Sunday, August 15, 2010

Peter Schiff : the boom is the problem, the bust is the solution

Peter Schiff : "Contrary to what most people think, the boom is the problem, the bust is the solution. A boom is like an artificial high, like if you take heroin and you shoot yourself up with heroin and it feels really great, at least that is what they tell me. But anyway, that is artificial! You want to get healthy, right? Then you´ve got to go to rehab or detox, and you go cold turkey and you go through withdrawal. The withdrawal symptom is very unpleasant, very painful, again, that is what I hear. But it´s necessary if you want to remove these toxins from your system and get healthy. The same thing happens in the business cycle. When you have a central bank, and the central banks made the same mistakes in the 1920´s, when you have monetary policy too inflationary and you create an asset bubble, you create malinvestments. The malinvestments need to be purged, the economy needs to be rebalanced. But the government solution is "shoot up with more heroin", so that we can delay the withdrawal. But of course, they risk killing the economy with an overdose, which is what we might get, and an overdose, as far as monetary stimulus is hyperinflation, and believe me, that is a real possibility and we do not want to live through that!"

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Peter Schiff is a well-known commentator appearing regularly on CNBC, TechTicker and FoxNews. He is often referred to as "Doctor Doom" because of his bearish outlook on the economy and the U.S. Dollar in particular. Peter was one of the first from within the professional investment field to call the housing market a bubble. Peter has written a book called "Crash Proof" and a follow-on called "The Little Book of Bull Moves in Bear Markets". He is the President of EuroPacific Capital, which is a brokerage specializing in finding dividend-yielding, value-based foreign stocks.