I heart Peter Schiff

I'll start with one of my favorite Youtube events:
http://www.youtube.com/watch?v=2I0QN-FYkpw


This is Peter Schiff, a (now) respected economist, talking about our present economic situation as early as 2006. He successfully predicted the financial boondoggle we find ourselves in today. This one is really funny because the folks on the other side of the desk literally laugh at his face. Ben Stein, Steve Forbes, among others tell him he's lost his mind and go on to recommend their favorite stocks to you.

It just goes to show you that people don''t like to hear the truth when it doesn't suit them. It has been pretty obvious that consumer spending has made up the vast majority of our GDP growth for many many years running now. But even today you can turn on CNBC, Fox Business, ABC, NBC (Lord help you), CBS, or Bloomberg and hear them talk about having reached a bottom, and/or being in a "recession" for another quarter or two before the turnaround.


And they talk about the "stimulus" package that is about to be crammed down our throats as if it is something that "has to be done." Even the most expert of experts says things like "action must be taken," or "any action by the government will help stave off disaster" or worse "our government can't do nothing." As if they really know what they are talking about. And get this: None of them do! Seriously. I know you're going to think they must be smarter than you or me to be where they are. Call me stupid if you must, but Robert Rubin and Larry Summers and Timothy Geithner and Warren Buffet are numskulls if they think that the Government can borrow their way back to 5% GDP growth. And that is exactly what they think. Even you and I know that if you are in debt up to your eyballs, the answer is not to incur still more debt. And poor Obama, whom I think is a good man, is listening to them.

The banks are sitting on credit card debts and commercial loans and home mortgages in which 25% or more of them will not get paid back. But they are valuing them as if they will make 10% interest (compounded) on it! They are so far in the red that they are effectively insovent, the FDIC doesn't have 1% of the money to cover the deposits, and our government wants them to loan us even more money to get the growth going again. This is absolutely insane. And the end result is going to be $20 per gallon of milk in about two years. I will get to the details of why this is true in future posts, but believe me it is coming and it is not hard to understand why.

It all started with a debt as money economy combined with no regard for leverage in the bank vaults. What I mean is our banks have taken your $1,000 and loaned it out 40, 50, even 100 times over. And paid themselves handsome bonuses for doing it. And many if not most of those loans will not be paid back. Our banks are screwed. Which means our businesses (notice I don't classify a bank as a business) are screwed, which means we are screwed.


Oh well at least we are all screwed together right?