Wes Moss: Author predicts end of American economy

Certified financial planner Wes Moss provides personal finance advice and accessible investment strategies. His guest post appears here weekly.

Wes Moss hosts 'Money Matters' Sunday mornings on AM750 and 95.5FM News/Talk WSB

Wes Moss hosts 'Money Matters' Sunday mornings on AM750 and 95.5FM News/Talk WSB

Are you enjoying the summer? I hope so, because the U.S. economy is about to collapse. That’s what financial adviser Peter Schiff predicts in a new book called, appropriately enough,”The Real Crash, America’s Coming Bankruptcy.”

Schiff is a best-selling author and a fixture on financial talk shows thanks largely to the notion that he predicted the 2008 economic meltdown. He is also legendary for his negativity, sensationalism and self-promotion.

According to Schiff, the current economic pause is actually the beginning of a serious recession that will hit full stride at the end of this year. At that point, the Federal Reserve will unleash a third round of Quantitative Easing, or “money printing.” This move, Schiff warns, will weaken the dollar without jump-starting the economy. As a result of the weak dollar, import prices will rise, pressing the profits of corporate America. Lower margins will prompt heavy layoffs, sending millions into unemployment. Banks will fail, housing will collapse and taxes will be raised in an effort to give the tapped-out government capital to try yet more futile stimulus.

These developments, Schiff predicts, will force the U.S. government to make massive budget cuts similar to the draconian austerity measures in Greece. Programs like Social Security and Medicare will be dramatically reduced or even eliminated.

“Alternatively,” says Schiff, “we can bail everybody out, pretend we can print our way out of a crisis, and, instead, we have runaway inflation, or hyper-inflation, which is going to be far worse than the collapse we would have if we did the right thing and just let everything implode.”

Schiff’s scenario seems like a stretch to me. While he makes some logical and legitimate points about our current economic challenges, bear in mind that he is selling a book that promises to protect readers from financial cataclysm. It’s obviously in his interest to predict such a cataclysm.

In order for Schiff’s nightmare to come true, every single element in his disastrous chain of events would have to work out perfectly. And if our economy hit the brakes hard again, I would be more worried about deflation than inflation. Things seldom go exactly as predicted.

For example, I find it hard to believe that in the face of a severe recession politicians would cut spending and hike taxes. Congress just doesn’t have the willpower to make such dramatic moves, regardless of the stakes. Last summer, with the U.S. facing a credit rating downgrade, lawmakers spent weeks debating our federal debt limit. The result: minuscule spending cuts and no tax increases.

Is there another recession in our future? Count on it. We’ve had 14 recessions in the past 70 years. But unemployment won’t hit 20 percent, and Social Security will be around for a long time.

When the next recession does hit – whether it’s ten months or ten years from now — Americans will survive it and go on to even better times. We’ll do that on the strength of innovation — by coming up with new and better ways to do things and by maximizing our resources. We’ll develop new technologies and tap new sources of energy for security and export.

In short, the bright light of America’s can-do spirit will wipe the darkness from Schiff’s crystal ball.

– By Wes Moss, for Atlanta Bargain Hunter

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15 comments Add your comment

independent voter

July 23rd, 2012
6:06 am

America’s ” can do spirit ” is gone under Obama.. his anti business pro labor union has put out the ” Bright light ” we only have a chance if Romney wins.. just watch CNBC ( not FOX ) for the true economic outlook of business men, not politicians…

independent voter

July 23rd, 2012
6:10 am

Peter Schiff is very intelligent.. not just trying to sell books.. he accurately predicted the great recession.. listen to him and learn !! look at the world stock markets today..

BobDog

July 23rd, 2012
7:28 am

A stopped watch is right twice a day.

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independent voter

July 23rd, 2012
8:32 am

the slow down is worldwide .. very little the U.S. can do.. we’ve kicked the can down the road for too long

Bob

July 23rd, 2012
10:17 am

Wes says that America will go on to better times…”We’ll do that on the strength of innovation — by coming up with new and better ways to do things and by maximizing our resources. We’ll develop new technologies and tap new sources of energy for security and export.” Do people actually pay you to offer such broad solutions to problems? Sounds like you have your head in the sand. Schiff has been saying this for more than a year AND he is selling a book…he is not saying it because he is selling a book.

Destin Dawg

July 23rd, 2012
10:55 am

proverty is way up… unemployment is WAY OVER 8% when you count under employed and those who have given up.. more like 17% and rising.. do you have any Hope or Change left ???

Independent voter

July 23rd, 2012
11:02 am

huge student loan debt crisis.. kids graduating college with general degrees.. can’t get jobs.. when we NEED engineers, nurses, plumbers, electricians, with H.S. or Vo Tech.. work while going to school.. no debt !!

Default Settings 2.0

July 23rd, 2012
2:21 pm

The Libor numbers turned out to be big fakerooneys. The threee corporate ratings agencies were being paid to fake numbers; so, why should I believe any of this? Seems like everything involving the market and the medias idea of the economy is bull. I think it will just keep on plodding along.

Default Settings 2.0

July 23rd, 2012
2:29 pm

BTW Wes, I do enjoy reading your column since H.U. decided to spend more time on leisure.

AustinDave

July 23rd, 2012
9:02 pm

This author’s argument is nonsense. Of course if the government does what Schiff suggests there will be deflation, that’s what he said. We all know that this scenario is not what the government will do. They will continue to spend, to keep the illusion alive. Nobody will loan us money at current rates. The (Un)Federal (No)Reserve(s) had to purchase 61% of our debt last year because we are not worthy of the low rates that we force on the market. That means that somewhere in the range of $800 billion was added to the money supply that the government got to spend at full value while we are stuck with higher prices down the road because of it. At some point rates will have to rise. We will default on our debt. Even a modest 5% interest rate will cost us $1 trillion a year in interest payments. Using the Fed to print money to pay our bills will force the rest of the world to stop using our dollars or require many more of them in return for their resources and labor.

These are all facts. The author would have you believe that if you just stick your head in the sand and let the wolves have their way, when you pick your head up you will find that the criminals in Washington have managed to innovate the world into an economic bliss. Wake up people that 5% can turn to 10% overnite. At that point we will have to default on our debt.

Amanda

July 24th, 2012
7:18 pm

DownT

July 25th, 2012
2:43 pm

to get ready for the crash, should I go long in put options and sell off my calls?

[...] Destin Dawg. July 23rd, 2012 10:55 am. proverty is way up… unemployment … Read more on Atlanta Journal Constitution (blog) Joey Warner: Matthews Park Titans headed to Babe Ruth World Series Jeremy Williams (University of [...]

Roy

July 27th, 2012
8:01 pm

Hey AustinDave – Looks like you have done your homework. And the thing that really scares me about what you have outlined is the $1Trillion interst payments on our debt. The 2010 IRS data on individual income and taxes is not available yet … but for 2009, the personal income tax paid by those 51% of taxfilers who paid taxes was only a bit more than $1 Trillion.
Wow – that will cover the interest but where will the rest of the budget come from??? It must be from all the savings from ObamaCare, right??? Yeh, in your dreams!!!