저자: Erskine Charles William · 외국인
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there's some major developments in the financial crisis in Europe. An aid package is coming to the rescue of Spain, specifically Spain's troubled banks, worth as much as 125 billion dollars. Stock markets in Europe initially reacted well but finished the day mixed, and Wall Street today was down just a little bit, 33 points in the Dow. Alarm bells, though, are also ringing for banks in this country. Moody's is expected to announce this week the downgrade of 17 global banks, including some of the biggest US financial firms.
Joining us live is Peter Schiff, president of Euro Pacific Capital and author of the new book "America's Coming Bankruptcy: How to Save Yourself and Your Country." On that optimistic note, as always, Peter, nice to have you back with us.
Thanks for having me on. Let's talk a little bit about the banks first. I know this has been telegraphed, that potentially these downgrades could be coming. What does it mean for us?
Well, first of all, I don't think the downgrades will go far enough. I think the banks are in a lot worse shape than some of these rating agencies appreciate. But we have to understand why banks are in so much trouble, and the reason is all the government involvement in the banking sector. It's the government involvement that subsidizes all of their risk-taking. The banks are in so much debt because the government has led them down this primrose path, and then we think bailouts are a solution. It's just moral hazard. It encourages more of the same bad behavior that government policy created in the first place. So I think we really need to get the government out of the banking sector as much as possible. But I already believe they've done so much damage that many of our major banks in this country are going to fail in a more spectacular way than they did in 2008, as soon as the Fed loses control of interest rates and they go a lot higher. These big banks are going to fail, and there's going to be huge losses as a result.
You're not alone, but we should point out to our viewers that this is your opinion on the way you're looking at the financial sector right now. Is there a timeline? Do you see these bank failures happening soon, five or ten years from now, or sooner than that?
I think it'll be sooner than that. Right now we're buying some time based on the problems in Europe, because people are so worried about the euro and the eurozone that they're taking refuge in the dollar and the Treasury market. That is temporarily keeping our interest rates lower and allowing our government to keep on spending and Americans to keep on borrowing and spending. But eventually we're not going to be able to do that anymore. People are going to be worried about all the money we're printing and all the inflation we're creating, and I think interest rates are going to move up in a very spectacular way. We are so leveraged we can't handle it. Not only can't the banks handle it, the federal government can't handle it. Our government can no longer handle a five or seven or ten percent interest rate than the government in Greece or Italy or Spain can.
Peter, I just want to point out to our viewers that we're trying to get your camera back centered. It's always good to have our guests in the middle of the screen, and sometimes it happens and sometimes it doesn't, but we're still listening to what you have to say. There have been calls, from people who may share a different opinion from you, saying the United States government has to get even more involved in Europe, because if we don't get more involved now, and jump in in whatever way that means (and there's a lack of specifics on that), then that's going to just crush us.
Well, can we get involved when we're already broke? Our government is running a budget deficit of almost a trillion and a half dollars a year. We're drowning in debt. All we can do is print money. We're printing all this money right now to bridge the gap between what we collect in taxes and what we spend, so we're just going to print even more money to give it to the Europeans, because that's going to help?
Let me just ask you real quick, since you're a financial adviser and give a lot of advice out there. Again, it's your opinion, but what advice do you give to your customers and the average person out there about how to protect themselves?
I outlined a chapter in my latest book, "America's Coming Bankruptcy." You get out of anything that these central banks are printing, particularly dollars. I think you buy gold, you buy silver, you look at some of the emerging economies and buy stocks abroad, buy bonds from better currencies, and get out of the ones that are being run off the printing presses. We have a huge financial crisis coming. It's not in our past, it's in our future. These downgrades and the troubles at the banks are just the beginning. It's going to get a lot worse. Europe is simply a precursor of what's going to happen in the United States. That's the preview. The main show is going to be playing out here in the United States, on this side of the Atlantic, and people had better be prepared.
Peter, you give us a lot to think about today, that's for sure, on a Monday morning. Thank you again for joining us. We love having you and look forward to having you back.
Thank you.
The economy is improving, jobs are growing, and the worst is over. Our next guest says sadly, you are dead wrong. Joining us now, the author of "The Real Crash," Peter Schiff. Pete, thanks for joining us. What do you mean the worst isn't over? We're not turning the corner? Things aren't getting better?
Hardly. We've actually made all the problems worse. My original book, "Crash Proof," was about profiting from the coming economic collapse. In that book I forecast the bursting of the housing bubble and the ensuing financial crisis and Great Recession. But what I was really concerned about was not that the crash would come from the bubble itself, but from what the government would do to try to revive the economy. That was the real crash, and it's still yet to come. It is the subject of this new book.
So you don't think anything has changed that would allow this crash to be avoided after the fall of 2008?
The problems are much worse. We're much more deeply indebted now than we were then. All the problems have been exacerbated, and what we have now is not a legitimate recovery. All we've done is borrow additional money and spend it, and we're counting the spending as economic growth when it's not. The debt is growing much faster than GDP, and ultimately we're going to have to pay this money back with interest. The only thing keeping us afloat right now is zero percent interest rates.
And why are they zero percent? We keep telling people that the debt clock is going to come back and bite us in the rear sometime, but it hasn't done it yet. There's no inflation.
Well, sure there is, and it's the inflation that's helping keep interest rates so low, because the Fed is monetizing debt. It's printing money and buying Treasuries. The biggest problem with the US economy is that interest rates are too low. Interest rates are probably the most important price in a free market. They're involved in one side of every transaction, and they need to be set by the market. Instead we're setting interest rates the way the Soviet Union used to set the price of bread. Because they're too low, we borrow too much, we spend too much, we don't save enough, and we don't produce enough.
So you think we have to go bankrupt?
