The Real Crash: America's Coming Bankruptcy---How to Save Yourself and Your Country

by Peter D. Schiff

You might be thinking everything's okay: the stock market is on the rise, jobs are growing, the worst of it is over.

You'd be wrong.

In The Real Crash, New York Times bestselling author Peter D. Schiff argues that America is enjoying a government-inflated bubble, one that reality will explode . . . with disastrous consequences for the economy and for each of us. Schiff demonstrates how the infusion of billions of dollars of stimulus money has only dug a deeper hole: the United States government simply spends too much and does not collect enough money to pay its debts, and in the end, Americans from all walks of life will face a crushing consequence.

We're in hock to China, we can't afford the homes we own, and the entire premise of our currency—backed by the full faith and credit of the United States—is false. Our system is broken, Schiff says, and there are only two paths forward. The one we're on now leads to a currency and sovereign debt crisis that will utterly destroy our economy and impoverish the vast majority of our citizens.

However, if we change course, the road ahead will be a bit rockier at first, but the final destination will be far more appealing. If we want to avoid complete collapse, we must drastically reduce government spending—eliminate entire agencies, end costly foreign military escapades and focus only on national defense—and stop student loan or mortgage interest deductions, as well as drug wars and bank-and-business bailouts. We must also do what no politician or pundit has proposed: America should declare bankruptcy, restructure its debts, and reform our system from the ground up.
Persuasively argued and provocative, The Real Crash explains how we got into this mess, how we might get out of it, and what happens if we don't. And, with wisdom born from having predicted the Crash of 2008, Peter Schiff explains how to protect yourself, your family, your money, and your country against what he predicts.

Genres: Economics, Nonfiction, Politics, Finance, Business, History, Audiobook

464 pages, Kindle Edition

First published May 8, 2012

About the author

Peter David Schiff is an American investment broker, author, financial commentator, and was a candidate in the 2010 Republican primary for the United States Senate seat from Connecticut.

Schiff is CEO and chief global strategist of Euro Pacific Capital Inc., a broker-dealer based in Westport, Connecticut and CEO of Euro Pacific Precious Metals, LLC, a gold and silver dealer based in New York City. He frequently appears as a guest on CNBC, Fox News, and Bloomberg Television and is often quoted in major financial publications and is a frequent guest on internet radio as well as the host of the former podcast Wall Street Unspun, which is now broadcast on terrestrial radio and known as The Peter Schiff Show.

Schiff is known for his bearish views on the dollar and dollar denominated assets, while bullish on investment in tangible assets as well as foreign stocks and currencies.

Reviews

[Dan Raymo · Rating 2 out of 5]

Having recently read Paul Krugman's, End This Depression Now!, and finding myself in more or less agreement with most of it, I was looking for the conservatives' take on our economic problems. After a month-long battle with Ayn Rand's, Atlas Shrugged, I eventually came across The Real Crash: America's Coming Bankruptcy---How to Save Yourself and Your Country by Peter Schiff.

Most of my friends consider me to be a "pinko leftist", and they're probably right (or maybe I just run with the wrong crowd,) but I've always agreed with a lot of conservative beliefs and like to think I'm objective enough to hear out opposing arguments. Of course these days, the opposing arguments usually consist of random shouts of "Obama", "Socialism", and ultimately, "well business can't operate under conditions of uncertainty"; so it was good to find that Schiff provided a lot of thoughtful arguments for his beliefs. I found myself agreeing with him on lot of what he felt was causing our problems, but not on many of the solutions.

Pretty much every solution was the same...such and such is broken...get rid of it. In effect, throwing the baby out with the bath water. This blind conservative belief that the invisible hand of the "free-market" will solve all issues is absurd. We don't have to guess what unfettered capitalism will look like – we know – we've seen the economic meltdowns, we've seen the rivers so polluted that they caught fire, we've seen the child-labor, the swindles, the corruption, and on and on.

In most cases he calls upon ridiculous examples to prove his case, thereby avoiding the real arguments against them. He proposes getting rid of all government licensing, and as an example tells of a Louisiana law requiring florists to be licensed, saying if you don't like the flowers, just don't go back. This may be a good example of special interest groups having too much influence in law creation, but a ridiculous one for his point. Does he really want an unlicensed brain surgeon or pilot? What happens when you don't like the brain surgery or the way the pilot flew into the side of the mountain? He tries to take advantage of our 30 second attention span, by showing us ridiculous examples, and hoping we'll have been convinced and moved on before we've realized the inherent problems with them.

On healthcare his arguments were equally weak. On pre-existing conditions, he says if all insurance was held to that, "...you could call Allstate while your house was burning and get insured for fire damage." Of course healthcare isn't anything like that. Even people with insurance can (and do) have their newborn child refused if born with a health problem. In supporting that healthcare should be completely privatized, he says, "You would shop more for health care. Doctors and other providers would have to start competing on price." I can't wait to start shopping around for my emergency appendectomy. The idea that a healthcare is best served by profitability is absolutely absurd.

He uses facts and history where convenient, and completely ignores them any other time. He says of the 50's, "At the time Americans enjoyed a living standard unmatched anywhere else in the world. Limited government maximized freedom and economic growth." Really? We had the highest marginal tax rates in our history (92%) and the toughest banking regulations.

I started out liking this book, but by the time I was done I was ready to shred it. He is an intelligent man who is quite knowledgeable, but his love affair with capitalism is religious in nature – he follows it with blind faith, disregarding facts, history, science and even his own common sense when they conflict with its dogma. I could go on and on, as he covers just about every social ill in this book, but the final straw was his take on gay marriage, "If you're gay and you want to be married, move to a state where most people agree with you on this."

[Seth · Rating 4 out of 5]

Peter Schiff accurately predicted the 2008 meltdown of the mortgage market and financial sector. Before it all hit the fan, though, he was called a doomsayer and was frequently laughed at on the mainstream financial talk shows. But he turned out to be right. The real problem, Schiff argues in this book, is that what happened in 2008 was not actually "The Crash," but was simply the prelude to it. The dot-com bubble popped at the turn of the century; the housing bubble popped in 2008; Schiff shows persuasively that we are now in what he calls the government bubble. The "recoveries" from each of the first two bubbles were not actually true, healthy corrections in the market; instead, the Federal Reserve used easy money policies to paper over the real issues and delay (and ultimately prolong) the inevitable pain.

Schiff explains very clearly and concisely how government intervention and the Fed's irresponsible easy money policies are the underlying cause of the mess we are in. Then, moving outward from these specific topics, he goes into a pretty cookie cutter libertarian presentation of all the things government should not be involved in, interventions which most often accomplish exactly the opposite of the stated goals. There's not much new content here if you're familiar with libertarian thought, although Schiff's presentation is readable (listenable, in my case) and compelling, particularly the explicitly economic issues.

But once Schiff got into social policy, I was reminded why I can't subscribe fully to the extreme elements of "live and let live" libertarianism. For example, I was not convinced to support decriminalizing prostitution or the Schedule I drugs (and beyond).

One major complaint I had was with the reader of the audiobook. During the parts of the book where Schiff was simply explaining financial concepts, the tone was straightforward and pleasant. But during the middle section of the book, containing Schiff's policy recommendations on a slew of issues, the reader's voice took on a snarky and condescending tone that was off-putting. I've seen Schiff on plenty of videos online, and he's not an arrogant jerk, but much of the audio presentation sure made him seem that way.

Back to economics. Ultimately, Schiff realizes that his prescription to avoid the pain and fix the financial and governmental mess (as much as we can) are unlikely to be followed, and so we gives advice on how to weather the crash when it inevitably comes. His advice is basically this: get out of the dollar, put resources in gold and foreign investments, and expect the standard of living in the United States to decline markedly. Ultimately, Schiff is not a pessimist, but rather an optimist tempered by realism, recognizing the crash that will come-- not if, but when.

[Bill · Rating 2 out of 5]

I normally pass on books like this, books that promise the next best and greatest investments, predict impending economic doom or guarantee how to get filthy rich in 30 days or less! Invariably these books tend to be narrowly focused, involve some sort of extreme political, social or economic position, grind lots of axes and conclude with an often times not so subtle sales pitch. However I went against my best judgment when a good friend at work insisted I give it a read and let me borrow his copy. He seemed very, very impressed and enthusiastic.

The Real Crash is a provocative libertarian, laissez-faire, free market rant that is narrowly focused, involves extreme political positions around minimalistic governments and unfettered capitalism, grinds lots of axes and concludes with a sales pitch for the author’s mutual funds and precious metals sales and physical storage business.

I knew it ... told you so!

