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Euro Pacific Precious Metals CEO Peter Schiff on the growing crisis in the bond market and its impact on the U.S. dollar.
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We don't seem to be any closer to a resolution on the fiscal cliff even though many -- warning that the economy could face dire consequences if there's no agreement but one strategist says.
-- -- worrying about December 31 backed up why isn't even the real fiscal cliff that -- Interest is -- other than Peter Schiff CEO of Euro Pacific precious metals.
Good friend of the show here and we're glad to see him again Peter although I wish was under better circumstances now.
You say the real cliff -- coming is going to be bigger than the housing mess bigger than the financial crisis that we went through.
It's the bond mess and specifically when the Fed stop spreading money to buy up treasuries.
All hell's gonna break loose right.
Well and if it continues to print money it's going to be a bigger hell you know if we avoid.
The fiscal cliff we end up throwing the dollar over the currency -- Because we send a message to the world that America will never pay its bills we're just gonna keep borrowing money -- -- our creditors cut us off.
And that's when interest rates skyrocket and the pressure is on the bad.
Because of the Fed caves into the political pressure to buy up all those bonds that nobody wants that we destroy the dollar.
And and that's an even bigger crisis that if we just let the bond market collapse and it and let it take the economy -- that.
-- -- and let's not start some background you're worth throwing up this term the bond market.
A lot of our viewers on treasuries what specifically are you talking about the entire yield curve.
Well the government is borrowing over a trillion dollars a year right now and I I I put borrowing in quotes because borrowing implies that you're gonna pay it back.
We will never pay it back we can't pay it back.
That's why we have to raise the debt ceiling because we can't pay our bills we got to borrow more money from the same people who listen to my first how will that giant -- -- -- OK so how what would cause of the back to break up this game that you Colin.
Well as as creditors don't want to buy treasuries.
And the only buyer left -- the Federal Reserve and and you still have foreign central banks but they're gonna back away so -- -- the -- is the only buyer it has to print an enormous amount of dollars to buy up all the maturing bonds and all the new bonds and that sends the dollar collapsing and prices skyrocket and then the Fed can't.
Maintained -- pretense that there's no inflation because prices are rising you know is faster that you could see them.
And end and then all of a sudden the Fed has to do something he can't just sit there and tolerate the inflation but -- it does anything at their raises interest rates that it causes a bigger financial collapse in 2008.
Hey Peter let's talk about how we measure things that might sound like a theoretical discussion but it's very real practical if you're looking at your 41 K -- -- portfolio.
You look at the S&P for example and how that did last year to think she -- -- pretty -- it's up double digits.
That's how I measure value by the amount by the dollar amount but you say that's a bad -- To measure the value of what you had you should measure relative to the price of gold.
And by the price of gold the SP hasn't done as well right.
-- or something objective you know something of look biggest -- -- yeah zawahiri Peter Peter Peter Peter hold -- what we're seeing now that blue line is how the S and he has done.
-- if you measure the SB in there in the value of gold the yellow line in dollars and as you -- see the gold values not as good go ahead Peter.
Well it's it's horrible -- -- -- how long the chart is I can't see it but if it goes back twelve years you can decisions that -- has just a year but I mentioned.
-- -- they -- they just announced they're gonna raise the price of -- subway rider bus tried to two dollars and fifty cents what's how the -- doing in terms of that and I remember when I live in the city when -- and I was there I was I was paying fifty cents to ride the bus and 25 cents signed on Sunday so that's a huge increase -- -- -- -- -- I just I just went to -- Pennsylvania over the weekend from New -- thirteen dollars in the Lincoln Tunnel.
To get back in the New York fifteen dollars at a price of -- It is going way up truck going from New Jersey to New York every -- okay -- out but let's just put it this way Peter.
But you talk about it a dollar crash people look at several really fair assessment to call the crash -- really expect that.
Well it hasn't crashed yet it's gone down I mean people forget the history the dollar but when Nixon because there aren't a day gets here right now we -- -- day by day but eight you know everybody -- anabolic rises again.
Well I might my point is in 1971 when when all the gold standard in the next seven or eight years the dollar lost two thirds of -- value that's what oil prices went from three dollars to thirty dollars that's what we had all the inflation in the 1970s and I think the decline that's coming for the dollar is gonna be much bigger than what we saw in the 1970s the fundamentals are much worse.
Meanwhile over the last five years and here's the dollar has been going down.
Look at put up -- -- you know the Australian dollar -- needed dollar five to buy Australian dollar he's real live for fifty cents or not to long go get your not your odds of that dollar is going -- you can't just look at the Euro they have they're having problems there too but you know what.
The dollar is also going down against the Euro.
-- be watching this and very closely as Peter Schiff says watch out for -- Peter you know you can you can go fly fishing with Paul Volcker what would you ask him if you -- on that for the RFK auction.
I don't know I mean I'm still disgusted over the three million dollars -- -- -- at that college in New York City a puppet.
Raise his taxes.
Absolutely love a lot of those guys don't pay -- alright Peter Schiff.
If I guess and support either.
Thanks like no show jobs before I shoot myself I'm gonna have to say -- -- Peter Schiff of Euro Pacific Capital thank you -- -- but did you ever wanted to.
