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10 of 11 people found the following review helpful
3.0 out of 5 stars An interesting book but where's the inflation?, 17 April 2013
This review is from: The Real Crash: America's Coming Bankruptcy--How to Save Yourself and Your Country (Hardcover)
The author is worth paying attention to since he was right about the internet and housing bubbles and predicted the collapse of both of them.

Now,(published 2012) he sees a bond bubble with the same root in FED enabled artificially low interest rates, and he spends some time on the sleazy alliance between fiscally irresponsible politicians and a currency debasing central bank.

He takes the entirely believable line that large deficits can't be funded for ever by dollar printing, and that politicians will never allow the massive tax rises and/or massive spending cuts necessary to reach budget stability, so the only route left is inflation with a consequent crash in the value of the dollar and government bonds.

I see some problems here with the evidence, and issues that could have been in the book but weren't.

The evidence (as of April 2013) is that FED liquidity isn't producing inflation. On the contrary, the banks are channeling liquidity into speculative market bubbles rather than real investments that would counteract societal deleveraging. Why should they do anything else? All sectors need to reduced debt and don't want to take on any more. The result is general deflation apart from the "bubble asset du jour" class with the evidence including falling commodity prices - particularly precious metals (which are on his list of recommended investments).

He wants to return government to the basic functions given in the Constitution and he is surely right that government has got involved in many areas where it should never have gone. Nevertheless, modern societies need a sophisticated "nerve centre" that is fairly large and expensive and the successful ones all have large and active governments. Because it is corrupt and inefficient doesn't mean that it isn't necessary.

The author speaks as if the United States is a homogeneous country like Germany, Holland, China or Japan, when in fact the government clearly states that it is multicultural. The evidence unfortunately shows that it is fast pulling apart (see The Big Sort: Why the Clustering of Like-Minded America Is Tearing Us Apart). Societies like this don't seem to react well to severe economic stress. If they can't pull together they fly apart like the once great multicultural Austro-Hungarian Empire.

Schiff recommends that people without capital store food and basic goods as a protection against 1) inflation and 2) societal disruption. The inflation may eventually come if a desperate government hands out wads of dollars to government workers, but the situation would probably be so chaotic that his recommendation would not work. A real possibility of dictatorship combined with some kind of civil war may well produce regimes like the Bolsheviks or Nazis who both outlawed food hoarding with a death penalty. In the winter of 1932/33 the Bolsheviks actually declared that all the food in the Ukraine was government property, and removed it, resulting in at least 3 million deaths from starvation (see Holodomor Kaganovitch in Google). A better recommendation if things go this way would be to leave the US temporarily or emigrate to a more functional country.

There's also the problem of how you get from here to there. If America is to return to a simple Constitutional style alliance of States with a minimal central government (which may work) and it can resolve its corruption and cultural issues, how under a Democracy will people (particularly minorities and the poor) be persuaded to vote to give up social medicine, schools, welfare benefits etc. etc? I may be wrong, but it seems very unlikely.
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Showing 1-2 of 2 posts in this discussion
Initial post: 4 Jun 2016 10:51:31 BDT
Getting to there from here: that is the problem. The America of the Founding Fathers was a smaller place than the America of today, not only in its territorial size, but also in its population. The principles of governance which they had in mind may have been workable then, But the US today is the size of some ancient empires. It spreads from the Atlantic to the Pacific, with a population of some 260 million. Or is it 300 million now? The Founding Fathers were great men, but I wonder what they would make of the America of today.

In reply to an earlier post on 6 Jun 2016 22:11:23 BDT
Last edited by the author on 6 Jun 2016 22:14:50 BDT
I don't think that they would be very happy.

Big government deficits were seen a problem in the late 18th century just as they are now. Also an overgrown military and the lack of common political principles.

George Washington's covered these points in his Farewell Address, 19th Sept.1796 and he also said, talking about "Factions" (Special Interests):

"Associations of the above description may now & then answer to popular ends, they are likely in the course of time and things, to become potent engines, by which cunning, ambitious and unprincipled man will be able to subvert the Power of the People, & usurp for themselves the reins of Government; destroying afterwards the very engines which have lifted them to unjust domination." - so this isn't a new problem either.
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