09 May 2010
Peter Schiff explains similarities between Greece and the U.S.
I previously posted the famous episode on FOX News where Schiff predicted the housing crash, and three other analysts laughed in his face. I realize that a lot of people don't like him (in part because they don't want to hear what he has to say). In this 10-minute presentation he opines that people in the U.S. would react the same way the Greek populace is reacting now if the U.S. responded to a financial crisis the way the Greek government and the E.U. are responding.
Thought-provoking.
Addendum: see also some of the thoughts in the Comments section.
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Such a great post.
ReplyDeleteSchiff is spot on. But I would argue that the biggest point he made is NOT whether U.S. citizens would behave like Greek citizens (we would) but that Americans MUST understand that we already ARE Greece.
And it would be refreshing if more Americans (particularly those on the left but certainly everyone else) realized that we are in the boat we are in NOT because of the greedy rich (although they have played a role in this) but because WE have refused to live within our means.
As Schiff hammers home, everyone has played a role and everyone should have to pay the consequences.
Just like the housing crisis: it was NOT caused only because of greedy bankers. First (and most critical in my book) the government forced banks to loan money to people who had no way of paying back the loans. Then there were millions upon millions of every day people who were not "cheated" or "tricked" - they knew what they were doing - they got themselves into homes they had no way of paying for.
And then there were the bankers, the mortgage lenders.
This worries me a great deal because we are no different than the Greeks. I am 100% confident that in the next 5 years, there will be violence in the U.S.
Uh, as for Schiff predicting the housing bubble bursting.. even a blind squirrel will find a nut now and then.
ReplyDeleteYou want to know if he really had an understanding of what was coming, then look at the advice he gave his customers - sell dollars. Had his customers listened to Schiff and divested from the dollar, they would have LOST a lot.
The point Schiff makes about inflation being a less dramatic, more surreptitious, and therefore more voter-friendly alternative to drastic cuts - had Greece been able to revert to the drachma - is certainly very interesting. Nevertheless, I do wonder: suppose Greece still had the drachma and did default on its debt, wouldn't that have repercussions on its credibility, wouldn't it influence the views and choices of investors in the long run?
ReplyDeleteA second point is that, unlike what Schiff reports, the main grievance of many Greeks right now is not that they are called to honour the bonds that are owned by 'foreigners', but that the austerity measures the government has announced mean disproportionally large cuts for people on low incomes and disproportionally small cuts for those on high incomes and for
mega-earners, such as corporations.
A third point is that inflation in Greece is high at any rate, and has always been so, never mind what official figures said and say, so, in fact, the Greeks are now told that they have to live with the worst of both worlds. Whether this is genuine inflation or whether prices are artificially pushed because of price fixing, cartel practices, domestic speculation, and opportunism, compounded by ineffective regulation and monitoring, plus corruption, I don't know. And, so far, there have been only nominal attempts by the government to change that status quo. The fifty-odd doctors who were named and shamed for tax evasion and/or demanding and accepting bribes from patients in exchange for medical favours (see, it DOES take two for corruption) are the tiniest tip of the iceberg.
However, there's one aspect that Schiff doesn't touch on, and which is likely to be very different from what goes for the US, definitely so for the UK: one of the reasons why Greece's coffers are in such an appalling state is that something like 40% of the taxpayers are in fact tax evaders. I haven't heard anyone predict how the new austerity measures will affect the black economy, which has been thriving in Greece for decades. Certainly the black economy depends on the 'official' economy it parasitises, but it wouldn't surprise me to hear that instead of combating tax evasion the new measures have the opposite effect, boosting, in fact, the black economy they're supposed to attack. I wonder whether fewer Greeks will actually, suffer because of the measures than the unions and the rioters expect/claim.
Those are interesting and insightful comments. Thank you, Stray Snippets.
ReplyDelete