I can be very susceptible to many libertarian ideas (I would characterize myself as a fiscal conservative but a social liberal) but the issue always comes down to the practicality of transforming abstract libertarian ideas and concepts into real life economic and social policy. And because of this susceptibility I get easily sucked up into some of these libertarian discussions and readings. Conceptually these ideas have much appeal but the reality of implementing them is daunting.

The author's basic premise is our nation is in the midst of a gigantic, ever expanding U.S. Treasury market bubble, far more dangerous and destructive than the dot com bubble of the 1990s or even the most recent real estate collapse and financial calamity. The only solution the author believes that will deflate this monumental bubble and avoid the impending economic apocalypse is to sharply reduce the size of the United States government, stop printing money and issuing U. S Treasury bonds, reduce or eliminate most regulations and let the free market take over.

Accordingly, the author advocates a return to the gold standard and elimination of the Federal Reserve, abolishing Social Security, Medicare, EPA, FDA, EEOC, ADA, FDIC, all Wall Street regulations and all minimum wage laws, just to name a few of the manifestations of big government the author believes are detrimental to free markets and the flow of capital to the most productive returns. The author writes that it was far easier to become rich in America before the new Deal and Great Society programs were enacted than after. But I would ask, at what social cost?

Hmmmm ... didn’t free market capitalism reign supreme in during the 1800s industrial revolution well into the mid-1900s? Any lessons learned from those experiences? Let’s see ...

The whole Robber Baron thing didn’t work too well for our society.



Our nation's experience without financial regulation or controls didn’t work out so well for lots of folks ...





The free market didn’t work out so well for women and children locked in factories and forced to work ten to fifteen hours a day for a pittance, sometimes leading to their very demise because of such unsafe conditions.



Oh, how about the environment ... didn't fair very well without rules and regulations. I live near the Connecticut River and in the 1970s LIFE Magazine called the river the best manicured sewer in the nation! It is gorgeous today thanks to environmental protections.



And how can we forget about slavery in the United States ... free markets worked wonders for these folks!



The author did offer some pretty interesting ideas around legalization of drugs (the war on drugs has been a colossal and expensive failure), gambling and prostitution. After all, we legalized alcohol in 1933 after the regulatory failure of Prohibition, put in place some parameters around alcohol sale and consumption and let people make their own decisions around alcohol in their lives. It seems we’re going down that same path with marijuana. Why not do the same for all drugs, gambling and prostitution? Kind of makes sense to me.

But most of his other proposals seem extreme. It feels like the author is either blind to American history or maybe he’s a historical revisionist. Or most likely, this book is a huge sales pitch for his mutual funds and precious metals sales and physical storage business masquerading as a book. Capitalism is not benevolent. Unfettered, unbridled capitalism can be brutal as it seeks the highest rate of return regardless of societal impacts or collateral damage. Without some regulations and controls in place I don’t see how we avoid back sliding into the experiences of the 1800s and 1900s.

It was very interesting to read about these social, political and economic ideas but in the end this book was nothing more than a well groomed and camouflaged investment sales pitch. Let the buyer and reader beware!

[Owlseyes]

Notes of 29th October 2013.

Now that it is a hot topic in the USA the question of the “debt ceiling” and the “default” risk (let’s see coming February), this book is quite appropriate. Some weeks over the Government Shutdown (a short-term victory for Obama) many wonder what’s next. A divided (and apparently unpopular) GOP tries to assert itself midst the moderates and Tea partiers.





Anyway, perplexity and doubts can surely be seen on the USA future. I’ve watched an interview investor Schiff gave in the Cambridge House, to a Canadian interviewer, some time ago. It seems Schiff has got a complicated relation with the Republican Party. He’s not a libertarian, but, clearly, he admires Ron Paul.

He speaks about the “phony recovery” : using stimulus (packages) …and artificial rates cuts; he prefers the real recovery: it would imply higher rates, and government cutting spending (entitlements cuts and Government personnel too), and the restructuring of “our” debt. He raises questions about the Fed's independence.

Small government is the solution. Canada is in better shape; the USA in a “lot of trouble”.

He says people (in the USA) don’t save…since saving is rewarded negatively. “We’ve got a cancer in our economy”. Despite trillions of borrowed money from the Japanese and China:” we’re broke”.

Of course, to him: Obama is “worse than Bush”.



Notes of 23rd April 2016





Peter Schiff: Dollar will collapse 100% in 28 May 2016.
---

Well, it didn't. Now, in the Trump era things may turn out to be different, yet Schiff keeps on being pessimistic. He still believes in the bubble ("owned" by the president); the fundamentals being "terrible", the bubble will burst.

"I invest for a living"

"The Fed will be printing so much money that your dollars could become worthless"

"You need to look to overseas assets"



As of past November, he was still affirming: "Gold Will Explode & Dollar Wiped Out"

[Serge Boucher · Rating 2 out of 5]

Despite the low rating, I actually really enjoyed reading this book. It's a super-interesting read, if you actually know a few things about economics and enjoy fishing logical mistakes and questionable (often hidden) assumptions in a superficially convincing argument. While Peter Schiff is right about some things (his libertarianism on social issues is well-placed and his arguments are sound) and more intellectually consistent than most pundits (admittedly a low bar), his economic model remains fundamentally broken, and thus his policy advice is inane. Still, a recommended read if you insist on hearing both sides of an argument.

[Jeremy · Rating 4 out of 5]

So basically this is what I got out of this: Invest in...
+ Raw materials
+ Agriculture
+ Dividend-paying stocks in companies that sell to growing markets abroad (not necessarily American companies who do so as they may incur burdensome taxes for their efforts)
+ Currencies of: Australia, Singapore, Hong Kong, New Zealand, Switzerland, Norway, the Netherlands, Canada, China.
+ Short-term, nondollar bonds
+ Gold


Quotes:

Whenever people credit me with calling the crash, it pains me to tell them that what they saw in 2008 and 2009 wasn’t the crash—that was a tremor before the earthquake.

America needs to restructure its debts. We’re already bankrupt, it’s time we declared it. The U.S.A. is insolvent, and should enter the sovereign equivalent of Chapter 11 bankruptcy. Then, like a bankrupt company, we can pay off some fraction of our debts—to China, to social security recipients, and other debt-holders—and then reorganize.

Our economy today is once again built on imaginary wealth. Like the proverbial house built on sand, it will collapse. When that happens, when America’s tab finally comes due, it will probably be as bad, or worse, than the Great Depression. You’d better be ready for it.

When off-budget and contingent liabilities are thrown in, total government debt tops 100 trillion!

A society that does not save cannot grow. It can fake it for a while, living off foreign savings and a printing press, but such “growth” is unsustainable—as we are only now in the process of finding out.

We’re importing to consume. Other countries are importing to produce.

The tax credits and handouts draw rational businessmen to invest in technologies that don’t really add value. If these technologies were valuable, they wouldn’t need subsidies in order to draw investment.

If you keep replacing one bubble with another, you eventually run out of suds. The government bubble is the final bubble.

Tightening money supply and rising interest rates will be productive pain—like medicine—while hyperinflation will be destructive pain.

A movable [debt] ceiling is tantamount to no ceiling at all.

While bursting a bubble is bad politics, it’s great economics. Bubbles have to burst, and the sooner they do the less damage they create.

Government jobs can provide value, and they often do—think about garbage men or policemen. But almost all government jobs that provide value would be taken up by the private sector if the government ceased taking care of them, meaning government isn’t creating those jobs, it’s just taking them away from the private sector.

If a congressman has firsthand knowledge that the FDA is going to turn down a promising drug, it’s perfectly legal for that congressman to buy puts or short the shares of the biotech company whose prospects depend on that approval.

My guess is the FHA will soon need a massive federal bailout.

I only keep my working capital on deposit. As any bank bailout will be financed with a printing press, you want to keep your real savings out of U.S. banks and out of dollars.

Why should some blue-collar guy working every day of his life in Bethlehem, Pennsylvania, be forced to pay for some rich hippies to camp at Yosemite?

The standard economics of our politicians and pundits is dead wrong when it holds that consumption is the root of economic activity. It’s the fruit.

Despite all the claims that an income tax is progressive in that it falls most heavily on those that can afford to pay, the reality is that it taxes labor far more heavily than it does capital. Since it’s generally the rich who have capital, while the poor have only their labor, the income tax is truly the most regressive tax we have.

For every dollar the IRS collects, another thirty cents is spent to collect it.

If people knew their true tax burden, they’d be a lot angrier.

With the schemes run by Charles Ponzi and Bernie Madoff, victims chose to invest with them. With Social Security, there is no choice. If you’re an American and you have income, you have to take part in the scheme… You don’t get to stop paying into Social Security once you realize it’s a Ponzi scheme. In that respect the Ponzi and Madoff schemes were actually far more honest!

