-market oriented investments.
Daily Bell: Would you like to recommend any books and articles that are especially valuable?
Peter Schiff: My books, Crash Proof and How the Economy Grows. I have a recommended reading list on my website. I have also been doing my radio show everyday, Monday through Friday, Peter Schiff Show. Every Monday to Friday, 6-8pm, Schiffradio.com
Daily Bell: Thank you for your time. Good luck with your firm and your political career.
Peter Schiff is certainly a success story. An intensely idiosyncratic individual – someone who prefers to think for himself just as his father does – Peter Schiff has succeeded on the business side and doubtless will succeed politically as well sooner or later. This interview touches on a wide variety of bases and shows how he built his enterprise piece by piece. Nobody helped Peter. He took the risks on his own and was not worried about making high profile predictions throughout the 2000s regarding the economy.
Several things are clear from his background and current situation. Peter Schiff had a vision of the world and stuck to it. He didn't conform to someone else's vision of How the World Works. He stuck to his vision because he believed in it; and gradually others have seen the rightness of what he perceived long ago. One of our elves once asked him if the "best" way to analyze investments was through a free-market economic approach. Somewhat baffled, he replied "What other kind of economics is there?"
It is this ability to cut through to the heart of the issue that has served him well in our view. He is not a complicated man in this regard, but he has the same quality as Congressman Ron Paul; he is someone who has a hard time fooling himself and seems to have a hard time lying to himself on fundamental issues, generally. Of course, this may not serve him well when it comes to politics, which is generally the art of lying for votes.
However, having observed Mr. Schiff for years, we would make the prediction that he may even turn politics upside down eventually, much as Ron Paul has. There is a great thirst for truth in the United States, indeed in the Western world, and courageous people like Mr. Schiff help fill that need – through business and investing in his case; and perhaps through running for office and offering people real solutions in the future. (Though it is true that change may actually come OUTSIDE of politics and beyond the system ...)
Peter Schiff was right about collapsing Western economies through the 2000s, even when he was mocked and pilloried by the mainstream media. When his predictions proved true, the media – controlled by the power elite in our view – simply ignored his correct calls and went in search of mainstream economists who had come around to his views much later.
Of course now, with his investment firm blossoming and money available for other projects, he has the opportunity to prove on his own what the mainstream media denies him. It is the truth-telling of the Internet in our view that has allowed people like Peter Schiff to propagate their courageous and non-mainstream visions. There is no going back now. There is little hope that the powers-that-be can control people such as Schiff – anymore than they could control his father. He is in the vanguard of a new consensus about free-markets and freedom generally. There are more every day who think like him and look up to him. We are admirers too.
Posted by Cj Coates on 01/22/11 10:04 AM
Schiff should be running his State, and definately Managing a seat in the Senate, but his talents would be wasted as President as Peter is no puppet.
Posted by Patriot on 01/20/11 04:45 PM
Schiff would make a great Vice President in 2012.
Reply from The Daily Bell
Ha, who would be president?
Posted by Angry Taxpayer on 01/20/11 04:43 PM
Schiff is Da Man. He's not right about everything, but he's right about all the important stuff. He's a lot smarter than all the dunderheads on Wall Street and in DC. Read his book "Bull Moves". It's a good read, and I gave it to friends and family as Xmas presents.
Posted by Gregory Bennett on 01/12/11 08:46 AM
I have great respect for peter schiff. His views about he economy have been and continue to be very accurate. I hope we can find a place in politics for his insight as it sorely needed.
Posted by AmanfromMars on 01/11/11 02:22 AM
"Peter Schiff: He just learned himself and came about it on his own. He grew up a Democrat, his father was a Roosevelt Democrat, so he started out as a liberal when he was in high school and a young kid. Eventually he saw the light."
Click to view link
Posted by Clark on 01/11/11 01:13 AM
I hate it when I get sucked into reading a whole thread.
Helvena said, "@DB, the free market is theory because there has never been a time when there wasn't some sort of governmental interference or private collusion, at least not that I can think of."
Just yesterday I read a reply to that same type of question: "You haven't been to a mid-sized Vietnamese city, have you?"
Posted by Catevala on 01/10/11 11:14 PM
"But there is absolutely no way gold and/or silver will work as the 'vehicle' in the 21st Century. There isn't enough of it on the planet to sufficiently 'lubricate' the system and it's use, like 'bartering' is entirely cumbersome. By some accounts, silver is more rare than gold, and if so, it is even less available for use as a currency".
