Peter Schiff joins the CNBC talking heads panel on Fast Money September 8, 2010. (Video follows excerpts and commentary)
As usual, Schiff is a bull on gold and precious metals commenting that silver “is going a lot higher.” Though he didn’t have a specific number in mind, he sees a likely and continued uptrend that can reach levels much higher than where it is today. “I think silver is going to go, ultimately, fifty dollars an ounce, a hundred dollars an ounce, who knows how high it can go?” forecasts Schiff.
When asked what sort of time frame he expects for silver to reach these levels, Schiff’s response closely mirrors our own view on when we can expect a significant move in precious metals and other essential commodities like food and energy:
It could happen very soon. It all depends, I think, on when you really have a collapse in the dollar. I think the dollar index, which is trading a little bit above 80, I think it’s headed down to 40. Whether it gets there in two years, three years, I don’t know. It just depends on when the world wakes up and figures out what’s going on. I mean the United States right now is completely powerless to prevent runaway inflation.
It is our view that not only have the major powers in the world like China, Russia and Europe woken up, but they are very well aware of what is going on. The Europeans, whose banks are closely allied with those in the United States may get slammed just as hard as US banks. And the Dollar and the Euro could very well see the same fate over the course of the next decade, which, in our view, would essentially be a complete destruction of their value in terms of buying power.
The Chinese and Russians, who are not as exposed to US and European financial problems from the banking side, are likely biding their time. We often hear that we have global collaboration in geo-politics, economies and finances, but make no mistake, China and Russia have no interest in seeing America succeed. At some point in the future, the Chinese are going to pull the plug on buying our Treasuries – their purchases are already down 10% year-over-year as of July 2010 – and when this happens we can expect other countries to follow. There will be a rush to the exits by Central Banks and institutional investors across the world as everyone holding any kind of US paper is going to be selling.
It is at this time that the USÂ “bailout bubble,” a term coined by trend forecaster Gerald Celente, or as financier George Soros refers to it, ” the super bubble,” will burst. Interest rates will sky rocket and the US dollar will collapse.
Why would China do this if they know that this would have a significant negative impact on their own economy? Because they are patient, that’s why. The Chinese powers-that-be are willing to take a short-term, multi-year hit to their economy, no matter how badly their people are affected if the end result will be a downfall of the world’s current super power. If you haven’t guessed by now, this is a global war being fought on multiple fronts over many generations.
The Chinese know where we’re headed, as do the powers that be here in the US, as we described in our recent article assessing Timothy Geithner’s recent comments to the Wall Street Journal.
In fact, not only do those in the top echelons of government and finance understand what is happening, according Peter Schiff it is clear that even consumers know the end game:
You definitely want to stay away from Mastercard – any company that’s leveraged to the US consumer. Remember, one of the reasons so many Americans are using Mastercard is because they’re putting their food on it, they’re putting their basic necessities on it.
I think a lot of Americans are so willing to use their credit cards because they’re so far in debt, they know they’re broke, and they might as well go out with a bang. A lot of people have no intention of paying back the money that they’re using whether it’s Visa or Mastercard.
As above, so below. It’s clear that maxing out debt on all levels is the strategy of the day (decade?) in America. The government is spending so much money, and pulling forward so much time and energy yield from our children, grandchildren and great-grandchildren that it is simply impossible to ever pay back our national debt without inflating the dollar. In other words, it is a mathematical impossibility for us to ever pay back what we owe in real US dollar terms. The only way to do it is to print more money and pay off debt with dollars that are worth less.
US consumers, already getting hit hard with permanent job losses that are never coming back, wage decreases, and depreciating real estate prices, understand that with their current debt load, most will never be able to pay back the money they owe. So, instead of defaulting on their debt with available credit remaining on their cards, they’ve decided to max out those cards before they stop paying.
This author has personally witnessed two separate instances of just this phenomenon. A close friend and Citibank credit card holder recently saw a rate increase from roughly 10% to 29.99% on their existing balance. Already running on a tight budget, his payment increased from a monthly $150 per month to over $400 per month. Our friend, rather than simply stopping his payments because he was no longer able to afford them, promptly took his Citibank card to a local outdoor goods store, purchased several thousand dollars worth of guns, ammunition, and camping gear. He never made another payment. That’s a $20,000 delinquency on Citibank’s books – and that debt will never be collected. We can talk about the ethics and morality of this move, but that is irrelevant at this point. Tens of thousands, perhaps millions, of Americans are doing exactly the same thing with credit cards and home loans.
Eventually, the US government itself will follow. This is the reason for why we recommend hard assets – because your paper currency will be worthless.
Watch Peter Schiff on CNBC September 13, 2010: