05 June 2007

Bear baiting: Peter Schiff on CNBC

As CNBC's pet bear Peter Schiff is convinced the end is near. It's true he's trying to sell his book, (Crash Proof: How to Profit from the Coming Economic Collapse) but some of his arguments are pretty compelling. Peter thinks American consumers have been "borrowing money like drunken sailors and blowing it." But he's really talking about all the dollar reserves piling up in foreign central banks. He expects the rest of the world to cut us off with significant impacts on the value of the dollar and interest rates leading to a serious recession.

The discussion, ok staged argument with CNBC bulls, in the video interview below is pretty interesting. Here's an excerpt from his latest commentary followed by the CNBC video:

When will all this bad news sink in?
Peter Schiff -- June 1st 2007

Yesterday we learned that 1st quarter GDP “grew” at an annualized rate of only .6% (of course if the government used honest inflation numbers, real GDP is already contracting). Slower growth means fewer jobs and declining incomes, which will further pressure the housing market as homeowners have less income to confront rising adjustable rate mortgages. For potential home buyers the situation is even worse. Not only do they face higher mortgage payments but they must now come up with actual down-payments (which they do not have) and meet far stricter lending standards, including documenting their inadequate incomes.

Today we received further evidence that our imbalanced economy is moving further off kilter as another 19,000 manufacturing jobs were lost and the personal savings rate fell to minus 1.3%. Fewer goods being produced means even larger future trade deficits, which will be made more difficult to finance as a result of rising interest rates. Tighter credit and inadequate income growth will also make record personal indebtedness that much more costly to service.

My guess is that Wall Street's blissful slumber may be ended by the shrilling wake-up call of the collapsing dollar. In the last ten weeks the Canadian dollar has risen by over 10% against the greenback. That’s about one percent per week - incredible! With the weakness in the U.S. economy becoming increasingly apparent overseas, and global interest rates continuing their ascent, it will not be much longer before foreigners pull the plug on the dollar. When they do, it’s the American economy, and Wall Street's phony rally, that will go down the drain.

If you'd like to hear Peter argue with the CNBC bulls check the video out.

Euro Pacific Capital | Video Interviews
CNBC Kudlow & Company 6/1/07

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