Every penny taken from taxpayers to fund Social Security was spent. So the government took money from taxpayers on the premise that they were not smart enough to save for their own retirement, then recklessly spent every dime it took. No matter how irresponsible taxpayers might have been, had the government left them alone, it’s clear that they would have done a better job of saving than the government did. After all, the government saved nothing. It’s safe to say that even in a worst-case scenario, most taxpayers would have at least saved some portion of what was taken from them in Social Security taxes.

I remember during the 1980s several young men suffering from AIDS tried to get out of paying Social Security taxes on the grounds that they would not live long enough to receive the benefits. Instead they wanted to use the money for medicine that might extend their lives. For their own good, their requests were denied.

Eventually, Social Security will be benefiting only the elderly poor. Some of these will be people who retired poor. Some will be people who retired comfortably but lived long enough to become poor. But it will be a relief program, not a subsidy program.

Once the government ends Social Security, and the punitive taxes that finance it, Americans will be able to comfortably save for their own retirements.

Many employers still think college is valuable. However wrong they are, that still matters.

From 1978 through 2008, the dollar lost a bit more than a third of its value. That means the cost of living slightly more than tripled.

Supply is up, cost is down, and quality is down, so what’s driving the price up? The heart of the matter is bottomless demand. Parents and students are seemingly willing to pay any price for a college education.

This is typical government action. Wreck an industry with subsidies and regulation; blame the ensuing failure on capitalism; then “solve” the problem with a complete government takeover.

Plenty of kids went to college before student loans existed, and plenty of people will go after they are eliminated. The main difference: tuitions will be a lot lower, and those who do graduate will do so with little or no debt.

We have to come to grips with an uncomfortable fact: too many Americans go to college. We have trouble accepting this fact because we see college as the key to opportunity. But that’s a narrow view. College is the key to many sorts of opportunities, but certainly not all.

What’s elitist is the mind-set that the only dignified work involves wearing a jacket and tie or sitting in an office. What’s elitist is looking down on manual labor and even on small businessmen.

Ironically, it’s the children of the poor who are the most damaged by public education, as their parents can neither afford to pay twice for private schools nor can they move into more expensive neighborhoods with better public schools.

Other things are more important than health care, like food and housing. Government doesn’t dictate how everyone gets those things.

Under free markets, the poor fare far better than they do under centrally planned economies theoretically designed to create equality.

Progress in health care should be measured by how little, not how much, a society is forced to spend on it. But our health-care spending keeps climbing.

You can count on plenty of Medicare recipients receiving medical care because it’s costless to the patient and lucrative to the provider. It’s basically a conspiracy to steal from taxpayers.

Article I, Section 8, enumerated a few powers of Congress, and the Tenth Amendment made it clear that everything else was left up to the states or the people.

Competition can be more local than at the state level. Take public education: why should towns send their money up to the state capital just to have it returned, with strings attached, for schooling?

Our efforts to keep out illegal drugs have just increased the profit margins of drug smugglers, pushing them toward more extreme and violent means.

If a john pays a prostitute to have sex with him they are both criminals and can go to jail. If a guy pays two people to have sex with each other and he films it, he’s a producer, the participants are actors, and it’s all legal.

It’s fairly simple: if a technology needs subsidies, it’s a waste of money. If a technology is already profitable, it doesn’t need subsidies.

Scientists estimate that 99.9 percent of all the species that have ever existed are already extinct. Extinction is a natural part of evolution

We need to protect nature in order to maintain our standard of living; environmentalists sometimes think we need to sacrifice our standard of living in order to protect nature.

If Obama confiscated all the wealth—not income, but wealth—of the fifty wealthiest people in America, he could use that $700 billion to pay down about 5 percent of the national debt.

If you do not get paid back, it’s not a loan; it’s a gift. When our lenders discover they are really benefactors, the gifts will stop coming.

It’s not even in the realm of possibility that we can pay off this debt. The sooner we admit it the better.

Anything that prevents the U.S. government from borrowing money is a good thing. First, the money borrowed is used to grow the government at the expense of the economy. Second, the money has to be repaid with interest. I do not want the U.S. government obligating me to repay loans to finance government expenditure I would prefer not to have been made in the first place.

If you buy an asset simply because you hope that you will be able to sell it for more at some later date, you’re speculating. For many people today, this is the definition of investing: buy low, sell high. But it’s more properly called speculating,

Americans can only live beyond their means because a good portion of the rest of the world is willing to live beneath its means.

The typical American is drowning in debt. The typical Asian is floating on a sea of savings. Here’s one representative detail: 90 percent of cars in China are purchased with all cash. Eighty-five percent of cars in the United States are bought with auto loans.

Remember there’s a difference between political freedom and economic freedom. That is, capitalism and democracy are not the same thing.

My strategy is a stool with three solid legs: (1) quality dividend-paying foreign stocks in the right sectors; (2) liquidity, and less volatile investments, such as cash and foreign bonds; and (3) gold and gold mining stocks.

I reject the stock strategy most professionals advise. They say, hey, you’re young, make risky investments in stocks, and sell them later on when they’re priced higher. If there are no dividends, even in the future, this looks a lot like a Ponzi scheme. Nobody’s buying these stocks in the expectation of getting paid—they’re buying these stocks in the expectation that someone will be willing to pay a higher price later on. It’s called the Greater Fool theory.

When it comes to bonds, I prefer short maturities, and nondollar denominations.

If you bought gold in the beginning of 2000, your investment has grown more than 550 percent. If you bought a Standards & Poor’s (S&P) index fund, your investment is down 20 percent.

The key to building a diversified stock portfolio centers around four components: countries, currencies, sectors, and individual stocks (in that order).

The key is to figure out which currencies will gain the most from the dollar’s demise, and which nation’s living standards will rise the most as America’s falls; then align your investments to be on the receiving end of this historic wealth transfer.

By preaching capitalism, but practicing something else, our leaders on the Right have tarnished the reputation of free markets.

The American middle class arose largely without government intervention. Workers at Ford Motor Company made twice as much on an inflation-adjusted-after-tax basis in 1915 (prior to any government or union intervention) than they did in 2010.

The greatest American fortunes were amassed during the nineteenth century when the U.S. government was its smallest.

[Aaron Thibeault · Rating 5 out of 5]

*A full executive summary of this book is available here: http://newbooksinbrief.com/2012/06/04...

Since the housing and financial crash of 2008 America's recovery has been tepid at best. Unemployment has remained high; manufacturing has not returned; personal savings are as low as they've ever been, and personal debt as high; housing is still a mess, and banking not much better; and, on top of it all, government debt is awe-inspiring and seems completely insoluble. According to financial investor, commentator and author Peter Schiff, while all of this is certainly disheartening it should not come as much of a surprise. Indeed, Schiff argues that all of this economic slumping is a natural result of America's misguided economic policies; including especially the Federal Reserve's manipulation of interest rates, the government's uncontrollable borrowing, and, in connection with this, the maintaining (and even expansion) of unsustainable social programs . For Schiff, these same policies led directly to the crash of '08 (which he correctly and very famously predicted), and are leading the U.S. directly into an even worse crash now. In his new book `The Real Crash: America's Coming Bankruptcy--How to Save Yourself and Your Country' Schiff outlines how America got itself into this mess in the first place, what the end game is likely to be, and what we should do to make the coming unpleasantness the least unpleasant as possible.

The main problem--and where most of the other problems begin--according to Schiff, is the Fed's manipulation of interest rates. By interfering with the free market value of money, and making it cheaper than the market would dictate, the Fed encourages financial bubbles that then necessarily pop. When a bubble pops the market needs to correct itself; however, over the past 20 years, the Fed has not really allowed this correction to take place, as every time a bubble pops the Fed has lowered the interest rate even further, causing more money to enter the system and a new bubble to form. First it was dot-com stocks, then it was housing, and now it is government spending.

As a matter of fact, while government spending has reached new and mind-boggling heights in the recent past, it has actually been ballooning in this direction for years, spurred on largely by the low-interest rates that the Fed has provided. The government has used this borrowed money to establish social programs (such as Social Security and Medicare), and, more recently, bailout packages for failing businesses and entire industries. All the while, the government has been going deeper and deeper into debt. A big part of what has allowed the American government to borrow as much as it has (and to keep on borrowing now) is the fact that the American dollar is the world's reserve currency, which means it is always in demand, and hence people and organizations have been willing to act as creditors in order to get it. For Schiff, though, the sheer size of the debt, and the fact that it is running away faster and faster everyday (and has no realistic chance of ever being repaid) will sooner or later turn investors away from considering the American dollar a valuable reserve--at which point it will lose its status as the world's reserve, and investors will stop investing in it.

