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DIALOGUE: Maverick Money Mastermind - A Discussion with Investment Guru, Economic Commentator and Prolific Author Peter Schiff
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In the early years of the 21st century, Peter Schiff, CEO of brokerage giant Euro Pacific Capital Inc, became a household name. Before the catastrophic crash of 2008, he repeatedly warned that US monetary policy and the drastically over inflated mortgage market would inevitably cause an economic disaster of epic proportions. As compelling as his forecasts for the global economy were, Schiff’s predictions fell largely upon deaf ears. Years later, while the world still faces tremendously bleak economic conditions, Schiff’s analyses are still contested by many economists and policymakers. In his latest literary work, The Real Crash: America's Coming Bankruptcy—How to Save Yourself and Your Country, this incredibly wise commentator insists that the worst may be yet to come. When he is not appearing on primetime financial shows or managing his investment funds, Peter is writing books and hosting his own radio show. We are delighted to speak to one of the world’s most respected economic thinkers and to gain an insight, firsthand, into his views on the problems faced by the global economy.
Throughout your highly successful career as a money manager, author and broadcaster, you have been incredibly passionate in your mission to put your views across to the public. Tell us what motivates you.
I suppose I hold my convictions very deeply. I am absolutely convinced that I am right. There are so many problems that I can see in the US and the rest of the world, and I know what the solutions are. So many people are suffering and most of the economic problems in the world are manmade. I can envision the way that the world could be- if only it were freer and if policymakers would stop acting as an obstacle to progress. Knowing how the world should be and how people’s lives could be so much better, you have to be passionate about it because the stakes are so high.
How do you see the current economic situation? Why is the world, particularly the west, in such a bad financial situation?
I think there are a lot of problems around the world and most of them are the result of failed government policies and over interference of policymakers and central banks in the economy. This has caused an inefficient allocation of resources and it has created bubbles and imbalances in financial markets. The problems that are raging on in America and Europe come from the ineffective micromanagement that has manifested itself through fiscal, monetary and reformatory policy in recent years.
So how can western societies solve these deep, fundamental economic problems they are facing?
We need to let markets be efficient so that resources, including labour, can be allocated effectively. The whole purpose of an economy is to try to satisfy as many human desires as possible- with the limited resources that we have. That only happens in a free market. When you understand this basic premise you can see how ineffective policies are in trying to fix the economy. If the government says “let’s create some jobs”, and they do so by paying one person to dig ditches and another to fill them in, then society is no better off. If you build a garage that doesn’t have a door, it has no function or value to anyone. Using labour to do something that adds no value is a waste. The only way to know if the end result justifies the means in this regard is via a free market system because you will find out if people are willing to buy whatever is being produced. That is the best indicator of economic value.
Would you say that monetary policies, namely low interest rates and quantitative easing, are just delaying an inevitable ‘crash and correction’ period?
Yes, but not only does it delay the inevitable, it makes whatever ‘the inevitable’ is, even worse! That’s because whatever problem the government and central banks are trying to avoid through ‘money printing’ it doesn’t make the problem go away; it makes the bubble bigger. Recently the Federal Reserve announced QE3 and has said that it will print money until the economy recovers. In my view, they will do it until the economy collapses. Their previous QE policies had a finite expiration but this hasn’t. It is reckless and is most certainly a sign of desperation.
Can you give us some comments about the outcome of the US election? What will the aftermath be of Obama’s re-election?
I think that regardless of the outcome, it would have been more of the same. It was always most likely that President Obama would get re-elected and therefore when the next crisis hits, the likelihood is that we will see more big government. Romney may or may not have improved things slightly, we don’t know. I think he would have been more likely to learn from some of the mistakes of Obama’s previous term as well as that of President Bush and Federal Reserve chairmen Ben Bernanke and Alan Greenspan. Nobody really knows what will happen and it is very difficult to make predictions about politics.
You have often voiced your opinion that the rise of Asia, particularly China, will shift global economic power significantly in the years to come. What do you see as the main factors behind these changes?
In China, it began all those years ago when the country set itself up for free trade. Allowing farmers to keep more of what they produced was certainly a very important step. The savings culture is also an important aspect of growth in China and Asia. In the US we used to save a lot of our income but now most people, including policymakers, are convinced that spending is the best way to achieve economic growth. What really drives the economy is saving and investing- which leads to production. Policies need to give people incentives to save money rather than constantly borrowing to consume.
If the western economic situation is a disaster waiting to happen and the rise of Asia is a safe bet, should investors pile most of their money into assets in this part of the world? What are your investment strategies?
Well, nothing is a safe bet when money is concerned. In terms of the west, it is an economic disaster that is already happening- it’s just going to get worse! Investors shouldn’t just pile their money into Asia, they should be more strategic in what assets they buy, but they should definitely be investing a significant portion of their money in the region. We have invested in Asia. In fact, we are overweighting Asia compared to other parts of the world. I think the Asian markets are particularly attractive now because they have underperformed against American and European stocks in recent years, but in the long term they will do better. When you have a short term period of under-performance, it generally represents a good buying opportunity for investors.
What I try to do when I invest in Asia is to look at the region as a whole and try to find companies that are focused on the emerging market consumer. I believe that there is going to be a big increase in their standards of living; especially as the US implodes and the value of the dollar is allowed to fall. When this happens, the purchasing power will return to the countries that produce the goods. I try to look for companies that will benefit from this re-alignment of the global pecking order.
When further economic crises come, how can savers and investors safeguard their financial well being? Do you agree with the view that commodities are going to be the safest play? 
Nobody knows what the safest play will be. Gold may be the safest option because commodities in general could be more volatile. Safety in investing is a relative term because you are always going to get volatility in any asset that you have. There is nothing that you can buy that the price is never going to change. But over the long term, it is clear to me which assets are going to be safer. I define safety as a store of purchasing power; what can you buy today that will get you an equivalent value of goods and services tomorrow, or next year. I am convinced that this will be the case with gold, silver and other precious metals, but currencies will be incredibly volatile in the coming years.
Finally, tell us about some projects you have lined up for the near future.
I am working on a few things at the moment. Of course, I am still working hard on managing my mutual funds. I am trying to get more outside firms to sell my funds to customers. I also have my offshore business, Euro Pacific Bank, which I’m trying to grow and get more foreign clients. A lot of my efforts right now are going into becoming a pioneer in gold banking. We are offering our customers the ability to choose what they would like their deposits to be held in- for instance in dollars, euros etc. They get a debit card and can hold their wealth in whatever they want- including gold bullion. So basically, I’m trying to reach out to people who want to put themselves on a gold standard- even if their governments don’t. If anybody is interested in this kind of banking they can visit our website www.europacbank.com for more information about our products and services. 

By Josh Cooper 
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