November 9, 2009

Inflation Versus Deflation

Earlier today at the "Commodities 2010: The Road Ahead" panel, you said you think the U.S. is headed for runaway inflation, rather than deflation. Why?

Peter Schiff, president, Euro Pacific Capital (Schiff): We're headed that way because we're creating too much money. Interest rates are too low. The Federal Reserve continues to expand its balance sheet. It continues to buy up assets that it shouldn't be buying. That is basically the poison that the government has decided to swallow.

We have a choice between allowing a deflationary bust, allowing asset prices to collapse, allowing businesses to fail and allowing the recession to worsen in the short run; or we can try and postpone some of that pain by creating inflation, and deal with the inflation pain down the line. The latter is what the government has chosen. Unfortunately, they chose wrong, from the point of view of the American consumer, the American worker, the American saver. The American economy is going to pay dearly for the price of re-electing some of these incumbent politicians.

Peter Schiff`s comments on the economy, stock markets, politics and gold. Schiff is the renowned writer of the bestseller Crash Proof: How to Profit from the Coming Economic Collapse.