What we need to do is let interest rates rise. But the problem is that when interest rates go up, the US government can't afford to pay the interest on the debt.
Let interest rates rise. The Fed is keeping them down now. Are you saying we should eliminate the Fed?
No, the Fed just has to stop holding rates down. It can let the market set the rate. Right now the Fed is setting the rate at zero, and that's too long. Let the market set the rate.
How can the rate be zero? You're saying the Fed sets the rate, but the market should set it too.
The Fed can still be there and not set rates. It can let the market do it, or the Fed has to move rates higher, because rates are much too low. Nobody can make any money saving. Nobody's saving, so we don't have any legitimate capital for financial investment. We have to borrow it all from abroad. But when we let interest rates go up, the US government can't pay its debts, and many of our major banks are going to fail. You think that two billion dollar loss at JP Morgan is big? Think about how much JP Morgan, Morgan Stanley, and Bank of America are going to lose if the Fed lets interest rates go to where they need to go.
The name of the book is "The Real Crash," and Peter Schiff is just getting started. The book just came out, and he predicted everything that's happened before. I hope you're wrong, but you seem very confident that you're right. Peter, thanks so much.
Thank you, Peter. We have Bob Pisani, Rick Santelli is with us, Euro Pacific Capital's Peter Schiff is also with us today, and Core States Capital Advisors' Bill Apolis. Welcome, all. Bob Pisani, the energy levels are high in here at the big board today. We can't even have a nice, boring, quiet close heading into a three-day weekend. We're standing here, and all of a sudden, a little after two o'clock, word comes out on the Dow Jones wire that Spain is getting a lot more money than people anticipated, 23 or 24 billion dollars. Bottom line, markets dropped. We lost several dozen points on that. This is the problem, guys. We're just hostages to headlines all of the time. Anytime you think we're stabilizing, and it's been a pretty good week, with the S&P up one and a half percent or so, you get a little headline and you drop a little more. Peter Schiff, this is exactly what the markets have been focusing on for a while now. It's all about Europe right now, isn't it?
Oh, I'm sorry, yeah. I was around, your name... you know, study time on that. That's not all about Europe. In some people's minds it is, but I think Europe is really foreshadowing a bigger problem here in the United States. There's still some short-term downside risk in the market, but I think the central banks, unfortunately, are not going to allow a substantial collapse in stock prices. They're going to come in with more money printing, and ultimately you're going to see a reversal, with nominal stock prices rising. But that's not going to be good economic policy, and it's not going to be good for the economy. That's exactly what we don't need.
Let's talk about that. Peter, what is your expectation for how this plays out? There's a lot of debate about whether Greece will have a disorderly or orderly exit from the euro, or whether Greece stays in Europe. Do you have a view?
I don't even know. There are several different ways it could play out. Long-term, I think the worst thing that can happen for the eurozone is for Greece to stay there and for you to have this moral hazard where everybody is basically subsidizing everybody else's profligacy. The only way it makes sense for Greece to stay in the eurozone is if they can force Greece to undergo more austerity. But I think if those are the choices, the eurozone will be better off if Greece leaves. I think there's more of a long-term threat from Greece remaining in the euro than from it leaving. That's overblown. But I don't know; the politics are very strong. There's a lot of incentive for politicians in Europe to do what's wrong in the long run in order to appease voters in the short run. That's exactly what we're doing here. Politicians are trying to avoid swallowing the bitter-tasting medicine that's necessary to correct the problem.
You're correct. Let me pop in, Peter. People keep talking about the mood on the streets of Athens. What about the mood on the streets of Berlin? How much longer are Germans going to be willing to write the checks? No matter what scenario I see here, the Germans have got to write a big check.
Yeah, and Germans are burning Merkel in effigy in Greece. They should be doing it in Berlin. They never should have signed on to this deal to pick up the tab for the irresponsible governments in Greece and other parts of Europe. They can't do it any more. It's like people in some states, if people in Texas don't want to pay for the deficits in California. That might happen.
Next week the focus returns to the US. Rick Santelli, you've got some Fed speak coming out next week, plus GDP and unemployment numbers.
Right. The Fed is going to be nervous about Europe and will hold out the notion of quantitative easing, but it's a political hot potato. So I move that right off. Then there are the unemployment data points: ADP on Thursday instead of Wednesday, BLS on Friday, and our second look at first-quarter GDP on Thursday. If we're disappointed with 2.2 and end up with 1.8 or 1.9, you can look at the Chinese stock market and see the cross-trade flows out of Europe impacting that, as well as weakening demand. I can't be optimistic. Even if we are the cleanest dirty shirt, it's still not that clean.
And that has made... I don't see where we've hit the bottom. I think we're dirty, or people just haven't figured it out. I was careful to say that the problems in Europe are actually helping us, because people are so worried about Europe that they're buying dollars.
Oh, yeah. Let's bring Dylan in here. Bill, you have to look forward. I think the gloom and the babble and all the negative stuff has been center stage for a long time. We've had about a one-third correction off the October lows. I think the news gets better going forward. There's change coming to America, and there are a lot of bullish things. Politicians are going to get sent home. Eight out of ten Greeks don't want to leave the euro, because they know politicians get a free ride, and the quality of life gets a whole lot better. They don't want to leave the euro.
Bill, why did they vote the way they did in the last election? Why do people vote the way they do?
Not everybody goes out and votes. But it's clear that the Greek elections right now are a proxy on whether they want to stay in the euro, whether they want the bailout money. Every voter wants something for nothing, although they're voting for nothing. Look, 75 percent of the people polled this week would like to stay in the euro. That's what people are saying. The problem is that what you're saying is that yes, they like the idea of staying in the euro, it sounds good, but they don't necessarily want to take the cuts in austerity that come along with it.
Yeah, but they already thought it was land, and they don't.
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