- Reviewed by David M. Kinchen
Just as walking away from a severely underwater house — one worth less than the amount of the mortgage payoff — might be the best idea for a victim of the housing bust, admitting that we’re hopelessly in debt as a nation and defaulting on our obligations might be the salvation of the nation.
So says Peter D. Schiff in a provocative book drawing on his libertarian ideas, “The Real Crash: How to Save Yourself and Your Country” (St. Martin’s Press, 352 pages, $25.99). Basically we’re all Greeks now, and it’s time to bite down hard on the proverbial bullet and face facts, says the man who was an economic adviser to Rep. Ron Paul in the 2008 presidential campaign. Schiff also ran — and was defeated — in the 2010 GOP primary for the senate seat of Sen. Christopher Dodd (D-CT) , who decided to retire.
Four years ago, during Ron Paul’s presidential campaign, Schiff said: “We need a plan that stimulates savings and production, not more of the reckless borrowing and consumption that got us into this mess in the first place. Ron Paul’s plan is the only one that amounts to a step in the right direction. If you want meaningful change—for the better that is—Ron Paul is the only candidate capable of delivering it.”
Like most libertarians who subscribe to Austrian economics made famous by Ludwig von Mises and others, Schiff finds fault with Democrats and Republicans alike. In his book he says Republicans draw the line at cutting military operations in the many countries, like Germany, where we have substantial armed forces. Like Ron Paul, Schiff is in favor of eliminating foreign aid, quoting Paul’s remark that it amounts to the poor (taxpayers) of a rich country (the U.S.) giving borrowed money to the rich of poor countries.
But, you argue, isn’t everything improving; the stock market is on the rise, jobs are growing, the worst of it is over. If that’s your line of reasoning, you’re way off base, Schiff says. In the first dozen years of the 21st Century, he writes, we’ve experienced a dot-com bubble, a housing bubble, a financial meltdown and government bailout, the failure of Fannie Mae and Freddie Mac, a student loan bubble and now we’re in the midde of a government-inflated bubble, one that reality will explode — with disastrous consequences for the economy and for each of us.
Schiff shows how the infusion of billions of dollars of stimulus money has only dug a deeper hole: the United States government simply spends too much and does not collect enough money to pay its debts, and in the end, Americans from all walks of life will face a crushing consequence.
Essentially, he says we’re bankrupt, thanks to the gigantic Keynesian Ponzi schemes the government has engaged in since the creation of the Federal Reserve system in 1913. Coincidentally — or maybe not — that was also the year that the federal income tax was legalized with the passage of the 16th Amendment to the Constitution. Schiff wants to abolish the federal income tax, replacing it with something like the Fair Tax advocated by Georgia talk show host Neal Boortz and Georgia congresssman John Linder, authors of “The FairTax Book” which spent time atop the New York Times Best Seller list.
Boortz and Linder have organized several FairTax rallies to publicize support for the plan. Other media personalities have also assisted in growing grassroots support including former radio and TV talk show host Larry Elder, radio host and former candidate for the 2012 GOP presidential nomination Herman Cain, Fox News and radio host Sean Hannity, and Fox Business Host John Stossel.
We’re in hock to China, we can’t afford the homes we own, and the entire premise of our currency—backed by the full faith and credit of the United States—is false. Our system is broken, Schiff says, and there are only two paths forward. The one we’re on now leads to a currency and sovereign debt crisis that will utterly destroy our economy and impoverish the vast majority of our citizens.
However, if we change course, the road ahead will be a bit rockier at first, but the final destination will be far more appealing. If we want to avoid complete collapse, we must drastically reduce government spending — eliminate entire agencies, end costly foreign military escapades and focus only on national defense— and stop student loan or mortgage interest deductions, as well as drug wars and bank-and-business bailouts. We must also do what no politician or pundit has proposed: America should declare bankruptcy, restructure its debts, and reform our system from the ground up.
“The Real Crash” explains how we got into this mess, how we might get out of it, and what happens if we don’t. And, with wisdom born from having predicted the Crash of 2008, Peter Schiff explains how to protect yourself, your family, your money, and your country against what he predicts.
Schiff’s very persuasive — to me, and to many others — ideas about reducing the size of the government — he wants to eliminate the Department of Homeland Security, the Department of Education, the Department of Energy and many other agencies — have been endorsed by my congressman, Ron Paul (R-TX-14) who writes: “Peter Schiff sounded the alarm about the housing bubble created by the Federal Reserve and predicted the bubble’s inevitable collapse, yet he was ignored by mainstream economists and ridiculed by the media. In ‘The Real Crash’ he is at it again, illustrating how the financial crisis of 2008 is nothing compared to what is coming down the road. Peter Schiff is right again. I hope more people listen this time.”
