Peter Schiff: "the real crisis is coming"

skiminnesota

skiminnesota

Active member
2008 was just a warm for the main event. the USA will be hit with a debt crisis that makes the housing bubble look like childs play.

discuss.
 
lottery win+ yurt + snowmobile + chainsaw + fuel + Guns n Ammo + skis + skins + food + remote mountainous area = my backup plan.
 
Getting my truck next week, in the tool box i will have.. Axe , Shovel , rope , chain, .22 rifle. among other stuff. If shit hits the fan i'm going into the woods to start my own country based on sex with models and happy hour.
 


How the Government Can Create Jobs

Testimony by Peter D. Schiff

Offered to the House Sub-Committee on Government Reform and Stimulus Oversight

September 13, 2011

Mr. Chairman, Mr. Ranking member, and all distinguished members of this

panel. Thank you for inviting me here today to offer my opinions as to

how the government can help the American economy recover from the worst

crisis in living memory.

Despite the understandable human tendency to help others, government

spending cannot be a net creator of jobs. Indeed many efforts currently

under consideration by the Administration and Congress will actively

destroy jobs. These initiatives must stop. While it is easy to see how a

deficit-financed government program can lead to the creation of a

specific job, it is much harder to see how other jobs are destroyed by

the diversion of capital and resources. It is also difficult to see how

the bigger budget deficits sap the economy of vitality, destroying jobs

in the process.

In a free market jobs are created by profit seeking businesses with

access to capital. Unfortunately Government taxes and regulation

diminish profits, and deficit spending and artificially low interest

rates inhibit capital formation. As a result unemployment remains high,

and will likely continue to rise until policies are reversed.

It is my belief that a dollar of deficit spending does more damage to

job creation than a dollar of taxes. That is because taxes

(particularly those targeting the middle or lower income groups) have

their greatest impact on spending, while deficits more directly impact

savings and investment. Contrary to the beliefs held by many

professional economists spending does not make an economy grow. Savings

and investment are far more determinative. Any program that diverts

capital into consumption and away from savings and investment will

diminish future economic growth and job creation.

Creating jobs is easy for government, but all jobs are not equal.

Paying people to dig ditches and fill them up does society no good. On

balance these “jobs” diminish the economy by wasting scarce land, labor

and capital. We do not want jobs for the sake of work, but for the

goods and services they produce. As it has a printing press, the

government could mandate employment for all, as did the Soviet Union.

But if these jobs are not productive, and government jobs rarely are,

society is no better for it.

This is also true of the much vaunted “infrastructure spending.” Any

funds directed toward infrastructure deprive the economy of resources

that might otherwise have funded projects that the market determines

have greater economic value. Infrastructure can improve an economy in

the log-run, but only if the investments succeeds in raising

productivity more than the cost of the project itself. In the interim,

infrastructure costs are burdens that an economy must bear, not a means

in themselves.

Unfortunately our economy is so weak and indebted that we simply cannot

currently afford many of these projects. The labor and other resources

that would be diverted to finance them are badly needed elsewhere.

Although it was labeled and hyped as a “jobs plan,” the new $447

billion initiative announced last night by President Obama is merely

another government stimulus program in disguise. Like all previous

stimuli that have been injected into the economy over the past three

years, this round of borrowing and spending will act as an economic

sedative rather than a stimulant. I am convinced that a year from now

there will be even more unemployed Americans than there are today,

likely resulting in additional deficit financed stimulus that will again

make the situation worse.

The President asserted that the spending in the plan will be “paid for”

and will not add to the deficit. Conveniently, he offered no details

about how this will be achieved. Most likely he will make non-binding

suggestions that future congresses “pay” for this spending by cutting

budgets five to ten years in the future. In the meantime money to fund

the stimulus has to come from someplace. Either the government will

borrow it legitimately from private sources, or the Federal Reserve will

print. Either way, the adverse consequences will damage economic growth

and job creation, and lower the living standards of Americans.

There can be no doubt that some jobs will in fact be created by this

plan. However, it is much more difficult to identify the jobs that it

destroys or prevents from coming into existence. Here’s a case in point:

the $4,000 tax credit for hiring new workers who have been unemployed

for six months or more. The subsidy may make little difference in

effecting the high end of the job market, but it really could make an

impact on minimum wage jobs where rather than expanding employment it

will merely increase turnover.

Since an employer need only hire a worker for 6 months to get the

credit, for a full time employee, the credit effectively reduces the

$7.25 minimum wage (from the employer’s perspective) to only $3.40 per

hour for a six-month hire. While minimum wage jobs would certainly offer

no enticement to those collecting unemployment benefits, the lower

effective rate may create some opportunities for teenagers and some low

skilled individuals whose unemployment benefits have expired. However,

most of these jobs will end after six months so employers can replace

those workers with others to get an additional tax credit.