At this point, the American government will have but two options. It can either declare bankruptcy, or it can print the money it needs to pay its debt. In either case, an enormous crash will result, for in the first case, an astronomical sum of money that the economy had assumed existed will suddenly be wiped away, and in the latter case hyperinflation will set in, and the American dollar will be whittled down to worthless.

At this point we will be forced to start over. For Schiff, this may not be such a bad thing, for, according to him, we have simply put ourselves in an unsustainable position, and the sooner we start over the better. At that time, Schiff argues, we can finally get back to the small government and free-market forces that America's founding fathers designed the country around. While much of the book is focused around how we can do this now, before the crash hits (in such areas as banking & finance, taxation, healthcare, education, the military, immigration and the war on drugs et. al.), you get the feeling that Schiff thinks that the crash is actually inevitable, and that these reforms will have to take place after The Real Crash.

The book is very easy to read and the arguments laid out cleanly and concisely, and backed up with both theory and historical evidence (though a little more of the latter would have been nice, on occasion). The author has done well to bring libertarian views into the mainstream. A ful executive summary of the book is available here: http://newbooksinbrief.com/2012/06/04...
A podcast discussion of the book is also available.

[Kim · Rating 4 out of 5]

For those who aren't familiar with Schiff's understanding of the economy I refer you to 2 things: 1) Schiff's book Crashproof (written in 2006) or Crashproof 2.0 (a copy of Crashproof but with commentaries after each chapter about how things played out in 2008). He wasn't just a "doomer" in predicting the 2008 financial crash; he explained why.
Secondly, he was recognized for his analysis by an economist, Bezemer, who wrote a paper "No One Saw This Coming." About a dozen other people were also recognized (note no Krugman-type Keynesians understood, because their economics ideas don't allow for such realities).

If you read books/articles by all of the "predictors" of the 2008 crash, you will find that none of them think it has been resolved. The problems weren't about a few regulations; they are about inherently spending more than what we produce. Their solutions, though, are all somewhat different.

Schiff understands we have to get back to the norm: we as a society have to live on less than what we make to recover. How to do this as a "gentle landing" or "peel off the bandaid" is the source for debate. His ideas are thoughtful and most probably realistic in the economic sense. Unfortunately, I doubt they are politically palatable because politicians won't admit the trouble we are in until it is too late. So while I agree with his message, I look at the book primarily for how I might handle things as an individual.

I also found the appendix on the history of money interesting.

The only thing I question when reading his book is his outlook on China. It is more positive than I hear from other analysts, and I don't know if anyone can be certain about the data coming from China. It seems to me a lot of his predictions (particularly inflation) would change if China is not as strong as he thinks. Therefore, my main criticism of the book is that I would like to see him discuss how things would work out "differently" if China isn't as healthy as he thinks it is.


In short, I think this is an important book in understanding the economy and trying to decide where to place your own investments and protect yourself.

[Julie Marsh · Rating 3 out of 5]

How interesting that I finished this book as the LIBOR mess is unfolding.

This book includes a lot of stuff I agree with, and a lot of stuff that's specious. Schiff absolves actions of corporations and banks with the excuse that they're merely following the government's lead. Business is equally corrupt as government; at least government acts under the auspices of improving everyone's situation, not just executives and the largest stockholders. The free market is not the cure-all Schiff (and Ron Paul et. al.) purport it to be.

I'm also weary of Republicans invoking the Founding Fathers as justification for their views, economic and otherwise (e.g., fallacy of a "Christian nation"). We don't cling to untenable explanations for scientific phenomena (unless you're a young Earth creationist) simply out of sentimentality.

In short, there's some smart advice in here, and there's some way kooky advice in here. Caveat emptor.

[Georgy · Rating 5 out of 5]

I am yet to find an opponent of Peter's ideas who can offer one half as strong of an argument as he makes

[Michael Scott · Rating 5 out of 5]

Every American needs to read this book. Few will though as it is chalk full of predictions about our economy that few will want to hear.

[Nathan · Rating 1 out of 5]

I would counsel anyone looking for a balanced, objective examination of the economic issues facing the country to look elsewhere. Schiff wears his ideological bias on his sleeve, and unfortunately a lot of what he says must be taken with a grain of salt.

While my myriad objections to the book I detailed below, my chief complaint is this: the book presents an inflammatory portrait of the American economy (not erroneous, see below) and is dotted with investment "tips" that may sound impressive to a layperson, but are really just basic principles of maintaining a diversified portfolio that could be found on any personal finance blog. After priming his readers to a state of frenzy and teasing them with his investment "advice," Schiff invites his readers who "interested in implementing any of [his] investment strategies" to contact one of his various investment companies. Basically, the entire book is a 300 page marketing circular.

Morever, having expended below more words than I intended in reviewing this book, let me just say up front that there are a few gems here and there, but they require a reader to carefully sift though a lot ideology-driven droning. In the final analysis, the problems identified and solutions advanced are dealt with elsewhere (and much better) by other authors. I would direct a reader to check into writings by conservative economists like Glenn Hubbard instead of wasting their time on this book.

Now, onto (some of) my other issues with the book: while Schiff does point out extant problems in the U.S. economy (ex., government policies promoting the housing bubble, the debasing of the currency through the Fed's activist monetary policies, over consumption and price insensitivity in the healthcare market due to Medicare/Medicaid and tax subsidies for employer provided insurance), these problems are obvious and, contrary to his self-lauding statements to the contrary, Schiff was by no means the first person to pick up on them or the most insightful.

In examining these problems, Schiff's analysis is incomplete as his ideological blinders lead him to ignore salient aspects of the problems that don't fit within his philosophical view. For example, in trumpeting about the easy money provided by the Fed and the loan guarantee by gov't GSEs that led to the housing bubble, Schiff largely absolves the private actors who freely capitalized on these distorted incentives and downplays the role private choice to employ overleverage, unregulated opaque credit derivatives, and "synthetic" products played in turning a crisis in a relatively small sector of the mortgage market into a global near-meltdown, and conveniently forgets that the moral hazards of FDIC-insured bank engaging risk taking behavior was phenomenon created by deregulation lifting the ban on FDIC-insured institutions engaging in such activities. Basically, Schiff is the counterpart to those rabid liberal economists who can only scream about corporate greed while neglecting the government actions which, though often well-intentioned, made it possible.

Moreover, Schiff displays a tendency to present skewed (if not outright inaccurate) pictures of American monetary and constitutional history (particularly on the issue of taxes, which is no surprise given his father is the patriarch of the tax protestor movement). He also has a tendency to sidestep opposing alternatives that he appears to be unable to argue effectively against. For example, he admits that socialized health care in nations such as Canada result in lower costs per capita and better outcomes than our current system (for example, Canada has lower infant mortality and higher life expectancy, a higher doctor to patient ratio) but doesn't present any compelling evidence as to why his proposed solutions would lead to a superior outcome than those systems.

As a work of scholarship, the book is, well, suspect. Leanly sourced, Schiff tends to make grand conclusory statements (often following fallacious reasoning and false analogies) without factual support or empirical research. His solutions are simplistic, and generally come down to "shred all regulation." Yet in articulating his solutions Schiff shows a tendency to confuse the sort of micro-level burdensome, costly, micromanaging regulations that are legitimate target of criticism and the macro-level regulations that, as Milton Friedman would put it (no commie he!), provide the "rules of the game" that ensure that markets stay free, open, transparent and competitive. He seems to forget that shredding regulation would not fix the structural issues and free rider problems in the insurance market, and that "wild west" lawless markets, like the Chicago stock exchange of yore, perform much more poorly than markets like the NYSE which have a stronger rules-based regime.

His solutions are also of limited value as he fails to address obvious criticisms or consequences. For example, he states all disclosure regulations should be abolished, and naively says that any company that doesn't provide investors with information would find itself as a disadvantage in the marketplace. Unfortunately, in doing so he ignores the litany of scholarship showing that strong disclosure regimes promote transparency and ensure that transactions are entered into on an informed basis. He even undermines his own argument later by raising the specter of Bernie Madoff, who succintly showed that you could be incredibly secretive and withhold information blithely, yet still garner billions in investment. As for consequences, he makes a simple statement that environmental regulations should be abolished, too. An obvious consequence here can be pointed at China, where a lack of regulations has lead to the pollution of 80% of its freshwater (and attendant illnesses like widespread lead poisoning and digestive cancers) and near-omnipresent toxir air pollution (and attendant respiratory illness). It's estimated that health costs of pollution exceed $100 billion per year, and will have long-term economic consequences to the labor supply that will take years to be fully realized. He is also woefully blind to social costs and inequalities, issues of negative externalities and trends toward private sector underinvestment in areas like infrastructure and long-term R&D lacking in immediate commercial value.