Two years ago, at a celebration in Calhoun County, TX, where I live and which Ron Paul represents, I finally met Paul and he autographed my copy of his book “End the Fed.” I reviewed the book on Sept. 16, 2009. The full text of my review of “End the Fed” follows this review.
I believe Schiff is on the right track. We need to fix this country, performing major surgery on the bloated federal government — just as states nearing bankruptcy — California, Illinois and several others are faced with the same crisis. We need to start making things again and turn loose the entrepreneurial spirit that made us a beacon for the world. Schiff’s and Paul’s ideas can do it. But I fear that the lobbyists working for the people that really run the country — the real estate industry, the Military-Industrial Complex, AARP, and many others — will do their best to prevent the drastic changes needed to reform this country. I don’t have much optimism that we’ll ever have real reform in this nation of the lobbies, by the lobbies, and for the lobbies.
About the author
Peter D. Schiff, born March 23, 1963, is an American investment broker, author, and financial commentator, and was a candidate in the 2010 Republican primary for the United States Senate seat from Connecticut. He frequently appears as a guest on CNBC, Fox News, and Bloomberg Television, and is the host of the radio show and podcast The Peter Schiff Show. He is the author of the New York Timesbestselling “Crash Proof” and “Crash Proof 2.0”, as well as “The Little Book of Bull Moves in Bear Markets”, which was also a Business Week bestseller. Schiff is CEO and chief global strategist of Euro Pacific Capital Inc., a broker-dealer based in Westport, CT and CEO of Euro Pacific Precious Metals, LLC, a gold and silver dealer based in New York City Schiff frequently appears as a guest on financial television and is often quoted in major financial publications. He is host of The Peter Schiff Show, a radio show broadcast on terrestrial and internet radio. He is a frequent guest on internet radio as well as the host of the former podcast Wall Street Unspun.
He was introduced to the Austrian school of economics by his father, Irwin Schiff, who is a prominent figure in the U.S. tax protester movement, currently serving a 13-year sentence for tax evasion. “The Real Crash” is dedicated to Irwin Schiff, whom his son calls a “quasi-political prisoner.”
BOOK REVIEW: Ron Paul Wants to ‘End the Fed’: Bring Back Sound Monetary Policies Backed by Something More Substantial Than Printing Presses
Don’t Steal, the Government Hates Competition. — Plaque on the desk
of Rep. Ron Paul
Reviewed by David M. Kinchen
Judging by the plaque on the desk of Ron Paul, R-TX, the so-called (by his detractors) “Doctor No” of the Congress, one would think he hates government. But, as he shows in his latest book, “End the Fed” (Grand Central Publishing, 224 pages, $21.99) he doesn’t hate government, he just wants it to do what the Constitution says it should do — nothing more and nothing less.
One institution that he thinks is not only unconstitutional, but philosophically, economically and morally wrong is the Federal Reserve System, established in 1913 — the same year as the federal income tax — as a backdoor approach to a central bank. It was developed — like the various czars, Troubled Asset Rescue Program (TARP) and bailouts of car companies and banks — in response to a financial depression, one that occurred in 1907.
In the post-meltdown world, Paul says it is irresponsible, ineffective, and ultimately useless to have a serious economic debate without considering and challenging the role of the Federal Reserve. Throughout the book — and especially in the last chapter, “The Way Out,” Paul shows how the nation functioned just fine without a central bank. The states don’t have central banks and must rely on tax revenue to live within their means, he says. He would like to see a return to the gold standard, but even without this ideal situation we shouldn’t wait for one before we end the Fed. Too, arguments that a central bank would prevent financial panics certainly haven’t come true in20the almost 100 years we’ve had the Fed. In his view, the Great Depression was at least partially caused by the actions of the Fed.
Questioning the Fed is like questioning Mom, apple pie and the American Way to most people who are unaware of its genesis at a meeting at Jekyll Island, GA. in 1910. Most people think of the Fed as an indispensable institution without which the country’s economy could not properly function. But in “End the Fed,” Ron Paul, a 2008 GOP Presidential contender and the 1988 Libertarian Party Presidential candidate, draws on American history, economics, and fascinating stories from his own long political life to argue that the Fed is both corrupt and unconstitutional. It is inflating currency today at nearly a Weimar Republic (Germany from 1919-1933) or Zimbabwe level, a practice that threatens to put us into an inflationary depression where $100 bills are worthless.