Of course the numbers get even more compelling for employers to provide

returning veterans with temporary minimum wage jobs, as the higher

$5,600 tax credit effectively reduces the minimum wage to only $1.87 per

hour. If an employer hires a “wounded warrior”, the tax credit is

$9,600 which effectively reduces the six-month minimum wage by $9.23 to

negative $1.98 per hour. This will encourage employers to hire a

“wounded warrior” even if there is nothing for the employee to do. Such

an incentive may encourage such individuals to acquire multiple no-show

jobs form numerous employers. As absurd as this sounds, history has

shown that when government created incentives, the public will twist

themselves into pretzels to qualify for the benefit.

The plan creates incentives for employers to replace current minimum

wage workers with new workers just to get the tax credit. Low skill

workers are the easiest to replace as training costs are minimal. The

laid off workers can collect unemployment for six months and then be

hired back in a manner that allows the employer to claim the credit. The

only problem is that the former worker may prefer collecting extended

unemployment benefits to working for the minimum wage!

The $4,000 credit for hiring the unemployed as well as the explicit

penalties for discriminating against the long-term unemployed will

result in a situation where employers will be far more likely to

interview and hire applicants who have been unemployed for just under

six months. Under the law, employers would be wise to refuse to

interview anyone who has been unemployed for more than six months, as

any subsequent decision not to hire could be met with a lawsuit.

However, to get the tax credit they would be incentivized to interview

applicants who have been unemployed for just under six months. If they

are never hired there can be no risk of a lawsuit, but if they are

hired, the start date can be planned to qualify for the credit.

The result will simply create classes of winners (those unemployed for

four or five months) and losers (the newly unemployed and the long term

unemployed). Ironically, the law banning discrimination against

long-term unemployed will make it much harder for such individuals to

find jobs.

At present, I am beginning to feel that over regulation of business and

employment, and an overly complex and punitive tax code is currently a

bigger impediment to job growth than is our horrific fiscal and monetary

policies. As a business owner I know that reckless government policy

can cause no end of unintended consequences.

As I see it, here are the biggest obstacles preventing job growth:



  1. Monetary policy



    Interest rates are much too low. Cheap money produced both the stock

    market and real estate bubbles, and is currently facilitating a bubble

    in government debt. When this bubble bursts the repercussions will dwarf

    the shock produced by the financial crisis of 2008. Interest rates must

    be raised to bring on a badly needed restructuring of our economy. No

    doubt an environment of higher rates will cause short-term pain. But we

    need to move from a “borrow and spend” economy to a “save and produce”

    economy. This cannot be done with ultra-low interest rates. In the

    short-term GNP will need to contract. There will be a pickup in

    transitory unemployment. Real estate and stock prices will fall. Many

    banks will fail. There will be more foreclosures. Government spending

    will have to be slashed. Entitlements will have to be cut. Many voters

    will be angry. But such an environment will lay the foundation upon

    which a real recovery can be built.



    The government must allow our bubble economy to fully deflate. Asset

    prices, wages, and spending must fall, interest rates, production, and

    savings must rise. Resources, including labor, must be reallocated away

    from certain sectors, such as government, services, finance, health

    care, and educations, and be allowed to into manufacturing, mining, oil

    and gas, agriculture, and other goods producing fields. We will never

    borrow and spend our way out of a crisis caused by too much borrowing

    and spending. The only way out is to reverse course.




  2. Fiscal policy



    To create conditions that foster growth, the government should balance

    the budget with major cuts in government spending, severely reform and

    simplify the tax code. It would be preferable if all corporate and

    personal taxes could be replaces by a national sales tax. Our current

    tax system discourages the activities that we need most: hard work,

    production, savings, investment, and risk taking. Instead it

    incentivizes consumption and debt. We should tax people when they spend

    their wealth, not when they create it. High marginal income tax rates

    inflict major damage to job creation, as the tax is generally paid out

    of money that otherwise would have been used to finance capital

    investment and job creation.




  3. Regulation



    Regulations have substantially increased the costs and risks

    associated with job creation. Employers are subjected to all sorts of

    onerous regulations, taxes, and legal liability. The act of becoming an

    employer should be made as easy as possible. Instead we have made it

    more difficult. In fact, among small business owners, limiting the

    number of employees is generally a goal. This is not a consequence of

    the market, but of a rational desire on the part of business owners to

    limit their cost and legal liabilities. They would prefer to hire

    workers, but these added burdens make it preferable to seek out

    alternatives.



