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Ron Paul Advisor Peter Schiff on CNN's Your Money (9/27/08)

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VELSHI: All right. Let's get right to the details and where we go from here. Stephen Leeb is the president of Leeb Capital Management. Peter Schiff is the president of Euro Pacific Capital. These gentlemen are both authors and they've both seen good markets and bad and they both probably agree about everything that Allan just said but there's a key difference between the leadership. You think that in fact a recession, a deep recession is necessary, not only inevitable. PETER SCHIFF, PRESIDENT, EURO PACIFIC CAPITAL: Absolutely. The root of the problem is in response to ... the most irresponsible monetary policy in U.S. history, American citizens borrowed and spent trillions of dollars and now the institutions that loaned the money are going broke because we can't pay it back and this bailout isn't going to change the fact that we're broke. As a society, we need to go back away from borrowing and spending and toward producing and saving again and the government is trying to interfere with the free market and if they succeed with this bailout they'll bring on a crisis far greater than the one they're trying to avoid. They'll destroy the dollar and then we're going to see hyperinflation and we are going to see prices and interest rates going sky high and there's nothing we'll be able to do about that. VELSHI: David. STEPHEN LEEB, PRESIDENT, LEEB CAPITAL MANAGEMENT: I don't know where to start, Ali. The one thing, the bailout doesn't necessarily have to be a losing thing. The headline in "Barron's" today is that actually the treasury could end up making money on this bailout. It's $700 billion, that's a huge number. But you know how much we've lost because of this crisis in terms of lower equity value in our homes? Lower stock prices? It's in the trillions So how does $700 billion all of a sudden counteract trillions of dollars that's been lost? How does $700 billion that can turn into a profit for the treasury somehow -- (to Schiff) why are you laughing? SCHIFF: It's not going make any mono pep. LEEB: One other thing, just sort of anecdotal, when you see Barney Frank and Hank Paulson, people whose lifestyles and political persuasions could not be more different the only thing they share in common is a very, very high intellect embracing on this, guess what? You do have an issue. I know Peters is brighter than those guys so I'll bow to him. But this is a very serious thing. Now Peters for the free market. No bailout, I'll tell you what's going on happen. You know what the government which already owns Freddie Mac and Fannie Mae, they backed AIG, you can add to that list without a bailout, J.P. Morgan and Citigroup, almost every other financial institution with the possible exception of one that's located in Omaha and that's called Berkshire Hathaway. SCHIFF: The government not going solve the problem. VELSHI: What will solve the problem? Letting nothing happen will solve the problem? SCHIFF: We have a problem. We're broke. We consumed ourselves into bankruptcy. Our factories are gone -- VELSHI: But do you lecture the child or do you put out the fire? SCHIFF: We can't. We're setting a bigger fire. You're talking about the fact that real estate prices are falling. They have to fall. They're too high. They need to go a lot lower. We can't interfere with that. LEEB: First of all, you can interfere and as "Barron's" points out, it's pretty simple. All of a sudden if you free up the credit system housing prices will stabilize and the money that this government is -- SCHIFF: We can't stabilize money prices are too high. LEEB: Peter, who says, you? SCHIFF: The market. LEEB: People can't afford -- VELSHI: Breathing time for a second. Don't even think of anything else because we will come back to this and we will stick around. This is important because this is possible the debate you should have heard on television last night with two different people with different philosophies explaining what the good and bad of this is. Your phone calls and twitter messages are next on this special live edition of YOUR MONEY. Stay with us we're coming right back. (COMMERCIAL BREAK) ROMANS: Welcome back. This is an emergency edition of YOUR MONEY. VELSHI: As the details of a financial bailout plan come out of Capital Hill, a lot of folks are going back to the original debate. Should there each be a bailout? ROMANS: Stephen Leeb is president of Leeb Capital Management; Peter Schiff is president of Euro Pacific Capital. Gentlemen, you disagree. You strongly disagree. Peter, you don't think that we can step in here that a big bailout will suddenly make this right. SCHIFF: No. First of all the smaller bailouts along the way have made the