What most people don’t realize is that the Fed — created by the Morgans and Rockefellers at a private club off the coast of Georgia — is actually working against their own personal interests. Paul’s urgent appeal to all citizens and officials tells us where we went wrong and what we need to do fix America’s economic policy for future generations.
Paul, a physician, is a dedicated follower of the Austrian school of economics — he’s a distinguished counselor to the Ludwig von Mises Institute, keeper of the fame for the Austrian school — and he quotes many of that school’s economists in his arguments against the Fed.
One of them is the late Murray N. Rothbard, who argued in his book “History of Money and Banking” that the Fed did not originate as a policy response to national need. It wasn’t erected for any of its stated purposes. It was founded by two groups of elites: government officials and large financial and banking interests. Rothbard adds a third critical element: economists hired to give the scheme a scientific patina.
Opposition to the Fed has come from the Left and the Right. An AlterNet story on the Left quotes a study by Huffington Post’s Ryan Grim (http://www.alternet.org/story/142603priceless%3A_how_the_federal_reserve_bought_the_economics_profession?page=entire) makes the same point Rothbard made in his book: That the Fed has dedicated itself to marginalizing economists who question the Fed.
Grim writes that “The Federal Reserve, through its extensive network of
consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found.”
Like Paul, Grim says that “this dominance helps explain how, even after the Fed failed to foresee the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism from academic20economists. In the Fed’s thrall, the economists missed it, too.”
Grim quotes Joshua Rosner, a Wall Street analyst who correctly called the meltdown: “The Fed has a lock on the economics world. There is no room for other views, which I guess is why economists got it so wrong.”
Grim says, backing up Ron Paul’s assertion that Keynesian economics has dominated the field, that one “critical way the Fed exerts control on academic economists is through its relationships with the field’s gatekeepers. For instance, at the Journal of Monetary Economics, a must-publish venue for rising economists, more than half of the editorial board members are currently on the Fed payroll — and the rest have been in the past.”
The timing is eerie, with the Huffington Post story coming two days before the Sept. 16 publication of “End the Fed”: Both Grim and Paul cite the failure of the Fed to see the housing bubble as it happened, with former Federal Reserve Chairman Alan Greenspan saying that “a national severe price distortion [is] most unlikely.” His successor, current Fed Chairman Ben Bernanke said that the housing boom “largely reflects strong economic fundamentals.
The Fed failed to see the housing bubble as it happened, insisting that the rise in housing prices was normal. In 2004, after “flipping” had become a term cops and janitors were using to describe the way to get rich in real estate, then-Federal Reserve Chairman Alan Greenspan said that “a national severe price distortion [is] most unlikely.” A year later, current Chairman Ben Bernanke said that the boom “largely reflect strong economic fundamentals.”
Despite all this, Bernanke has been nominated for a second term by President Barack Obama, convincing many observers that Obama’s first term is becoming George W. Bush’s third.
In a July 19, 2009 interview with Politico, the interviewer notes that “Dr. No” — a nickname invented by his detractors — is finding that “With the economy in the tank, the same cable news shows that spurned him during the election now keep asking him on to talk monetary policy. Republican House members are finally voting with him on spending measures.”
Politico notes that “following his exhilarant, if quixotic, quest for the presidency, Paul finds himself simultaneously gratified and frustrated by his return to the friendlier-than-before confines of the House of Representatives. He thinks he’s well situated in Congress to push for his libertarian causes, but then claims he doesn’t ‘pay a whole lot of attention” to the activity on the House floor these days, adding, “I don’t think it’s relevant to the big picture: “A lot of this is just tinkering, bailing out, more money, more spending, no shift of direction and it’s a little bit frustrating.”
Ron Paul manages to unit those on the Left and the Right of the political spectrum. The book’s jacket has this endorsement from liberal Arlo Guthrie: “Rarely has a single book not only challenged, but decisively change my mind.”
And, on the Right, actor Vince Vaughn says: “Everybody must read this book — Congressmen and college students, Democrats and Republicans — all Americans.” Vaughn is a libertarian who concluded after reading an advance copy of “End the Fed” that “the Federal Reserve, which serves private banks, has compromised our economy and is undermining our freedom. It can and must be stopped now.”
Whether you agree with Ron Paul or not, “End the Fed” is must reading for everyone, especially those who’ve accepted the conventional wisdom about the Fed.
Publisher’s web site: www.hachettebookgroup.com