[Brian Sachetta · Rating 4 out of 5]

I’ve listened to my fair share of Schiff podcast episodes (both from his own show and appearances he’s made on others). I love his principles, personality, and energy. I was hoping for more of that here, so I listened to the audiobook version of this one.

While the opinions put forth are the same, this one lacks a little bit when compared to Schiff’s podcast content in the sense that he doesn’t narrate this book. That’s no dig on him — narrating a thirteen-hour book is a serious undertaking. It’s just to say I think this one would’ve benefitted from having his own voice behind it.

Okay, so onto the content itself. If you’ve listened to Schiff before, there’s nothing totally new here, but that’s not necessarily a bad thing. It’s the same good stuff around economic collapse, runaway inflation, the value of gold, etc. It’s very on-brand for Schiff, and it fits well with what he normally talks about.

There were a few parts that dragged on or got a bit preachy at times, however, which is why I’m pulling my rating down a little. For example, I didn’t love the “get rid of every single part of the government” or “legalize everything under the sun” narratives. Sure, they’re no divergence from Schiff’s known philosophy, but when you start talking about legalizing heroin, you’re inevitably going to lose me.

But, all in all, this is still a pretty solid book, and again, one that’s very much stamped with all the typical Schiff trademarks. If you’re looking for some high-level advice on the economy or financial paths to pursue further, give this one a spin.

-Brian Sachetta
Author of “Get Out of Your Head”

[Evan McB · Rating 5 out of 5]

One of the clarifying metaphors Schiff uses in this book to explain current economic woes is about a patient who presents to a doctor with symptoms of illness in his hands, feet, face, eyes, dick, brain, etc. etc. (I forget all of the body parts that were featured) The doctor, seeking to find a root cause for the various maladies, checks the patient's blood, which courses through the whole body, so chances are that something wrong with the blood would be causing problems in all the patient's various extremities. The blood in this metaphor stands in for money, which courses through and gives life to the whole body that is the economy.

But something is wrong with this blood. The heart, standing in for the Federal Reserve, has created too much blood through a process of
blood inflation, and now all the blood is worth less than when there was a competitive amount of blood to use for creating jobs at the various organs of the body (I would never work in the intestines, personally, no matter how bad the blood economy is).

Of course, the doctor makes note of this excess blood in the patient, and prescribes a treatment of bloodletting, attaching leeches all over the patient...you know what, it's not a perfect metaphor. Let's forget the metaphor and just talk about the actual economy.

In 1995, there was $3.5 trillion in circulation. As of 2011, there was $9 trillion. If the government were tied to a commodity standard (such as gold) for its currency, this level of inflation (increase in the money supply) would be impossible. It already should be impossible because the United States Constitution specifically forbids the government from creating fiat (paper) currency, and only allows for fixing the standards of weights and measurements so as to regulate the amount of gold and silver in coins minted by the Treasury.

Being tied to a commodity standard would prevent the government from spending money it does not have, or creating excess money (quantitative easing) in the form of fiat currency (paper dollars) that then devalues all the currency in circulation. This destroys the idea of savings, since money you set aside now is guaranteed to have less purchasing power in the future as prices rise. As an individual, you can stay ahead of inflation by making more money each year than the rise in inflation, but even then, your wealth is not as great as it would be if the dollar were tied to a commodity standard and could not be manipulated by government regulation and the Federal Reserve.

As for those who are not able to make more money than the rise in inflation, they are effectively poorer each year even if their wages remain the same, since their cost of living increases. For that reason, any person who is not in debt should want deflation in the money supply, as that will increase the value of the money in circulation, and increase the value of savings. Those who are in debt, like, say, THE FEDERAL GOVERNMENT, do no want deflation, as this raises interest rates on borrowed money, making it harder to pay back. But as Schiff explains in this book, it is effectively impossible for the government to pay back the interest on its debts, let alone the debts themselves, even if everyone in the country were taxed at 100%.

Schiff argues that many of the taxes levied by the government are unconstitutional and illegal anyway, chief among them the income tax. And even if the income tax was constitutional, there is so much slippage in lost productivity through compliance that the same amount in total revenue could be generated by variations on sales tax or bank transaction fees. Schiff also makes the strong point that the income tax by definition values labor at zero, since all wages you earn are taxed, compared to only profit taxed on capital gains. The argument against this idea is precisely what creates so much slippage in collecting the income tax: that value of labor is nothing until someone pays for it, and then we must take that cost, not value, into account. But if you were to list as deductible all the sunk costs made towards that labor (a place to sleep, food to eat, clothes to wear to work, transportation to and from work, etc.), you are just creating more problems for compliance in trying to find the fair taxable amount for that labor. Again, it is better to abolish the income tax and generate that lost revenue through some form of sales tax, if at all.

There are also several proposed solutions in this book for how exactly government can cut its spending, but most of these boil down to the elimination of regulations that artificially manipulate demand. It is the height of foolishness to tell someone else what they want, and the height of cruelty to coerce someone into doing what they do not want to do under threat of imprisonment. Any reasonably intelligent child realizes this, and when the real crash arrives, chances are the government will be forced to realize it as well (probably for about 70 years or so until they try fiat currency again).

[Jon]

There's nothing very surprising in the early going in Peter Schiff's new book, though it does serve as a good introductory work for those who aren't familiar with the workings of the Federal Reserve, and the role which the government has played in the most of the financial crises recently, such as the dot-com bubble, the housing bubble and the credit bubble.

Schiff relates the tale of what happened in the Harding administration after WWI, when the economy saw an increase in unemployment and a lack of economic growth - the last time in our history that a politician had the courage to let us suffer the pain of doing the right thing - and Harding "paid off the war bonds, slashing the national debt by one third". The money used to pay off that debt was removed from the money supply, which put a downward pressure on prices, and an upward pressure on interest rates, which discouraged borrowing and encouraged saving.

"Instead of trying to fix the lagging economy through stimulus, the Fed responded to the economic contraction with monetary contraction."

Within a few years, unemployment had shrunk to 2.4%, and the stock market had exceeded its previous highs.

Quite a contrast to our government's response to the 2008 crash, and quite a contrast in results, as well.

On the creation of the dot-com bubble, Schiff writes,

"Many liberal economists and Fed defenders will argue that the Fed didn't create the stock market and dot-com bubble of the late 1990s. They blame 'greed' and 'manias.' There's a small degree to which they are right: the Fed did not specifically steer capital toward dot-com stocks. The Fed just created the excess capital that needed a home, and market forces and other government policies determined where that money went."

Schiff brings up an interesting distinction regarding the mortgage interest deduction.

"This is a huge mortgage subsidy...it distorts the market in favor of homeownership (more precisely, leveraged homeownership)."

The real estate bubble, he argues, was also brought on primarily by the Fed and other government policies. Fannie Mae and Freddie Mac guaranteed subprime mortgages in numbers never seen before, the Fed made cheap money readily available to lenders, the Community Reinvestment Act pushed banks to lend to poor people who would never have previously qualified for a loan, and the Bush administration, through the American Dream Downpayment Act, provided grants to first time homebuyers.

The next bubble Schiff sees forming is the "government bubble", a rapidly growing federal debt caused by out of control spending, reckless borrowing, and the Fed's inflationary policies.

Schiff busts the myth of government "job creation", by showing its many failures in that area, but also showing that the government's attempts to create jobs actually misallocate resources that could create jobs in other areas the government hasn't blessed with its favors.

The money quote:

"The problem isn't that the government bets on the wrong horses. It's that the government should be at the track in the first place."

In fact, government can best create jobs by staying out of the way.

"Jobs come from (a) the incentive to make a profit and (b) capital formation. The harder government makes it for employers to earn profits and the less we save to finance capital formation, the fewer jobs that will be created."

He spends a bit of time talking about "Hiring Taxes", those costs associated with creating a new job for employers, such as the employer match on Medicare and Social Security, unemployment insurance, worker's compensation, and other taxes, including new costs imposed by the ACA, aka Obamacare.

Schiff claims that people could take the additional money they would be paid if these hiring taxes were eliminated to "self insure" on some of these things. I have to differ with him there. Most people, unfortunately, will not do the wise or prudent thing, they'll simply spend the excess on consumer goods. We've seen this with the optional retirement plans like 401Ks and IRAs, we've seen it with young healthy folks failing to sign up for employer-provided health insurance, and recently the ACA, and if we went to an optional "social security" system, they'd probably not put anything away for retirement there unless forced to.