    In my own business, securities regulations have prohibited me from

    hiring brokers for more than three years. I was even fined fifteen

    thousand dollar expressly for hiring too many brokers in 2008. In the

    process I incurred more than $500,000 in legal bills to mitigate a more

    severe regulatory outcome as a result of hiring too many workers. I have

    also been prohibited from opening up additional offices. I had a major

    expansion plan that would have resulted in my creating hundreds of

    additional jobs. Regulations have forced me to put those jobs on hold.



    In addition, the added cost of security regulations have forced me to

    create an offshore brokerage firm to handle foreign accounts that are

    now too expensive to handle from the United States. Revenue and jobs

    that would have been created in the U.S. are now being created abroad

    instead. In addition, I am moving several asset management jobs from

    Newport Beach, California to Singapore.



    As Congress turns up the heat, more of my capital will continue to be

    diverted to my foreign companies, creating jobs and tax revenues abroad

    rather than in the United States.



    To encourage real and lasting job growth the best thing the government

    can do is to make it as easy as possible for business to hire and

    employ people. This means cutting down on workplace regulations. It also

    means eliminating the punitive aspects of employment law that cause

    employers to think twice about hiring. To be blunt, the easier employees

    are to fire, the higher the likelihood they will be hired. Some steps

    Congress could take now include:

a. Abolish the Federal Minimum Wage

Minimum

wages have never raised the wages of anyone and simply draw an

arbitrary line that separates the employable from the unemployable. Just

like prices, wages are determined by supply and demand. The demand for

workers is a function of how much productivity a worker can produce.

Setting the wage at $7.25 simply means that only those workers who can

produce goods and services that create more than $7.25 (plus all

additional payroll associated costs) per hour are eligible for jobs.

Those who can’t, become permanently unemployable. The artificial limits

encourage employers to look to minimize hires and to automate wherever

possible.

By putting many low skill workers (such as teenagers) below the line,

the minimum wage prevents crucial on the job training, which could

provide workers with the experience and skills needed to earn higher

wages.

b. Repeal all Federal workplace anti-discrimination Laws

One of the reasons unemployment is so high among minorities is that

business owners (particularly small business) are wary of legal

liability associated with various categories of protected minorities.

The fear of litigation, and the costly judgments that can ensue, are

real. Given that it is nearly impossible for an employer to control all

the aspects of the workplace environment, litigation risk is a tangible

consideration. Given all the legal avenues afforded by legislation,

minority employees are much more likely to sue employers. To avoid this,

some employers simply look to avoid this outcome by sticking with less

risky employee categories. It is not racism that causes this

discrimination, but a rational desire to mitigate liability. The reality

is that a true free market would punish employers that discriminate

based on race or other criteria irrelevant to job performance. That is

because businesses that hire based strictly on merit would have a

competitive advantage. Anti-discrimination laws titled the advantage to

those who discriminate.

c. Repeal all laws mandating employment terms such as work place conditions, over-time, benefits, leave, medical benefits, etc.

Employment is a voluntary relationship between two parties. The more

room the parties have to negotiate and agree on their own terms, the

more likely a job will be created. Rules imposed from the top create

inefficiencies that limit employment opportunities. Employee benefits

are a cost of employment, and high value employees have all the

bargaining power they need to extract benefits from employers. They are

free to search for the best benefits they can get just as they search

for the best wages.

Companies that do not offer benefits will lose employees to companies

that do. Just as employees are free to leave companies at will, so too

should employers be free to terminate an employee without fear of costly

repercussions. Individuals should not gain rights because they are

employees, and individuals should not lose rights because they become

employers.

d. Abolish extended unemployment benefits

In addition to being a source of emergency funds, unemployment

benefits over time become more of a disincentive to employment than

anything else (although the disincentive diminishes with the worker’s

skill level -- i.e. high wage workers are unlikely to forego a high wage

job opportunity to preserve unemployment benefits). For marginally

skilled workers unemployment insurance is a major factor in determining

if a job should be taken or not.



Even if unemployment pays a significant fraction of the wage a worker

would get with a full time job, the money may be enough to convince the

worker to stay home. After all, there are costs associated with having a

job. Not only does a worker pay payroll and income taxes on any wages

he earns, the loss of unemployment benefits itself acts as a tax. Plus

workers must pay for such job related expenses as transportation,

clothing, restaurant meals, dry cleaning and childcare, and they must

forgo other work that they could do in their free time (providing care

for loved ones, home improvement, etc.).

