Fiscal Cliff: Day of Reckoning or Crisis?

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Fiscal cliff.

Let's bring in Peter Schiff DC EO of -- Pacific capital.

And with us is former Clinton advisor Doug -- all right so -- Peter first -- were at an impasse we've got -- basically and mr.

Boehner saying look new said -- you have yet have come up with any kind of a deal hasn't done its job.

What do you make of the impasse right now.

Well I think unfortunately will probably get around it I think the US economy is in big trouble either way.

But I think that it's -- worst outcome to avoid a cleft.

-- to go over it but I think we should broaden the discussion a look at what's going on around the world you know look at what's happened in Japan and Europe.

In Japan it -- had an election and it basically proves that Americans don't have monopoly on stupidity.

But the Japanese government is declaring war on Japanese citizens it's gonna debase the and it's gonna -- inflation.

That's not gonna grow the economy but it might -- that the bond bubble in Japan and JGB's and -- the Japanese -- start to dump their bonds.

And the Bank of Japan has to start by JGB's instead of treasuries they've been a bigger -- Japan -- -- that's a big problem for us.

And you're up the the Euro has been quietly appreciate even more than a dollar if a lot of that safe haven flows that went into treasuries goes out that's a much bigger fiscal -- -- the big buyers of -- -- sellers and interest rates really start to rise.

I you know there's a lot of -- so Peter your argument -- -- -- deduction on and you're just saying -- -- Japan application.

Of the US but you know dug their bond markets -- still pretty quiescent we haven't seen a lot of action.

Nothing from the bond vigilantes yet -- -- Clinton advisor or use our -- in the mid ninety's bond yields really spike higher because the economy was going getting healthier.

And that's -- -- to -- don't -- wheezing economy healing bond yields could go up this.

Investors say wait a second why invests in bonds we're just gonna go right for stocks square go ahead.

You see that the that in Italy is is the key issue we haven't seen interest rates spike.

For a simple reason nobody has confidence in the economy nobody believes we're gonna have robust.

Economic growth that I think there's a substantial reason given the confidence numbers today from the University of Michigan to believe.

That we could well be heading towards.

A recession especially given the disappointing Christmas sales so I'm frankly skeptical about what's gonna happen with our economy.

Either way I think we're gonna go over the cliff and with the debt ceiling limit being hit Liz I'm getting more and more pessimistic by the hour.

The only musician Peter and you know that and you're just saying it's more than -- -- we've got DC dysfunction and high definition this is political theater in DC at its most erotic.

And I think the issue at -- pointing out it's not really a bond market issue right now is that right here it's more about how it hits consumer wallets go ahead.

Not it's going to be a bond market issue you know the the public is not gonna gain or investors to knock me gain confidence in our economy.

They're gonna lose confidence in the US government's ability to pay its bills without trading massive inflation they're gonna lose confidence in treasuries.

That is the big problem that's the Achilles heel in this phony economy because yes interest rates have been artificially low they're not gonna stay artificially low and when foreigners start selling dollars rates are gonna go up and consumer prices are gonna -- -- and that's really getting hit consumers hard take a look what's happened in the crude oil market.

That chart looks really really strong you can see huge break out and oil prices and food prices in 2013.

That's gonna hit to consumer right in the wallet and Ben Bernanke authorities said he doesn't care how much is inflationary monetary policies.

Pushes up the cost -- -- energy he's gonna ignore that and just gonna feed the fire -- pretty even more money.

All right Doug what do you make and a.

-- -- -- -- I just believe we are in a holding action.

-- we resolve these immediate immediate.

Political problems I agree with you -- this is a political crisis.

First and foremost it is a week -- our economy getting weaker bond yields even today.

Are going down.

I think what -- speaks -- is certainly possible in the near future perhaps the more distant future but bottom line and I expect.

More softening and a lack of confidence.

It will focus more out of his political day of -- that a political crisis the fact of the matter is big government is very expensive and we're finding that -- there's no free -- -- we -- all this government we need much higher taxes on the middle class not on the -- but on the middle class -- -- the middle class doesn't wanna get stuck with this bill that we better start slashing government spending -- if you can -- bigger -- -- -- fiscal -- -- not a -- -- into Washington.

To advise both sides.

Are we got to leave it there thank you -- -- -- -- -- -- -- OK really appreciate again.

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Fiscal Cliff: Day of Reckoning or Crisis?

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