It is truly amazing how persistent this notion is. But it is not true. G. Edward Griffin in his magnum opus book The Creature from Jekyll Island explains how to do it (there are several steps but I am just going to give the salient ones).
Pledge the government's hoard of gold and silver to be used as backing for all the Federal Reserve Notes (FRNs) in circulation. The denationalization of thse asssets is long overdue. Determine the weight of all the gold and silver owned by the U.S. gov't. and then calculate the total value of that supply in terms of real silver dollars.
Determine the number of all FRNs in circulation and then calculate the real-dollar value of each one by dividing the value of the precious metals by the number of Notes. Retire all of the FRNs from circulation by offering to exchange them for dollars at the calculated ratio. There will be enough gold and silver to redeem every FRN in circulation.
Posted by Bert on 01/10/11 10:59 PM
What is disturbing is Mr. Schiff's alluding to an anti-competitive, pro-certain big business, and anti-second ammendment attitude of government and its agencies. And we're supposed to be a capitalist, free market society! This attitude and related actions are certainly not limited to the financial services industry. Much more has been documented, and dramatically so, regarding the health services and products plus alternate-medicine industries.
Posted by Dan B on 01/10/11 10:55 PM
Posted by Dan B on 01/10/11 10:48 PM
Dear Bell, this is a long analysis called econophysics. I find it fascinating. I was hoping that a group of elves could reflect on it.
True, it's off-topic but, I do think that it deserves a read.
Posted by Victor Di Suvero on 01/10/11 05:47 PM
Dear Peter Schiff:
I read with great interest your interview on Why the American Economy is broken and concur with practically all your conclusions as stated as well as the ones you did not state but are evidenced in what you have said. Items such as the probability of a devaluation of the US Dollar and the revision of the relationship of the US Government to the Federal Reserve particularly in terms of the QE2 current exercise.
However, given your reference to the "Austrian" situation I have to ask some personal questions but before I do I must give you some personal history: My Grandfather Cesare Augusta Levi was a scion of the Venetian Levi banking family who married my grandmother, Anna Schiff from Vienna who came to Venice and had an only son, my father Vittorio Edmondo Levi Schiff. The title, Baron di Suvero came later. My father had a career in the Italian Navy and then in the Italian Diplomatic Corps where he served finally as the Secretary of the Italian Concession in Tientsin, China until Mussolini's racial laws made for a hurried and successful escape to the United States in February of 1941.
My grandmother, Anna Schiff had been a second cousin of Jacob Schiff, the banker who immigrated to the United States, I believe in the 1870s, and whose career you must know.
In any event and not to belabor the history, I wonder if we might be related? And to further explain, the apparent disjunction of names, when we arrived in San Francisco at the Immigration hearing my father was told rather brutally that in America people only had one last name and sent us from the "L" for Levi lineup to the "D" and we have been di Suvero ever since. If any of the above is of interest I would look forward to hearing from you... and yes, I am the principal and sole managing member of Liberty Resources, LLC a precious metals mining and development company, currently under capitalized but with significant properties in California, Nevada and Oregon.
Looking forward to hearing from you I remain,
Sincerely yours " Victor di Suvero
Reply from The Daily Bell
Dear Mr. Suvero, you might do better sending your letter directly to Euro-Pacific. Not sure if Mr. Schiff will respond via the forum. Good luck.
Posted by Ramon S on 01/10/11 05:08 PM
Don't know how the elves do it, so I'm happy to pinch-hit for them from time to time.
It is good that so many people are realizing the massive problems caused by central banking, but a real shame if their energy and enthusiasm for "change" gets purposely steered into similar or even worse "solutions".
Reply from The Daily Bell
Yes, like having the Treasury take over Federal Reserve functions.
Posted by Ramon S on 01/10/11 04:51 PM
@Timothy L. Kostka
With all due respect, I'm quite well-read on the history and development of money and pretty confident on the subject. Yes, certainly, at different times and places, different types of goods were used satisfactorily as money but, over extended time and distance, gold/silver emerged as the winners in the marketplace of money (as you state "having the consensus").
In fact, a significant reason why so many other types of goods were temporarily used as money in isolated places was the simple lack of availability or awareness of the gold and silver commodity ...hence exotic types of money existed for rather brief episodes until being eventually eclipsed by these metals.
Of course, something of general value has to emerge having "exchange value" which is another way of saying that people have confidence that others regard it as money, and so thus it will likely to be useful for a later exchange.
