So says Peter Schiff, CEO and Chief Global Strategist of Euro Pacific Capital in edited excerpts from an interview* he had recently with Taki Tsaklanos (goldsilverworlds.com) entitled Peter Schiff: The Collapse Of The Dollar Is Unavoidable.
[The following article is presented by Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com and www.munKNEE.com and the FREE Market Intelligence Report newsletter (sample here – register here) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]
Tsaklanos’ article goes on to say in further edited excerpts:
The collapse of the U.S. dollar is unavoidable[While] the current economic problems in the Western world (excessive debt levels and too many promises by governments in untenable social welfare states) are shared by most countries…the U.S. is suffering the most from this disease… [Says Schiff:] “Because of the privilege of the U.S. having the dollar as the world reserve currency, the U.S. economy has been able to evolve in a way that no other nation could. Like no other country in the world, the U.S. is dependent on debt, cheap money, artificially low interest rates, and imports…When all this comes to an end, the U.S. economy will suffer like no other. Maybe it will be a wake-up call to other countries in what the U.S. did wrong in terms of the destruction of the country.”
When the dollar became the world reserve currency in 1944 the U.S. was a fundamentally different country than it is today. At that time, the dollar was backed by gold. Everyone holding dollars could exchange it for gold at a pre-set rate. Gold was available on demand, so the dollar was as good as gold. In that period of time, the U.S. was the world’s biggest creditor nation. It had a huge trade surplus which it invested in the rest of the world. The fact that the U.S. once was so great, however, does not mean it still is. None of the attributes that made…it deserving of the world’s reserve currency exist today.[Says Schiff:] “America is now its mirror image of its former self. We are the world’s biggest debtor, with the biggest trade deficit, and the dollar is backed by nothing. We have mountains of debt. If the U.S. dollar was not the reserve currency today, nobody would accept it to become the reserve currency.”
Schiff’s fundamental concerns are related to politicians who are not doing the right thing.[Says Schiff:] “Looking at the fiasco of the debt ceiling, we are not doing the right thing. For the time being, the right thing is wrongly considered to be more debt and reckless spending. Any restraint on debt is seen as a problem. The type of ‘problem’ the U.S. is solving currently is the limitation on debt, not the decrease of debt levels. The conventional wisdom, mainly in Washington, is so wrong that only a complete implosion can impose discipline. An externally driven crisis will finally force the government to take the right action. It will be a currency crisis. Right now, the dollar is weakening somewhat, but that is nothing compared to what is coming…”
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What will the dollar be replaced with once it falls?
Schiff believes the world cannot use the euro or the yen as the world reserve currency because they are nearly as bad as the U.S. dollar. At the end of the day, those are all fiat currencies backed by nothing but promises…[So what could be done to] stabilize the dollar and recreate confidence [in other currencies]? Gold… and the U.S. has 90% of its reserves in gold. Gold was the international reserve before the dollar hegemony. Going back to the gold standard would result in one of the two things:
- the price of gold goes up or
- the price of everything else goes down.
Schiff believes that it is much easier to adjust the price of one thing up instead of the price of every other asset down so his expectation is that the gold price will go much higher from here…
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
*http://goldsilverworlds.com/economy/peter-schiff-collapse-of-dollar-unavoidable/ (© 2013 Gold Silver Worlds)
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