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Schiff: U.S. Problems Worse than Europe's

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    Euro Pacific Capital president Peter Schiff weighs in on the market selloff.

  • Duration 4:23
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It's set down with this market sell off underway let's bring Peter Schiff again president of -- Pacific.

-- capital he's the author of the book the real crash America's coming bankruptcy.

Areas and there's the book.

Peter from Stamford Connecticut today suffered about health care for a second we know we won't hear about it -- Thursday but the market.

As Lawrence has pretty messy and I know we've talked in the past about Europe but what do you make of this latest sell off.

Well you know I think that Europe is actually more of a short term positive.

That a negative people like to blame the weakness of the US economy in the markets on the problems in Europe.

I think our problems are worse and I think right now the fact that so many people are worried about Europe is actually taking some of the pressure off of our bond market.

And often marked currency market -- I think that we had to -- drop in the bond market.

That would be even more problematic for the US stock market than what's happening right now in Europe -- don't don't you know don't eat that allow people to scapegoat Europe.

We have real serious structural problems underline our economy -- they're not gonna go away if Europe solves this problem.

Not necessarily any argument there but the markets down today with just the short term and -- people are still concerned about Europe you're just saying if they solved Europe.

And the problems don't go away they can come here people thought -- -- nice -- they.

They might actually get worse in fact I keep hearing to about the fact that while gasoline prices are are falling oil prices well there are falling because of the problems in Europe as well and the problems -- in May be in the emerging markets because of what's happening in Europe so.

We're you know we're catching a break -- -- you're getting knowledge the fact that.

The stock market is going down for problem -- pricing going down for the same problems so any thing that -- temporarily improves the situation there would send oil prices back up and will will lose that benefit as quickly as we as we got it is interesting because we did try to point out every time you see oil prices go down another -- down below eighty dollars that yet to look at the recent.

You know why there they're falling and if they're falling because of economic concerns is the -- is 7848.

As we states and that's not a silly.

A good thing but you that our economy will benefit the short term we have low interest rates and we have lower oil prices you just think it's gonna turn to -- turn around a real big hurry and move the other well.

Action that.

The low interest rates are are are actually our Achilles heel because remember the low interest rates are temporary but all the debt that we accumulate is permanent.

And so in the short run we can afford to service the debt only because interest rates are so low.

But what happens when interest rates actually rise right you know Ben Bernanke was actually asked that question -- and a senate hearing.

And he dismissed the -- concerns because he said well even if interest rates rise to 1%.

It only increases the cost of servicing the debt by a hundred billion a year in which a hundred billion is not trivial but.

Who said 1% is the cap on interest rates I remember when I was the floor right what -- -- interest rates go to 5% what happens it 7% we've been asked these same oh yeah well in Spain or Italy for one year well America either and these interest rates have not gone up we've been asking the same question for years in the rates of just.

And I -- you probably have lots because Europe's of -- once they solvent then they'll spike but really think selling overnight interest rates and go from where they are which is basically zero -- tenure one and a half percent and it's gonna spike up.

Very very quickly while it might not it might not happen overnight but what if it took six months there's still gonna get there.

Where we feel they can't afford to service the debt when interest rates go up and just remember wasn't a few years ago people thought real estate prices would never fall that's why nobody was worried about the financial crisis.

How or the banking system.

Because people were operating under phony premise that real estate prices were never fall what -- now they're operating under the same premise that he -- will never -- before -- let you -- where's there no -- in terms of rising interest rates when it and how much of a spike are you talking about.

Well eventually they're gonna go significantly higher -- -- 5% 10% may be higher than that.

And the fact of the matter is we can't even afford 5%.

Which historically would still be a low a level of interest rates for the federal government -- 5%.

That's historically low okay but we're measuring that against numbers when the federal government was in much better shape fiscally it's -- given this situation now the federal the federal government should be borrowing at a high.

Cost -- costs relative to history not not average and so rates have got a long way to go off and we have a huge price to pay when that happen right it provides us a perfectly into our next guest leadership taking a break from his live radio show to join us which we appreciate --

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