Do you think seashells would have any kind of consensus in our modern, global economy today? Only gold and to a lesser extent silver will do the job in terms of a redeemable currency. These are the monetary WINNERS on this planet, full stop.
You will find pretty much all you need to know about money (and none of the obfuscation that is so common in this subject area) in Mises (Theory of Money and Credit) and Rothbard (several).
Of course, money is only the facilitator/intermediary, as the true purpose of any exchange is to enable want-satisfaction with real items of value...money won't keep your belly full. That is why fiat money is so immoral (i.e. value-for-no value).
As for your notion of insufficient quantity of money, you are probably right in the sense of short-term, fast-moving goods. This is real where the function of Real Bills comes into play to cope with seasonal demands. Mr. Ingo Bischoff does a far better job than me in explaining this topic, so I suggest you search for his many excellent posts in the archives.
I stand by what I said on OZ. The movie does a very good job of pulling emotional strings in the viewing but it distorts the underlying facts quite a bit...Gary North has done a good job of documenting several examples on his website (in reference to Ellen Brown who uses many of the same quotes/stories in her book and actually appears in the OZ Click to view link is basically the movie version of her book).
With all due respect, you seem eager to learn and good-hearted but the solutions are not in government issuance of money...you've ventured into a forum where many of the very learned feedbackers will tear this position apart with their VERY DEEP knowledge of free market (i.e. REAL and NATURAL) money and banking.
Reply from The Daily Bell
Thanks for taking the time to post this. Our elves run out of energy repeating the same thing over and over ...
Posted by William3 on 01/10/11 04:51 PM
Good point, John. Let's hope Schiff is aware but just not showing his cards.
Posted by Timothy L. Kostka on 01/10/11 04:00 PM
@ Ramon S
You appear to be saying that the real item of value that people exchange are their goods and services, and if so, I agree with you. Money, whether it is gold, silver or fiat paper is merely the 'vehicle' used to transact the 'trade.' With this I also agree. The alternative is to 'barter.' But there is absolutely no way gold and/or silver will work as the 'vehicle' in the 21st Century. There isn't enough of it on the planet to sufficiently 'lubricate' the system and it's use, like 'bartering' is entirely cumbersome. By some accounts, silver is more rare than gold, and if so, it is even less available for use as a currency.
I would suggest reading The History of Money as well as other long standing books and publications, because this is where much of my information comes from.
With respect to the movie The Secret of OZ, to suggest the same is full of half-truths is simply incorrect. Either our founding fathers harbored ideas and desires for a fiat based monetary system ' not based on debt " or they didn't. Since you can read Franklin and Jefferson's writings on the matter, no one can deny where they stood on the issue.
Moreover, you cannot deny that hundreds of societies over the past centuries have operated with great success under such a formula. Whether the 'vehicle' is paper money, sea shells, or ivory the plain and simple fact is if the 'vehicle' has consensus of value than it will work as a method of exchanging goods and services. The real trick lies in not destroying the consensus ' which is what is occurring right now " probably by design " in order to 're-set' the system, on a global scale, with the 'vehicle' being digital credits.
Now, I do not subscribe to any attempt to use digital credits as the 'vehicle' as this is more disastrous, from an individual liberty standpoint, than any of the alternatives.
As to the Daily Bell's reply . . . . your point is well taken!
Posted by Timothy L. Kostka on 01/10/11 02:48 PM
One point I neglected to make in my previous post is the following:
When money is spent into the economy directly by the government (as it has been done for centuries) creating the 'liquidity' for the system with no obligation to repay the same ' in the United States this would be the US Treasury ' you eliminate the concept and fraud of a 'national debt.' If the 'national debt' is thus eliminated in this manner, you no longer have the need for an income tax. This is precisely why the Federal Reserve Act and the 16th Amendment to the US Constitution (authorizing the income tax) were ratified/enacted within ten (10) months of one another.
Money issued as 'debt' and the income tax are inextricably interlinked. Both are frauds operating as parasites on the labor/productivity of the masses for the benefit of a handful.
Given the current incarceration of Schiff's father on the tax issue, this is the point he should be making, and I am very curious as to why he is not.
Reply from The Daily Bell
If you ran an anti-establishment (highly regulated) brokerage and your father was a high-profile anti-state convict would you make an issue out of it?
Posted by Ramon S on 01/10/11 02:46 PM
@Timothy L. Kostka
Real money is not "issued" by the "society". It naturally arises on the marketplace over time based on ongoing voluntary interactions between individuals. That is what gold and silver are truly free-market money and will always retain value.
It is important to be very precise in this area, both with language and economic truth.
