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January 14, 2013

I just finished reading author Peter D. Schiff's book "In the Real Crash" after a customer gave it to me. I was interested to find out more about the man that predicted the collapse of the  U.S. housing bubble and 2008 global economic crisis. Mr. Schiff now predicts the next crash, which we are temporarily enjoying(are we), as a government inflated bubble. This bubble, he states, will explode with disastrous consequences for the economy and for each of us.

The current infusion of billions of dollars of stimulus money has only dug a deeper hole. The Fed is currently expanding its balance sheet by an additional $45 billion per month, as it prints new money to buy up long-term government bonds. That's in addition to the $40 billion worth of mortgages the Fed is already buying with money that it creates out of thin air. So that's $85 billion a month, multiplied by 12, and the Fed has announced that it intends to expand its balance sheet by over a trillion dollars in 2013. 

So Ben Bernanke is just going to print more money and we're going to buy a trillion dollars worth of paper every year for as long as the unemployment rate stays above 6.8 %. The United States government simply spends too much and does not collect enough money to pay its debts, and in the end, Americans from all walks of life will face a crushing depression.
We have borrowed from China for homes we can no longer afford and our currency, backed by the full faith and credit of the United States, is a lie.  The system is broken and there are only two paths forward. The one we're on will lead to a currency and sovereign debt crisis that will utterly destroy our economy and impoverish the vast majority of our citizens. The other, if we are able to change course, is a rockier road but the end will be far easier for all Americans.

If we want to avoid complete collapse, we must drastically reduce government spending. That means eliminating entire department agencies.  Ninety percent of them have already proven to be failing as our children are illiterate, our postal system is constantly subsidized, social security was robbed and the list goes on and on. Our government is an overgrown, bloated, wasteful entity who in 75 years went from the largest international creditor to the largest international debtor!

We must do what no politician has or will propose which is to declare bankruptcy, restructure our  debts and reform all government programs from the ground up. What that would mean is that programs would stop or be cut back. Everyone would be affected from the military to green reforms, home mortgage deductions to farm subsidies, social security to food stamps and free housing  to Pell Grants. Everyone would be affected but more importantly that would mean that the common American would expect even our leaders to take pay cuts, medical benefit cuts and lifetime retirement cuts. That simply won't happen because our leaders are not leaders but takers as well. Just like us, the average American is totally addicted to their drug of choice.  Ever since F.D.R. proposed his "New Deal" have we added to the number of programs under every administration until the weight is breaking the camels back.

We are constantly hearing about the "fiscal cliff" and everyone is hoping and praying that we won't go over the cliff, but does it really matter?  If we don't go over the cliff we send the message to the world that America will never pay its bills. So we are just going to keep borrowing money until our creditors cut us off. That is when interest rates will sky rocket.  If the Fed buys up all the bonds, that nobody wants to buy any longer, then we destroy the dollar. That is an even bigger crisis than if we just let the bond market collapse the economy. The ironic thing is that actually going off the "fiscal cliff" if exactly what needs to happen to our government so that jobs, programs and our economy in time could get back on track. But it won't happen at least not this time around.  

Now it has been reported that the average American's net worth grew during 2012's third quarter at its highest rate since late 2007? REALLY, DID YOU SEE OR FEEL IT?  Rising homes prices are driving that increase they say. Bernake had planned that all his money printing would, do just that, bolster home values and make the consumer feel more comfortable about spending their money. The Fed planned another housing bubble encore. Today holiday spending reports are coming in and those reports show that the average American isn't buying into it. Holiday shopping rates were dismal, just proving that he can't re-inflate a burst  bubble.  There are simply too many holes in the bubble and the cheap money goes elsewhere.   

Our creditors will be shocked into reality when they discover that there is no limit to what we can raise our debt ceiling to. We will borrow until we can't do it anymore. We're not going to do anything about this crisis nor are we going to do anything to diffuse this bomb and it will go off. Sooner or later our creditors are going to put as much distance as they can between themselves and the explosion. They're going to want to sell dollars. They're going to want to sell debt denominated in dollars. What is that going to mean? A weaker dollar and higher consumer prices for all Americans. It means higher interest rates for Americans and the rug is going to be pulled out from under our slow economy. It means that we are going to go over the "Mother of All Fiscal Cliffs" because it is impossible to avoid.

So how does one protect themselves and their family was my question in reading Mr. Schiff's book?  Mr. Schiff emphatically states, "Get out of the dollar. Don't wait, run. Get out of it. Don't worry if you're a little too early, because believe me, you don't want to be late."  The urgency and the time with which to do it this is running out. Our government is not going to pay their bills, they're going to inflate them away which is the same thing as default. They won't be paying off other nations, nor paying us what we expected and planned for.  No social security, no food stamps, no Medicare, Medicaid, no Obama Care, no farm subsidies and what will happen then? The populace will be angry, starving, rioting, and fighting over what they no longer receive. The Department of Homeland Security will be forced to take control against its own people then we will know why they bought 1.7 million rounds of ammunition and built FEMA camps across the nation for. Protect your family!  

We may be fortunate enough to see this process unfold in Japan before it happens here in the U.S. as Japan has been doing the same thing for the past 30 years that we are doing now. So you won't want to ride out that inflation. You'll want to get out of U.S. currency. You'll want to look at foreign currencies where the governments are much more responsible than ours. Look at real money. Look at gold and silver. Look at foreign stocks if they're suitable that pay dividends. Do whatever you can to get out of Dodge, because just when the government assures you that there's nothing to worry about, that's the time where you need to worry the most.
Why not gold and silver? It may go up or it may go down but at least it will be worth more than the monopoly money we are currently playing with. People are going to be shocked at how inexpensive gold was when it could be snapped up for such a bargain price. It's not going to take too long, possibly in just a few years, to see gold to $2500. Banks are already purchasing gold to ready themselves for the imminent collapse. Remember Ben Bernanke has promised to print over a trillion dollars in 2013. I think he's actually going to print more than that. It's not going to revive the economy. It's not going to create jobs, but it will help destroy the dollar and that is going to send gold and silver even higher.

Forty percent of Americans recently reported that their biggest economic concern was rising prices. Their second primary concern was unemployment at 24 percent. The real problem is unforseen by the large populace. My original question's answer was one that I already knew. Get out of the dollar, don't wait, get out of it now before its too late and protect your family!





Spot prices accurate as of
Mon Aug 2 20:57:27 PST