Heh. In contrast to the whole "follow your passion" movement these days, Schiff mentions in passing,

"With a few exceptions most people have jobs only because they need a job in order to afford the stuff they really want and need."

And, under the category of "preaching to the choir", he says,

"Entry-level jobs are not supposed to provide enough income to support a family. By the time individuals are old enough to marry and have children they should have acquired the skills necessary to command much higher pay. They acquire those skills working for low wages while still in their teens and prior to marriage. If the (artificially and legislatively high) minimum wage prevents them from getting those jobs, they will never acquire the skills necessary to support a family. In other words, the minimum wage knocks the bottom rung off the job ladder, making it impossible for many ever to climb up."

I like,

"While politicians and the media portray regulations as a way to keep 'big business' in check, the real effect of regulation is often to crush their smaller competitors and to keep others from even entering the fray to begin with."

and,

"So there you see the real threat the FDIC was created to battle: banks were losing business because customer didn't trust them. The real effect of government deposit insurance is not to protect depositors, but to protect banks."

When the Fed inflates our money supply, Schiff says,

"When inflation's effects show up in the form of rising prices, consumers don't typically blame politicians, they blame the merchants. In fact, politicians - the ones who caused the higher prices - are often the first ones to scapegoat merchants or manufacturers when prices start rising."

Schiff also debunks Warren Buffet's mantra that he pays a lower tax rate than his secretary. It seems Warren is only talking about his personal income tax rate, not the amount that Berkshire Hathaway, of which Buffet is the primary owner, paid on its earnings - $5.6 billion.

He proposes some "macro" solutions in the middle section of the book, including:
Return the Fed to its original mandate
Tax Reform
Return to the Gold Standard
Eliminate Social Security, Medicare and Medicaid
Deregulate the Financial Industry
Fix Higher Education
Fix Healthcare
Shrink Government
I think we've seen over the last few decades that there is little actual political will to allow free market policies and the principles of limited government "fix" these problems. They all sound like great ideas, but I am really doubtful that any of them will ever come to pass, absent a black swan event that forces us in that direction. Schiff's Real Crash may be that event, but the magic eight ball isn't giving out any answers right now.

During all of the years my kids were going to school and participating in band, orchestra and choir, I got to listen to music teachers lecture the parents about how it was a proven fact that learning to play music was good for children's grades in all the other subjects. I had my own theory about that, since I would see the same group of parents - heavily involved with their children's success - at all of the other school events, soccer games, football games, and so forth. The parents encouragement and active participation in making sure their children's lives were enriched and educational was, in my opinion, more important than whether or not they played music.

Schiff says something similar about the mantra that people who attend college will earn a significantly higher income than those who do not.

"In other words, all the factors (being a hard worker, coming from wealth, attending private or good public schools, being smart, having parents who attended college) that make someone more likely to go to college and finish college are also the same factors that, in and of themselves, raise a person's likely income."

Another thing upon which he and I agree, and which I have believed since I first attended college, decades ago:

"As an employer, even if you think college has no value, you might count on colleges to perform a screening function. Getting into college and finishing college indicates some level of competence and ability to follow instructions."

With respect to the huge "public service" push to make sure that all students in the U.S. attend college:

"Who is the real beneficiary from policies and cultural biases that push more and more eighteen-year-olds to go to college? The answer, of course, is the educational establishment itself."

It's all about the benjamins, baby.

And the reason for the skyrocketing college costs we've seen (applies to healthcare also):

"This is typical government action. Wreck an industry with subsidies and regulation; blame the ensuing failure on capitalism; then 'solve' the problem with a complete government takeover."

Bingo.

Regarding ridiculous student loan debt:

"...it's hypocritical for Congress to push eighteen-year-olds to take on $20,000 or more in debt. Our federal government is always trying to say who shouldn't be borrowing, and which loans are 'predatory,' claiming that lenders are exploiting people who don't know better. Is there any clearer example of someone who doesn't understand debt than a high school senior who has never handled his on finances on a meaningful level?"

Schiff does a great job of identifying many of the root causes of our huge debt problem, and lays out another prediction of how it will all end - badly, of course. He proffers some libertarian-flavored solutions for most of the causes, which will, in my opinion, never get implemented due to lack of political will to do the right or necessary thing. It's far simpler to bury our heads in the sand and pretend everything is all right.

Also unfortunately, the "personal" solutions he offers aren't much better, for the lower to mid- middle class. His company, EuroPacific Capital, only serves high income, high net worth individuals, and the types of services they provide for wealth protection and management are unavailable to average hard-working folks. Nothing he prescribes is significantly different than what I've seen before from other Cassandras, and the practical issues remain the same. If it is possible for you to do so, he recommends getting your money out of America and out of the US dollar.

I've got a bit of Kiwi shrapnel* lying around somewhere, I should be ok.

This is a book which most people would benefit from reading, but it's unlikely that the ones who need it the most, will.

*a New Zealand slang term for pocket change

[Cody Allen · Rating 5 out of 5]

I turned 30 at the beginning of this year and with this new decade decided it was time to start investing my money for the future. I once had it described to me that lower-class people ‘spend’ their money, middle-class people ‘manage’ their money, and upper-class people ‘invest’ their money. The more you think about it, the more it seems to ring true. So, although I am somewhere in the lower middle-class, I liked the idea of someday having wealth, so I decided to start investing.

I had seen Peter Schiff’s videos of himself talking to people at the Occupy Wall Street rally in 2011 and figured he would be a good place to start my economic education. In the videos, he is holding a microphone and standing next to a large sign saying “I am the 1%. Let’s talk.” A millionaire who is willing to spend a day humbling himself to an emotional group of middle-to-lower-class protesters seems like a person who’s opinions should be heard.

Schiff has studied economics for a long time and from that point of view, The Real Crash is excellent. He has done his homework diligently and clearly shows that the numbers don’t lie; America is flat broke. Our federal government has been going into the red for decades and currently holds debt in the tens of trillions of dollars. He reveals how Social Security is basically a Ponzi scheme who’s only safety net is the printing press inside the Federal Reserve that is perpetually producing new money. He shed’s light on the nonsense that is estate and gift taxes. Basically, when you die and pass your assets along to your children, the government has decided that it gets a piece. That is simply tyrannical! Same with the outlaw on prostitution. If two consenting adults want to transact money for sex, the government should keep its nose out of their business. Why is it that if you set up a camera and call it pornography, it’s legal? This is hypocrisy at it’s finest.

The problem, I find, is that Schiff is strictly an economist, and as soon as you open your moral compass, a lot of the “issues” become more complex. Social Security feeds, clothes, and provides roofs for millions of retired people. Schiff argues that essentially all governmental regulations of the economy should be abolished, but the fact remains that some are in place for reasons of morality - like measures taken by the EPA to ensure the longevity of our shared ecosystems despite not being cost-effective. Clearly we must find compromise, but the journey to doing so will be rough.

Something I took away from this book was the importance of saving. We live in a culture that is spend, spend, spend, as the media and economic news consistently encourage us to do. Schiff contends: “Consumption is the ultimate goal of all economic activity. You work or invest so that later on, you can consume more. Consumption is not the means, it’s the end.” Schiff argues that the opposite strategy should be employed and people should save, save, save. On this he writes: “Savings is the key to economic growth, as it finances capital investment, which leads to job creation and increased output of goods and services.” Obviously, both must be employed simultaneously for the economy to function, but the dichotomy is far too tilted towards spending and must be weighted back towards saving, so that a truer balance can be found. The overwhelming evidence for this, I believe, is clear. American’s have been increasingly living paycheck to paycheck, barely making ends meet, yet how many of those same people have multiple televisions in their house, season tickets to their favorite sports teams, and take lavish vacations to far off destinations? We are quick to spend money on lifestyle accessories and slow to save for a rainy day. How many people knowingly rack up exorbitant credit card debt and then simply walk away? Sure, their credit rating will take a hit, but their 72” plasma tv and memories of spending Oktoberfest in Germany are worth it. (It’s not quite as simple as this, especially once debt collectors get involved, but people are consistently able to get away from large portions of their debt with a little negotiation.) The government, in effect, is doing the same thing except it cannot walk away. Eventually, sooner or later, someone is going to have to pay.

