Unfortunately, I think he (and they) are right. How do we get out of this mess? How is the government going to pay for all of this spending - both the bailout spending by Paulson and the planned make work spending by Obama? It won't come from taxes, the money's just not there. So they'll try to borrow, but not only are there fewer dollars out there to borrow, but dollar holders are increasingly less likely to want to give 'em to the US federal government, knowing that the likelihood of getting paid back is decreasing.
So that leaves printing as the only solution. Hello inflation. Goodbye dollar purchasing power.
Does anybody else see any more likely outcome? I'm dying to hear it, but I don't think it's out there.
I don’t find anything about Peter Schiff on the Von Mises link but I am glad to know he’s not a Democrat congressman from California.
Don't forget that the dollar is the primary world reserve currency. So there are lots of dollars out there being held by foreign central banks.
In his book Crash Proof, Schiff suggest that as the dollar weakens foreign holders will divest themselves of the dollar, dropping out of US treasuries and buying up everything they can get their hands on. All of those extra dollars in our domestic market will mean WAY higher prices for goods.
If he's right, mighty hard times are on the way.
I’ve come back to reading my Austrian textbooks from my finance undergrad days.
There are some great powerpoint presentation that make the case for the Austrian school at the following url:
http://www.auburn.edu/~garriro/tam.htm
TIME AND MONEY
THE MACROECONOMICS
OF CAPITAL STRUCTURE
by ROGER W. GARRISON
If anyone is interested in a introduction to the Keynesian vs Hayek arguments being played out in the world’s economic policy makers offices, I strongly suggest viewing the 2006 editions* of this professors powerpoint slides:
http://www.auburn.edu/~garriro/cbm2006.ppt
Sustainable and Unsustainable Growth
Keynes and Hayek: Head to Head
*The 2006 editions require PowerPoint 2003 or later.