Peter Schiff's Quotes and Analogies
“First of all the main problem the past number of years is we spent a lot of money we didn’t have to buy foreign products we can’t afford. We have run up an enormous debt to the rest of the world and have nothing to show for it. It’s analogous to an individual loses his job and instead of getting another job he buys everything on his credit card,and he shows his wife his credit card bills and says “Look honey, look how great we are doing”.
“WE have just been going on a consumption binge where we borrow money like drunken sailors from the rest of the world and blow it.” “You know we are are selling off our cows and our chickens to buy milk, you know were mortgaging the farm and foreigners are repossessing these assets which is how nations bankrupt themselves. We’re selling off productive income producing assets to enjoy current consumption.” “You know rather than the recession being resisted, it should be embraced. Because the disease is all this debt financed consumption, and the cure is we stop consuming and start saving and producing again, and that’s a recession.You know sometimes medicine taste bad but you got to swallow it.”
”To explain business cycles and how they work, the boom is the problem,the bust is the solution. The boom is like an artificial high, like you take heroin, you shoot up and it makes you feel good, it’s artificial.You want to get healthy, then you have to go to rehab, detox. You go cold turkey, you go though withdrawal. The withdrawal symptoms are very unpleasant, painful but it’s necessary if you want to remove these toxins from your system and become healthy again. The same thing happens in the business cycle, when you have a central bank, same as the 1920s(cause of great depression) , you have monetary policy that is too inflationary and you create an asset bubble, you create mal-investments. And the mal-investments need to be purged. The economy needs to be rebalanced”
"Printing money is merely taxation in another form. Rather than robbing citizens of their money, government robs their money of its purchasing power."
"You don’t drive an economy by consuming – the consumer is not the engine, the consumer is the caboose."
"Bankruptcy is like when a body has an infection. It fights it off, and that's what the free market is doing by trying to kill off noncompetitive companies. Bankruptcy is a positive force in an economy.Maybe it's not positive for the entity going bankrupt, but it is positive for the economy as a whole because it's purging from the body of the economy nonviable companies that are squandering our resources."
"We need companies to fail so that more prosperous companies can succeed. By keeping certain businesses around, the government is preventing others from coming into existence that would have been more productive".
From There180;s No Pain-Free Cure Recession
“Governments cannot create but merely redirect. When the government spends, the money has to come from somewhere. If the governmentdoesn180;t have a surplus, then it must come from taxes. If taxesdon180;t go up, then it must come from increased borrowing. If lenderwon180;t lend, then it must come from the printing press, which iswhere all these bailouts are headed. But each additional dollar printed diminishes the value those already in circulation. Something cannot be effortlessly created from nothing”.
“It would be irresponsible in the extreme for an individual to forestall a personal recession by taking out newer, bigger loans when the old loans can180;t be repaid. However, this is precisely what we are planning on a national level. I believe these ideas hold sway largely because they promise happy, pain-free solutions. They are the economic equivalent of miracle weight-loss programs that require no dieting or exercise. The theories permit economists to claim mystic wisdom, governments to pretend that they have the power to dispel hardship with the whir of a printing press, and voters to believe that they can have recovery without sacrifice”.
From the Humpty Dumpty Economy
“Before the current economic crisis became apparent to all, the most popular fable used to describe America180;s uncanny economic resiliency was the story of Goldilocks. It was argued that our economy was skipping down a sunny path of moderate growth, low inflation and rising asset prices. However, a much better parable for our economy over the last decade would have been the story of Humpty Dumpty: a bloated,fragile shell perched on the top of a dangerously high stone wall”.
“As I have long said, the business model of importing cheap goods for Americans to buy with credit cards was unsustainable. We were told to“Shop till we dropped,” and we did”.
From the Tales Get Taller
“The main lesson our creditors will learn from this crisis is not to lend American consumers any more money. Once the lending stops, our“cart before the horse” borrow to spend economy will crumble. While therest of the world absorbs their losses and moves on, we will be digging our way out of the rubble for years to come”.
From A Nightmare Before Christmas
“In the end, rather than filling our stockings with Christmas goodies,our foreign creditors will likely substitute lumps of coal. Of course given how high coal prices will ultimately rise as a result of all this inflation, in Christmas Future perhaps our stockings will be stuffed with nothing but our own worthless currency. It might not burn as well as coal, but at least we will have plenty of it”.
“Some people that got stranded on an island, and I think it was 6 or 7were Asians and there was one American and as soon as they were on the island they had to divide up the jobs. And one Asian was given the job of fishing, the other one was hunting, one of them got the job of gathering fire wood. So they all had jobs, and the American was assigned the job of eating. And so at the end of the day, they would all gather around and prepare this feast and the American would sit there and eat it. But he would180;nt eat it all, he180;d just leave enough crumbs so he could give to the 6 Asians so they could go on and repeat it again tomorrow, spend all day preparing a meal for the American to eat. Now, the way modern economists would look at it, they would say “Well, this American is vital to the whole island economy.Without him nobody would have to fish, nobody would have to hunt,nobody would have to gather fire wood. He is creating all this employment on the island”. But the reality is, every Asian on that island, his lot in life would be dramatically improved if they kicked the American off the island because now they would have a lot more to eat or maybe they wouldn180;t have to spend all day hunting and fishing and they can lay on the beach a little bit”.
