Peter Schiff Believes a Consumption Economy is a Bubble Economy

In a recent interview for Compact Financial News, economist and gold investor Peter Schiff declared that America has transformed into a consumption economy.

According to Schiff, such an economy is unsustainable. Schiff declared that “Consumption economies are bubble economies.” For an economy to be healthy, it needs production.

Schiff expanded on his views regarding production:

Because you cannot consume what is not first produced. Since our economy is so weak and we’re unable to produce the things that we’re consuming, America relies on strong international economies that are able to produce what we consume.

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The reality is that America has had a Potemkin village economy thanks to its dollar reserve status and the global order it has created where it has offshored millions of jobs overseas for the purpose of importing tons of cheap goods. So far, this has been disinflationary at worst, and at best, deflationary. However, it has come at a great cost, with the US becoming a largely consumption-based country that does not produce much and has seen its heartland hollowed out.

Schiff noted that a crash in the dollar system would end this entire charade:

And then the dollar crashes and that’s the end of this game. Because to the extent that we can only spend our dollars on the things that we produce ourselves, that’s where it hits the fan, because we’re not producing things.  And then price increases are going to explode in a much more visible manner.

The contrarian economist believes that this economic unraveling is already taking place:

Prices are going up all over and we want to pretend that, well, this is a one-time thing. It’s transitory. It’s because of supply shocks or shortages. No. It’s a surplus of money. That is the problem. And we’re creating even more.

It’s no secret that money printing and non-stop consumption are the main features of the economy. In light of the recent wave of stimulus checks, Americans have only continued this consumption trend with little production to show for it. Schiff asserted that “Americans are buying stuff that they didn’t produce. There’s no productivity related to this money printing. And so we’re going to see a surge in prices.”

Unlike most mainstream economists, Schiff understands inflation is the product of central bank intervention:

They’re the consequence of the inflation. The inflation is created by the Fed as it inflates the money supply to buy up all the bonds the government is selling so the stimulus checks don’t bounce.

Americans are likely in for a rough 2020s. The American political class is not serious about economic reforms, so many individuals will have to make proactive steps in securing their wealth. Gold and cryptocurrencies will likely play a major role as alternative assets for people to hold in these times of uncertainty. This is probably the most pragmatic strategy going forward for people who have little faith in the current economic order.

All told, holding alternative currencies is a major political act that serves as a form of rebellion against the present economic paradigm. 

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