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Are we on the edge of the Peter Schiff dollar collapse?

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On 9/5/2015 at 6:45 AM, happiness said:

I've been blocking out the economic news for the last few years to my detriment, but the events of the last few weeks have really captured my attention. After six years of 0% interest rates, the markets are in turmoil and signs point to a recession on the horizon. It is clear that the Fed will not raise interest rates or keep them high for long if the economic data is negative. So what are they going to do now? Print print print print print print money is my assumption. Peter Schiff seems to think the dollar collapse he's been predicting for years is nigh. My other favorite analyst, Jim Rogers, points out that the world still thinks the U.S. Dollar is a safe haven even though it's not one, so it might stay strong a little longer, but says that soon the world will lose confidence in the Fed and the dollar.

 

What do you think? Is likely that the U.S economy will suffer some real pain in the next few years, either a big stock market drop + recession, or if the Fed refuses to raise rates, a very high rate of inflation?

I'm not an economist, but there was a time shortly after the financial crisis where I used to follow everything by Peter Schiff, Jim Rogers etc., really thinking that they're up to something. Meanwhile I'm more sceptical about such people's ability to predict such things in the short term. In the long run, they're right of course, but in the short run, a lot of other things have the power of delaying things:

  • Wealth is very elastic. Once you've created a certain oversupply, you can go on for decades before really paying the full price for your mistakes, never actually feeling that something is deteriorating. Just look at socialist Europe, how they can make socialism look like a recipe for success. Look at Dubai, where they just live off of stolen wealth, until one day the material resources will be used up.
  • As Peter Schiff himself said, it takes two to Tango. China doesn't seem to have the self-confidence and/or the right system of their own - real capitalism - in order to shrug off the US.
  • Just like other "imminent Doomsday" apostle's like LarouchePAC etc., Peter Schiff, too, seems to have a disproportionate focus on the material economy as measurable in factory output, food production, or generally, energy density. Wealth creation isn't just manufacturing and farming, it's primarily originating ideas, inventions, patents and providing services. Virtually anything that people want to buy, care about, value must be considered wealth. And economists often don't even measure all the mental energy that goes into those products. Just because e.g. the iPhone gets built in China doesn't mean they created it. Its created by brilliant minds like Steve Jobs and his successors. Add Google, Microsoft and the many tech-companies with enormous wealth creation in Silicon valley, and you get much closer to reality.

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It’s crazy that I’ve been following Peter Schiff for 10 years and his predicted economic collapse hasn’t played out, yet all along I’ve felt as if the threat has been imminent, and even hoarded a small fortune (by my standards) in gold. I’m actually no less dismissive of the collapse scenario than I’ve ever been, and still holding tightly to my gold, but at this point I do at least grant the possibility that the Schiffs of the world could turn out to be completely wrong. If this is the case, what flaws in my general thinking could have contributed to the formation of this erroneous belief that, five years ago, I held with certainlty? Over-pessimism? Some degree of emotionalism? Lack of understanding of economics? Maybe just being out of my depth?

Edited by happiness

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Back in the 90's, my now ex-wife and I were spending more than we took in.  We were unable to increase our income and were not willing to decrease our outgo.  Our debt kept increasing, but we insisted on maintaining our lifestyle, hoping that "somehow" we'd pay off our debt.

Well, the day came when we had to start borrowing to pay off our creditors.  Then, for me (we had by then separated), it became a hectic round of getting new credit cards, shuffling balances...and, as certain as sunrise, came the day when none of this juggling was possible, the day when I was unable to even pay for necessities.

The day when I was forced to acknowledge my bankruptcy could not have been predicted -- that primarily depended on how much work I could manage and how foolish the credit card companies would be -- but the fact that such a day would come was entirely predictable.

This, in miniature, is what is happening in the US.  (Except that the US is being even more stupid than we were.) "Whether" is predictable, "when" is not.

My excuse was major depression, which really messes with one's judgment. But only I (and my foolish creditors) paid for my stupidity.  America has no such excuse. And when America falls off the cliff, the consequences will be much worse.

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9 hours ago, happiness said:

It’s crazy that I’ve been following Peter Schiff for 10 years and his predicted economic collapse hasn’t played out, ...

Two points here:

  • If all you have is a theory  of why something ought to work out a certain way, it's very weak. You need to have historical evidence of how there have been repeated episodes where the theory was shown to be true. This still does not prove the theory, but it is a basic requirement for taking it seriously
  • 10 years is not enough. You have a lifetime to live, so you should look at a few lifetimes worth of historical evidence. Visualize yourself during the Great depression: Roosevelt is confiscating gold, enacting social-security, imposing all sorts of ridiculous rules on businesses. 

Finally, you are making decisions within the context of your lifetime. Imagine you see some causal factor that created some end result reliably, from the Roman empire down to today. But, imagine it took 400 years to play our from cause to effect, and in your judgement you are in year 90 of such an episode. How much does it really impact the decisions you should be making in the context of your lifetime?

9 hours ago, happiness said:

...  hoarded a small fortune (by my standards) in gold. 

Gold should not be considered an "investment" in a core sense. Of course, if market values of productive assets are too high (in your judgement), then it makes sense to "park" your assets in a "store of value'.

Doomsday scenarios sell, but your best bet is that they will not take place. Of course spending beyond one's means is bound to cause a problem some day in the future, but that's abstract enough to be useless as a decision-making tool. You have to flesh it out with concretes. Someone spending a small percent more than they take in is in a different position that someone more profligate. Both will eventually hit rock bottom, but time-horizons vary. Also, possible solutions vary. 

In a mixed-economy, when shit hits the fan, the democracy will typically take assets from those who did not get too hard, and redistribute it to those who were screwed. Consider what the Saudi king just did. He needed money, so he arrested a bunch of the richest guys in the kingdom, and told them they have to give the government money.  probably raised about $100 billion in a few months. Democracies do these things with politeness and a softer glove.

To be clear, history would say we should expect booms and busts, with occasional panics at a rate of (say) a couple in each investor's lifetime. But, that's different from doomsday scenarios.

Edited by softwareNerd

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2 hours ago, softwareNerd said:

To be clear, history would say we should expect booms and busts, with occasional panics at a rate of (say) a couple in each investor's lifetime. But, that's different from doomsday scenarios.

Personally, I don't believe in doomsday scenarios as long as humans have resources at hand and the ability to manipulate them - ie. anything but large-scale world annihilation.

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6 hours ago, JASKN said:

Personally, I don't believe in doomsday scenarios as long as humans have resources at hand and the ability to manipulate them - ie. anything but large-scale world annihilation.

Yes. 
In the context of the OP, "doomsday" probably means something like German pre-WW2 hyper-inflation.

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