"The U.S. thinks it is the engine of economic growth in the world, when really it's the caboose. If the rest of the world lets the caboose go,the rest of the train will be able to move faster."
"The American consumer, like the proverbial Emperor, truly has no clothes (unless, of course he imports them). It will not be long before the non-American producer finally acknowledges his nudity, and the dollar bubble will finally burst. When that happens U.S. consumer prices and interest rates will spiral upward, stock and real estate prices will collapse, unemployment will soar, and the U.S. economy will enter a prolonged recession as it enters a new era of savings,self-sacrifice and under-consumptions, and begins a long and painful process of re-industrialization".
"We have just been going on a consumption binge where we borrow money like drunken sailors from the rest of the world and BLOW IT!!"
"Contrary to what most people think, the boom is the problem, the bust is the solution. A boom is like an artificial high, like if you take heroin and you shoot yourself up with heroin and it feels really great,at least that is what they tell me. But anyway, that is artificial! You want to get healthy, right? Then you180;ve got to go to rehab or detox,and you go cold turkey and you go through withdrawal. The withdrawal symptom is very unpleasant, very painful, again, that is what I hear.But it180;s necessary if you want to remove these toxins from your system and get healthy. The same thing happens in the business cycle.When you have a central bank, and the central banks made the same mistakes in the 1920180;s, when you have monetary policy too inflationary and you create an asset bubble, you create malinvestments.The malinvestments need to be purged, the economy needs to be rebalanced. But the government solution is "shoot up with more heroin",so that we can delay the withdrawal. But of course, they risk killing the economy with an overdose, which is what we might get, and an overdose, as far as monetary stimulus is hyperinflation, and believe me, that is a real possibility and we do not want to live through that!"
"A kid tells his teacher he has a straight A policy but he skips class and he doesn180;t study. He is not going to get A180;s just by saying he has a policy. The treasury can say they got a strong dollar policy all they want, but if we got Ben Bernanke debasing the money, it180;sgoing to go down".
"Remember, this wasn180;t created by the free market, all this excess leverage is there because of the government, it180;s there because of the Fed, they did this, they infected us with this disease! The fact that all these companies are now dying, they provided Wells Fargo and all these companies with free money, and they let them go out and leverage it up. And it180;s like I use the analogy, if a kinder garden school teacher passes out pixie sticks and soda pops and then leaves the classroom and she comes back and the kinder garden have wrecked the place, who do you blame?"
"The reason we have a flood is because Alan Greenspan blew up the dam!"
"The problems is that our pilot and copilot Bernanke and Paulsondon180;t know how to fly, they are blind, they are drunk. They are going to crash this plane even faster. They said we have to do this,they said we had to go into Iraq because they had weapons of mass destruction, they were wrong! This plan is a weapon of mass destruction to destroy our economy and to destroy our currency".
"This crisis can180;t be managed, we need the free market. You180;vegot these cronies in Washington, they are like little kids with achemistry set, and they keep on throwing these chemicals together,trying one thing after an other, they hope they are going to stumble on a miracle, but they are going to blow us all up!"
"It180;s a disaster, not just down the road but right now. Everybody is sugar coating this and glossing over it. Look at what President Bush said today, he said all the evidence points to a soft landing in housing. I don180;t know how he can say that with a straight face, I mean the evidence points to a crash landing. This is the Hindenburg".
"Every time I turn on the TV there is Paulson reassuring the American public that the under laying economy is sound. You know, it180;s like you go to your doctor and he tells you you are in excellent health but I just want to perform open heart surgery, just in case".
"What we are really doing is the equivalent of selling our financial souls to the devil. It180;s Henry Paulson and Ben Bernanke, they are the pipe pipers that led us down this path. Now they are going to lead us over a cliff".
"It almost reminds me a lot of this book, Tom Sawyer, where Tom is able to convince all of his friends to white wash his fence for him, and to not only to do that, but to pay him for the privilege. Because Tom Sawyer got his friends so convinced that there was so much joy in this toil that it was worth paying him, and so he got the world to do his chores. Little did Samuel Clemens realize that that little passage in that book would one day form the basis of the global economy, where America convinced a billion Chinese to paint our fence and to pay us for the privilege. That is going to end!"
"We are selling off our cows and our chickens to buy milk. We are mortgaging the farm, and foreigners are repossessing these assets, this is how nations bankrupt themselves. We are selling off productive income producing assets to enjoy current consumption".
"Because there would be nothing to rescue, but under a gold standard,if politicians want to spend money they have to have the gold, they just can180;t print it. So that is why politicians don180;t like the gold standard, because it keeps them honest. Just like if you go out on a date, if a high school kid goes on a date he doesn180;t want a chaperon there. They don180;t want a chaperon at the party but they are there anyways. So gold is like a chaperon making sure that the politicians are honest"