While Schiff boldly contends that nearly all governmental regulations should be abolished and their bodies closed down, there are some truly grey areas that need careful consideration. For one example, the creation and implementation of the Equal Employment Opportunity Commission. This commission was set up to ensure that traditionally marginalized groups (black, female, disabled, gay, muslim, etc.) were considered equally on the basis of employment. This is a noble cause. When employers are not truthful in their reasoning for hiring or firing an employee of a marginalized group, they are not living up to our American standard of ethics and equality. The EEOC is meant to hold them accountable. But let’s consider the actual effects of this implementation. If you’re a large company, your HR and legal departments can handle disgruntled employees regardless of whether they are represented by the EEOC or not. If the employee’s complaints are legitimate, the company can afford to make amends. If the complaints are not legitimate, they can afford the legal trials. If, however, you’re a small, perhaps family run business, the risks are much higher. Every employee hired may potentially be an employee you must fire (or promote, for that matter.) What happens if you hire a black person, but then you must fire them because they are a bad worker? That person could then sue you for wrongful termination based on discrimination of skin color. It would inevitably be a hard fought battle in court, with the small business having to pay their way in time and money that they may not have. Perhaps this disgruntled employee wins their case, and the sum of money demanded by the court for reparations is large enough to force the family to close their business. The same way that firing an individual for being black is wrong, so is someone bankrupting a private business because they feel aggrieved (and in this case, was fired for being a bad employee.) So, you’re a small business owner and you’re faced with the inherent risk of hiring a new employee. You never truly know how someone will perform until they actually have the job. You have two applicants, and, all else being equal, one is a white guy and one is represented by the EEOC. Whom do you pick? It’s a tough choice to be presented with, with no clear answer. Should we then dissolve the EEOC? What about all those racist business owners? What if we continue to keep the EEOC active. How can we differentiate between legitimate profiling of marginalized people and those who are bad employees taking advantage of a system that will in a majority of cases reward them? Unfortunately, this is not the only space where dignified policy has led to moral grey area.

It is interesting how a book about the economy has led me to a moral predicament. In reflection, however, it seems to make some sense. If human beings made all their decisions from strictly an economic perspective, things would probably be running pretty smoothly. But we don’t. We are arguably more concerned with what is deemed right and wrong than we are with whether our budgets add up. And so they don’t add up at all. And that’s a big problem.

As the Fed continues to print more and more money to keep up with our nation’s expenses, the value of the dollar continues to go down. This book is titled The Real Crash because Schiff foresees an economic crash the likes of which we have never seen. He called the 2008 housing crash a warm up, and, after reading this book, I am afraid to admit that he might be right. The main event could be just around the corner.

[Craig · Rating 3 out of 5]

Schiff argues that America is enjoying a government-inflated bubble, one that will eventually burst with disastrous consequences for the economy.

In his view, the disease in the economy is debt-financed consumption, and the cure will require a recession. The medicine – Americans consuming less and saving more while companies invest for the long term and the government tightens its belt – was deemed too bitter a pill to swallow by the Bush and Obama administrations. Instead, they fed the economy bailouts and stimulus to blow the bubble back up. This political aversion to austerity has set the USA up for an even bigger crash.

Schiff argues for supply-side economics (“savings is the key to economic growth, as it finances capital investment, which leads to job creation and increased output of goods and services. A society that does not save cannot grow”) and in favour of deflation (“Ask an economics writer today, and ‘deflationary death spiral’ is the biggest threat facing our economy today. This is bogus. In the Depression, falling prices were a rare boon.”)

I don’t accept everything that he says and dislike his abrasive tone and sometimes extreme views, but find myself agreeing with most of his arguments. I do think the US economy is facing serious problems; that the worst is yet to come. But whether or not you agree with Peter Schiff, I think it’s important to consider a wide range of views and come to an informed position.

[Branden · Rating 4 out of 5]

Peter Schiff gets it.

I could have written this book. Probably not as well, but in an ideological sense, I have never heard someone espouse economic and political beliefs that mirrored my own so much.

Most of the policy changes he recommends will ever see the light of day, simply because the US of today is comprised of a government that is too big and covetous of it's own power, combined with a gutless and sheepish population that have grown up with the notion that government will always be there to save them.

It will not. We are living on borrowed time as well as borrowed funds. The crash will come easy, or it will come hard. Schiff's no-nonsense approach basically lays out how we might "land softly." No doubt his advice--and advice of those like him will be ignored until it's too late.

This book gets 4 stars instead of 5 because there is almost no information on how to personally invest/prepare for the coming crash, other than:
*Buy physical gold and gold mining stocks
*Invest in certain strong foreign currencies
*Buy a firearm and invest in ammunition
*If you don't have money to invest, try and buy commodities and nonperishable food items in bulk to protect yourself from hyperinflation.

Like duh.

That being said, it's still a very good read.

[Wolfgang · Rating 1 out of 5]

You would think someone who works in finance would know something about economics, but you'd be wrong. Don't believe me? Take deflation. At one point in the book, Schiff wonders why in the world people think deflation is so bad. Well, here's why:

Say you're a business and you've built this product that a lot of people would like to purchase, but in order to bring it to market you've had to take on a great deal of debt. Now the economy crashes and you've still got that debt only no one's buying your product at the original sales price, so you've got to discount it. Problem is, the new price won't make you enough profit to pay off your debt. Bye, bye, business, hello, bankruptcy.

Or let's say you've got personal debt and deflation sets in. Your boss tells you, you can take a pay cut or he has to lay you off. You decide to take the pay cut, only, guess what, that debt you owe...it doesn't go down along with your pay. Good luck paying it back.

The book is fraught with such ill-considered ideas. Do not buy!

[Kevin Halter · Rating 2 out of 5]

Wow.
I wanted to like this book, I really did, but there were times that I wanted to throw it down and just walk away.
Peter Schiff was okay when the subject was economics, debt, national deficit, etc. but when he started talking about the environment, education, legalizing drugs and prostitution I became frustrated (mainly by the books inability to respond to my mental arguments) by the deficiency in the exploration of the socio and moral repercussions for some of the changes he was arguing for, but I kept with the book reminding myself that it is after all a book about economics and not sociology or morality.
In the end I found the book more frustrating than informative.

[Eric Molicki · Rating 2 out of 5]

While Schiff is very good at identifying what's going on and what is likely to come economically, "the market" is not the answer to everything. Some solutions I liked. Others were proposed with federalism trumping morality.

[Ghassan Linjawi]

In chapter 5 he sound like recommending his own buesniss as an advisor.
Nevertheless, He was right all along

[Ann]

He has a lot of interesting points. And maybe he is a bit of an alarmist. I need to study the subject more before coming to any conclusions.

[Chris Gard · Rating 4 out of 5]

I'll admit, there were a few hiccups here and there with some questionable ideological shortcuts to make his arguments more salient to the reader. Nevertheless, Schiff is great at making arguments that are clear to understand. You don't need to do cognitive somersaults to conjure the imagery of cause-and-effect in the discussion of tax rates, inflation, saving disincentives and the impact of excessive stimulus spending when he unpacks them, unlike a lot of others who attempt to simplify these concepts to laypeople but fail miserably.

I'd consider this a good stepping stone into the discussion of taxes and monetary policies, but certainly not the grand finale by any stretch. He made the mistake of slotting in unnecessary arguments into the book that he clearly has only a one-sided view of, such as environmental and social policies, among others. I don't know if he did that to win conservative voters over for some future re-attempt for senate election, or if his publisher knocked him back for not putting enough material in it, but he should stick to what he knows best. If he didn't know that the sledgehammer, right-wing writing style wouldn't appeal to anyone other than right-leaning readers, he probably shouldn't be writing for approval or for winning over people in political discussions.

Having said all that, I'll reiterate that on the topics he knows best about, he is clear and concise. He doesn't use verbosity or literary interpretive dance to impress or to seem smart. He talks like a classic conservative and sometimes that's just far easier to digest than left-wing doublespeak. For years I struggled to grip onto the concept of the impact of different taxes, fed vs bank interest rates and government overreach, and in one fell swoop I actually have some rudimentary understanding of the relationship between those three actors.

Avoid investing in his political rhetoric, take this book instead for his insight into conservative, free-market answers to MARKET problems, rather than free-market answers to bullshit like social policy.

[Leib Mitchell · Rating 4 out of 5]

Book Review
4/5 stars
"Reads like a series of broadsides mashed together."
*******

As above: The whole thing comes across as a series of broadsides (education, social security, tax law, compliance costs for small businessmen, banking).

I have a lot of questions about this author.

1. At first I wondered: "What is he trained in?" It's clear that the economists have not known what they are talking about for a long time--if ever-- (and Schiff does quote Paul Krugman's idiocy abundantly-- ever notice how every idiotic economic argument seems to always lead back to him?). Nassim Nicholas Taleb has demonstrated to us that economists often don't know what they are talking about, and so this well educated and intelligent amateur (Schiff) offers a well reasoned perspective. (For the same reason that someone who is trained as an engineer could take apart these common misperceptions and tell us where they fail-- general intelligence.)

