A few years ago, there was an ad that ran for a long time on TV that included the line "when... speaks (silence spreads across the room as everyone waits for the pundit's prediction) everyone listens."
It may well be that the government should be listening to Peter Schiff, a leading conservative economic light whose predictions have proven uncannily accurate. For example, his 2007 work "Crash Proof," Schiff argued that we were heading for another economic cliff over which we were going to fall and he's been right, so far. His work argued that we would try to borrow and print our way out of the country's economic problem and that would only result in further problems downstream.
The Real Crash might be the book that every government agency should be required reading, as it points out Schiff's conviction, that we have only weathered about half the storm - the easy half.
Now comes the part no one wants to face. Schiff, whose insights into the Crash of 2008, illustrated what would happen if we tried to bail ourselves out of our economic problems with tax credits, loans and grants and other paper notions. He indicated correctly that the bubble would burst and that the government would be called upon to an even greater degree to ensure that the country would remain viable.
Now, Schiff points out, we are involved in another bubble, this one is a lot more serious because it is government-backed, or, as the Constitution puts it "backed by the full faith and credit... of" the USA. Thinking about this, one can see this is serious and if Schiff is as seemingly clairvoyant as he was in his earlier work, then we may be facing grim times, indeed.
Schiff believes there are two tracks facing the US. We are on the wrong one right now, the track that has disastrous consequences where we continue to the bailout bubble until there's nothing left -- and our debtors call our debt. It is at this point that everyone is in trouble. It's not as if we are not on the way, already, Schiff points out. The US has two possible tracks, the first of which we are on and the second of which is where we need to go.
On the current track, the government continues its policy of major cash bailouts without paying interest on the principal it has borrowed. This puts the nation at risk, if the countries from which we borrowed major funds, mainly China, call their loans now. There's not much left in the banking system to pay back principal and interest. If, one the other hand, the loans aren't called by the debtors, but continued - a more likely scenario as China is highly dependent on our economic health - we still have a situation where home owners are upside-down on their homes (where they owe far more than the home is worth) and it is likely that, given the poor state of the economy, these owners could easily lose their homes.
The solution, Schiff believes, is going to be painful, but it will result in a stronger nation economically. The first step is to declare national bankruptcy. (In business this would be called a "Chapter 13 bankruptcy where the company stays in business while it reorganizes.")
At the same time, government spending, except for national defense would be cut. The cuts would include some agencies, probably the ones that have to do with health or welfare, while the military will still get nearly full funding, although foreign adventures like Iran, Afghanistan or even Libya, where the US supplied air support, would be cut. The focus would be on national defense, an isolationist viewpoint.
Finally, Schiff believes that money spent for home mortgage or student loan interest deductions should stop, as should funds for the war on drugs. And, bank and business bailouts would also be things of the past. This would all follow Schiff's call for a national bankruptcy plan. The plan would also call for a return to the gold standard, as well as a wholesale restructuring of all debts.
When this is achieved and only then will have nation with a stable economy ready to grow.