Understandably, most people also find leisure time preferable to work.

As a result, any job that does not offer a major monetary advantage to

unemployment benefits will likely be turned down. This entrenches

unemployment insurance recipients into a class of permanently unemployed

workers.

It is no accident that employment increases immediately after

unemployment insurance expires for many categories of workers. In fact,

many individual will seek to max out their benefits, and remain

unemployed until those benefits expire. If they work at all, it will be

for cash under-the-table, so as not to leave any money on the table.
 
yeah as i don't have any money, i consider myself hiding from the economy.

post graduation debt in 2015 will change that...
 
Surprisingly, my parents house just sold. It was worth a lot and they only got about half of that (a little more). But still, it sold, but my dad took good care of it.

But my dad's told me for ages to put $100 from each paycheck away, so I've started to do it (5 years later) into a non-reachable account.
 
eh being liquid in these times may not be the best thing.

if rampet inflation hits owning a home would be far better than the alternative.
 
some of the points he made were downright retarded, and his justification was just stupid.
 
in a cynical way i kind of hope it completely crashes. money is the route of all evil.

and i know what kinds of plants i can eat around here so im all set.
 
i got hella guns and hella food. I aint worried about shit. If i loose my internet then im really going to be in trouble though.. wtf i do wit out xbox live dawwgg
 
I wouldnt mind seeing Schiff as RP's running mate when he wins the nomination, there ware talk of it prior to the 08' election.
 
So you think that money is the root of all evil? Have you ever asked what is the root of money? Money is a tool of exchange, which can't exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value. Money is not the tool of the moochers, who claim your product by tears, or of the looters, who take it from you by force. Money is made possible only by the men who produce. Is this what you consider evil?

im sure Woozy knows where this comes from, but can anyone else name it? (without google duh)
 
Henry ford............what about everyone else?

He was a great example but for every great example there was like 10 poor example back then
 
If the Eurozone can pull their shit together and the E.C.B. (European Central Bank) will begin lending to the indebted countries (Portugal, Spain, Italy) which still have favorable odds for recovery, I'm moving there
 
"hahaha you're saying my house won't be worth double next year? Good luck with that"

"hahaha you're saying my $100,000+ fafsa loan for a sociology degree won't get me a 6 figure job? Good luck with that"

The value of a college degree is steadily declining while the cost continues to rise. However, the perceived value is still there, which is what is still driving the bubble. The idea of an education as a "safe" investment is the same mentality that drove the housing bubble.

What exactly do you think will happen when all these students cannot pay back the money they owe for lack of an adequate job?Sallie Mae will go the exact route of Freddie and Fannie. If you cannot see that you are either blind, or just straight up dumb.
 
I think he's right about simplifying the tax code and removing the bullshit as well as cleaning up some regulations. I also think his idea about shifting to a save and spend economy is good. It is an idea that supports smart, controlled growth. Spending won't magically make the recession go away, either. He's right about that.

His folly is in trusting business, especially the big kind, to regulate themselves. The removal of regulations during the Reagan and Clinton presidencies were what allowed the stupid, irresponsible, uncontrolled growth that led to this whole situation in the first place. Over and over again, big business has demonstrated an inability to govern itself, driven by greed. This guy is intelligent, but he seems to have forgotten history. But really, none of us can say too much about that, because we did, too. We all went along with it.

What is going to fix this economy is time, really. If we attempt to shoot up super fast to make up for what we've lost, we are headed for the same problems in the future. What we need to do is put back in place many of the regulations that were passed during/after the Great Depression. Regulations are not as big of a business inhibitor as some would have people believe-smart ones, anyway. Doing this will lay a foundation for steady, stable growth for the future. As much as I wish there was a magic wand we could wave to make this all go away, we can't. All we can do is make sure it doesn't happen again, and that the recovery doesn't leave the working class behind.

That is my two cents on our economic situation.
 
the first schiff video. one of the guests "dow at 16k in 2008"

HA

watching some of those clips is down right creepy now that its 2011 Schiff nailed it when he berated americans for thinking that their homes are infallible investments (does that word even apply anymore to homes)

IMO its the time to buy a house but not because its gonna grow hand over fist, from now until eternity but because if you have the credit its cheaper than renting in cases.
 
No, when did I ever imply that I did?

Many people do however, just take anyone who goes to an out-of-state or private college. Racking up that kind of debt is actually surprisingly easy.
 
I thought you said your 100k fasfa? And I know it's easy it's just a shocking #. Puts the other tread about subsidizing illegal immigrant tuition in perspective As gov. Loans and school aid gets harder to get
 
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