2. Some of Schiff's arguments seem prima facie oversimplified. He says that the US has traded production for consumption. So, the trade deficit is because the US doesn't produce anything anymore (a very populist argument). But trade deficits have to be recycled to buy something (real estate? treasurys? financial instruments?). So is the US really producing nothing? Later, he goes into more detail in his tax section, but if he had organized the book better (telling us how he was going to set up the argument), then that would have helped to win us over earlier.

3. In the first part of the book, his structure is just chaotic. What is he talking about? It's hard to know. Under-investment? Fractional reserve banking at insufficient fractions? Trade deficits? Wall Street? Mercantilism? Malinvestment? The gold standard? Seigniorage? I wish he would have picked one topic and stuck with it-- or at the very least gave us a good index. He does focus for a couple of pages on the government not knowing what it is doing in the context of regulating the money supply, but to be honest this was not new. Milton Friedman has already done a much more thorough (and organized) job of that in "Capitalism and Freedom".

4. By the second part, he is also talking about Things That We Should Already Know. Compliance costs make it too expensive to hire workers. Productive jobs are better than make-work jobs. Anti discrimination laws may sometimes have the opposite of the intended effect. A lot of this infomration could be found in two places (and in a better way by two people who were/are trained to talk about these things): Basic Economics: A Common Sense Guide to the Economy/ Applied Economics: Thinking Beyond Stage One. (Thomas Sowell). Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics. (Henry Hazlitt). Schiff also would have us believe that skills are falling and productivity is *falling*, yet does not show us any evidence of that. He says that he will get to it in a later chapter (but then why bring it up at all if it is only to be resolved several chapters later?).

5. Further in, the book could have become something about banking (another broadside). Everyone seems to have an idea about the line that "banking deregulation was a bad idea," but no one knows specifically what was deregulated. This book talks about that a little bit. He could have talked about it a little more and made it a section of a book (and cut out the Libertarian Manifesto).

The book really picked up when he got into compliance costs in the context of the financial services industry (earlier he had told us about compliance costs in the context of hiring workers that were simple and obvious). The strongest part of that section was when he quoted Alan Greenspan from 1973 and then again 30 years later. (Eric Hoffer noted half a century ago that the position of men of words depends on where do they stand with respect to the levers of power. So it is no surprise that Alan Greenspan would deride central bankers when he was "out of the loop," but pontificate on their wisdom 30 years later.)

I think what Schiff was trying to say (and a lot of gold standard advocates have been trying to say) and are misunderstood over is: The point of a gold standard is to not allow the money supply to be managed by a central bank, because it is very likely that they don't know what they are doing. Milton Friedman's proposition to keep money supply increases at a constant and automatic rate is the same logical equivalent as the Gold Standard Argument.

There was a good description of deflation and why the common argument is not so good. He also explains the vested interest in Keynesian economics of people like Paul Krugman. That was another new and useful thing that took a few reads to understand.

Schiff cleared up difference between direct and indirect taxes and in the process gave a neat history of taxes in the United States. There were some very thoughtful arguments about the difference between taxes on capital vs taxes on labor. Apparently taxes on the former are much more regressive but on the latter are much more progressive (which brings into the question the veracity of the populism of people who call for "taxes on the wealthy."). That section was worth rereading several times in order to understand the logic. There was also a great section on legal logic behind Social Security. (Is it a tax? Is it insurance? Is it a savings plan? Is it an entitlement? Is it ever any of these things twice?)

There was some discussion of things that have been covered in Glenn Harlan's broadside "Higher Education Bubble." Schiff's discussion was a bit more complete because he folded in the topic of third party payments. Told some of the truth on B. Hussein's disingenuous Healthcare bill (that consolidated loan powers under the Department of Education?).

The whole 10th chapter gets a bit distracted writing a Libertarian Manifesto about sundry issues (drugs, prostitution, abortion, states' rights) but not clearly showing us how this would resolve US budget issues. Lots of irrelevant waffle-- but well written.

The 11th chapter was not focused. He talked about the US debt in terms of the average bonds maturity's ability to precipitate a crisis (i.e., there could be 5 trillion worth of debt that needed to be rolled over at any particular moment that couldn't be), but he wasn't detailed enough. He gave us a reasonable scenario of how that might play out, but not enough quantitative information about how it actually *did* play out in other countries. In fact, he gets downright weird when he talks about differential haircuts for creditors (foreign vs. domestic) in the case of a haircut. (I guess for trillions of dollars, we are going to sit down and haggle with every single bond-owner over how much they should get.)

Verdict: It is not quite worth the new Kindle price. If you can find a friend willing to go in with you half, then buy it. Otherwise, leave it.

[Jonathan · Rating 1 out of 5]

Here is a list of things Schiff would like:
Repeal the minimum wage, remove on the job training, (even though we have historically had low unemployment, and the main thing a lack of minimum wage would do is potentially help unemployment). Remove unemployment insurance. Remove all licensing laws. Remove all consumer protections. Insider trading should be legal. Go back to the gold standard. Deflation is a good idea, things going on sale is wonderful (he doesn’t mention the stock market, so its possible he hasn’t though this idea through.) No more income taxes, and slash all public benefit programs, Medicare, Social security, etc. Remove the safety net and allow people to plummet to their literal deaths.

Every example of old people is warren buffet, as if that’s a reasonable corollary for your average geriatric.

Ok Schiff is literally an idiot. He says we need to increase military spending to post World war II levels (up to 50% of federal budget), and we can get this money by cutting every other social spending program.

He wants fewer immigrants, somehow not realizing that’s its literally the surest way to grow an economy.

“Its time for the US to declare bankruptcy.” This is where he’s been going this whole book, but its still shocking to hear something this stupid.

End the war on drugs, finally something we can agree on.

So what does he recommend? Invest in foreign markets and buy gold. If you had done that when he recommended it in 2012, when the book came out, the stock market would have outperformed this strategy by almost 4 to 1. I don’t say this lightly, but Schiff really is an idiot.

Schiffs understanding of the economy, and Global market more generally, is directly out of 1800, and he see’s no reason to update it.

US debt doesn’t matter.

https://www.forbes.com/sites/johntamn...

https://www.fiscal.treasury.gov/repor...
Funny thing is no one talks about the debt owed to the US when we talk about the debt we owe.

Most US debt is owed to the US, something conveniently forgotten, as we are unlikely to default on ourselves.

[Edwin N Cuevas · Rating 5 out of 5]

If you have an open mind and are very analytical you will understand the explanations of this book. Very well thought out perspectives, I can’t say I agree with everything though. For me as an inspiring investor I really enjoyed this book and the advice it gives in order to be hedged. Ironically this book was published around 2012 it’s 2018 and just now has the mainstream economics have started mentioning/worrying about the national debt and deficit; we were playing a lying game with growth and deficit spending for this past bull market. It’s a game insiders know and play, if you’re smart enough and get ahead of the game you can have better chances of becoming rich just like they do. Most of the book is advice for reducing govt. spending with well thought out ideas extremely interesting to read.

[David · Rating 5 out of 5]

greedy vultures...he is telling us and warning us something in life must be conducted in basic way: savings is actually a good thing, no free lunch..and debt especially personal debt is a very bad thing..government is leading a pack of greedy evils to sell you to loan you something you don't need: car loan, student loan, QE, and what USA is facing is enormous debt and personal debts in which is only heading to one direction: spiral downwards..but someone has to poke the balloon for all the fake safety measures done by those who don't want their pockets pockets. Very much coincide with Prof Taleb..it is better for the market to experience many shocks rather than one Black Swan event...Peter is telling the truth!

[james · Rating 3 out of 5]

Good, well thought-out, but repetitive

Decent book, but fairly repetitive. Schiff’s logic and reasoning stand up years after this book was published. My only gripe is that the book is fairly repetitive, once a reader is 1/3 of the way in, they will know what the problem is, and what the solution is, but they’ll read that same problem and solution several times before the end. Also, the book is more about political solutions to economic problems as opposed to actionable insights for investors. I suggest reading the first 1/3 or 1/2 of the book, and then skipping to the last chapter.

[Adi Rabinovich · Rating 1 out of 5]

I was hoping for evidence and science based advice, instead this book is nothing but political rhetoric with many inconsistencies. At the end there is very little factual or actionable information, and author totally fails to identify real issues holding economy back - such as unreported economic activity, lack of investment in innovation and many more real issues.
The basic premise that Fiat currencies naturally have inflationary risks is well known and did not need such big book to document. Ultimately author fails to untangle unique situation that US dollar is in, or how to avoid financial ruin if US fortunes were to shit at some point.