Peter Schiff Sheds Light On The Economy

In a recent exclusive interview with Benzinga, Peter Schiff discussed the shape of the economy, beginning with the upcoming midterm elections and the impact it may have.

Schiff states that with the elections coming up, it wont be enough to boost the market out of a depression. Even if Republicans move in they probably still wont do the right thing. Their party isn't offering any better direction than the way we are moving right now.

He says the government needs to get out of the house market beginning with ditching Fannie Mae and Freddie Mac. The question was asked if they should be taken private instead. Schiff commented that it didn't work before. No one wants to own them. The government wants people to buy houses they can't afford. Not everyone should be a homeowner just like everyone doesn't need to own McMansions. Homes keep getting larger and larger because of subsidies and people are living in houses they can't afford.

Should the stimulus be withdrawn? Schiff emphasizes that there is too much spending and not enough investing. We aren't going to build the economy without saving and investment, which is where real growth comes from. It's the uncontrollable spending that got us here. The only thing that comes from spending is inflation. The economy is being propelled by the Chinese in a way. They're producing many of the goods that we're using everyday.

Schiff says the people who thought the economy was recovering didn't realize why it was sick. We're getting even more infected from the same disease, but now we've got a worse case of it. We're sicker than before and deeper in debt. Interest rates were too low for too long. Saving went to zero and the trade went negative.

The government has socialized the economy in a way. Excellent ways to save money would be to stop subsidizing education by guaranteeing student loans. It allows colleges to continuously increase tuition. By subsidizing it only reinforces the fact that colleges can get away with it. Without subsidies tuition would plunge because many people would not be able to afford it at the current rates.

Another way to save is to cut government worker pay. Government workers get paid too much in some cases, much more than they should.

Schiff finishes by adding that all of these solutions would lower taxes as well as attract foreign capital.

See Benzinga's interview with Peter Schiff here