Also Bill Stills and Ellen Brown are both in the same (Greenbacker) camp, as both want the US Treasury to issue money instead of the Fed. This is no solution whatsoever to our current problems.
In fact, it sounds like your entire post was lifted near-verbatim from the OZ movie, which is full of fallacies and half-truths.
Posted by Dogster on 01/10/11 01:32 PM
Hey Peter, $4.95/mo. won't attract much of an audience. Would you rather get the money or win the primary?
Posted by Timothy L. Kostka on 01/10/11 01:10 PM
While I agree with some of what Schiff says, this interview raises some serious 'red flags' in my opinion.
Schiff's support for a return to a 'gold standard' is very revealing and suggests his intentions may not be what I previously thought. I find it very interesting that Schiff (and many others who are revered on this topic) never mention the true fraud that is perpetuated by the elite. These 'experts' either do not understand the problem, or they are 'mouth pieces' for the current system.
As regional currencies collapse, the new 'meme' and dominate social theme will be a return to 'sound money' or 'honest money.'
If you think currency ' and its quantity ' are easily manipulated now, just wait until it is tied to gold. Remember the 'golden rule' ' he who owns the gold makes the rules. Remember also, the words of Meyer Amschel Rothschild, "Give me control of a nation's money supply, and I care not who makes its laws." When you combine a gold standard with a debt based money system, a system now owned by the elite (who also own a majority of the gold), you are leaping from the frying pan and into the fire. A gold standard will provide the elite the ability to manipulate the game by controlling the price and quantity of gold in the system. They have been manipulating the price of gold for decades.
Fiat currencies work so long as the quantity of currency in the system is tightly regulated by an oversight committee who has no 'skin in the game.' Of course, we do not have that today in any country on the planet. Central banks are private entities run and managed for a profit. They create the money from 'thin air' and then loan it to 'the herd' at interest. This is the real scam and something well understood by Benjamin Franklin, Thomas Jefferson, Abraham Lincoln and Andrew Jackson. Why it is not more discussed is perplexing.
The single issue is . . . who controls the quantity of money ' it's a game of sorts the elite play at the expense of 'the herd.' If the elite want a 'boom' they extend easy credit and turn on the printing presses. If they want a 'bust,' they contract the money supply and can use the 'bust' to acquire hard assets like real estate for pennies on the dollar(which is what they are doing now). Consider the statement of Congressman Charles A. Lindberg Sr. who accurately proclaimed in response to the passage of the Federal Reserve Act, " . . .from now on depressions will be scientifically created."
The elite would love to move us back to a currency backed by gold. This would further concentrate their power. This is how the elite got their start in the first place. The Knights Templar exchanging paper for gold so that travelers would not have to carry the heavy metal or run the risk of being robbed while traveling. This method of exchange started the current banking model, and ultimately led to the fraud that is 'fractional reserve banking.' The Templars figured out that very few people actually came back to collect their gold preferring instead to carry the much lighter and more convenient paper. After realizing this, the Templars started issuing more paper money than they had reserves in gold " essentially earning interest on money they created from 'thin air.' This is what occurs today.
Fiat currencies have been used for centuries with great success and this fact has been concealed from 'the herd' by the power elite. Consider the American Indians using Wampum, the British use of tally sticks, West Africans trading in decorative metallic objects called Manillas and the Fijians economy based on whales teeth, the use of sea shells, amber, ivory, decorative feathers, cattle, jade and quartz which have all been used for trade across the world. When money, the medium of exchange, is issued by the society without debt to the people, the economic success of that society is unparalleled in history. It is when money is issued as a 'debt' to the people that you experience the problems we now face.
The issue is not what backs the fiat currency. The real power lies in who controls the quantity of currency ' 'we the people,' or a small elite group of un-elected bankers. For more on this topic see Bill Still's The Money Masters and the Secret of Oz both are available for free on Youtube and/or Google video.
Click to view link
Reply from The Daily Bell
Don't read into this. He surely believes in the market not in some sort of elite-imposed gold standard.
Posted by Bruno on 01/10/11 11:48 AM
I'd just like to say that Peter Schiff has many "followers" all around the world.
I'm from Brazil and found out about his work on Youtube. Is amazing how guys like him are not called by the media to give their opinion. The only guys who get attention are the ones like Krugman, who represents everything that is wrong in Economics.
I've always looked to the US like a light, a place where the free market makes the law, not politicians. When I look at the shape that the US is now it really worries me, because they are starting to look just like your latin american cousins over here.