situation worse. All the government can do is create inflation. The government doesn't have any money. They're going print it. They'll calm the Chinese and the Japanese and the Saudis into loaning us more money, but they're done. We borrowed and spent ourselves into bankruptcy. That's the problem. It's the fundamentals of the economy. I wrote a book called "Crash Proof." The economy is collapsing in exactly the way I wrote that it would. But also in that book I was afraid that the government would do exactly what they're doing now and this is worse. We're going die from the cure, not the disease. LEEB: OK, I just have to one up Peter, I wrote a book called "The Common Economic Collapse" about two years before Peter wrote his book and I said that if housing prices ever declined it would make the tech bubble look like a picnic, but we would have to get out of it and here's why. Jim Laird told us last night there is no difference between economic security and national security. If we let this economy go into the tubes 25 or 30 percent employment Peter mentioned China, Russia, Saudi Arabia, forget about it. Our access to resources is gone. In the past week lost in these headlines, the president of Iran taking advantage of our economic weakness said I made a mistake. You know what his mistake was? I cooperated with the nuclear inspectors. No more. They're gone. I'm going do what I want. Two weeks ago, Russia, marches in to a prospective NATO country and takes it over and controls that oil pipeline. We've got to keep this economy as strong as we can for as long as we can so we can build alternative energy infrastructure. SCHIFF: The government can't keep it strong, but it can make it a lot weaker. These problems are severe. VELSHI: The free market -- SCHIFF: We can't solve them with a printing press. Go to Zimbabwe and see how well it works. LEEB: Peter, comparing us to Zimbabwe -- yes, it is. Somehow you may not like George Bush, but he is not Robert Mugabe (ph). They're a little bit different. A little bit different. SCHIFF: Government doesn't work. Making the government bigger, printing money and buying up debt will not solve the problem. LEEB: Look at "Barron's" today. You should have read it before you came in. I hate to tell you, the lead story in "Barron's" today is the treasury department, if this works out we'll make money with the $700 billion. Maybe. SCHIFF: No. "Barron's" -- you don't care about "Barron's," you don't care about the financial media and you don't care about Barney Frank. ROMANS: Want to look forward. We talked about the presidential debates. We talked about Jim Laird trying to push these candidates on how the economy is a national security issue. Why didn't we hear the candidate say there's going to be pain ahead and this is the kind of pain we're going to have to take? Did they really face it? SCHIFF: No. That's a good point. They certainly don't want to level with the American public. They want to be Santa Clause and they don't want to tell the voters that hey, you've spent too much money. You can't buy a new car and you can't buy a new plasma TV. You have to save your money and you have to accept the lower standard of living because that's the reality. LEEB: I think that Americans know this in their hearts. Over the last 20 years real median income in this country have gone down. So we've already been paying the price. What Peter said is yesterday's news. What we need and the real problem and I do give the candidates a little credit on this. We have to get past this and yes, we may pay a higher price in terms of higher inflation, but the real problem, and I know it's been put on page 840 or 850 in the newspapers is resources. We've got to figure out a way of building alternative energies infrastructure. If we don't do it then it's totally game over and if we -- No. Who won the Second World War? I'm asking you, I'm asking you who won the Second World War? It has a lot to do with it because this is a problem that will cause several trillion dollars to fix. Who won the Second World War? SCHIFF: So why didn't the Soviet Union, why did they crumble? VELSHI: This is what it comes down to. This is an interesting point Peter. So those of you who say we shouldn't have a bailout or it should be very small or we shouldn't deal with it are saying that it is socialist in nature, it is anti capitalist to intervene in the private markets when the private markets fell. Peter, Stephen -- SCHIFF: Its government intervention that made it fail. VELSHI: What's the solution? What is the argument in favor of the fact that the government should get involved in the capital markets when they make mistakes? LEEB: Because I'm going to show how contradictory Peter's arguments are. If the government doesn't get involved how many Wall Street firms stand today. VELSHI: Maybe none. LEEB: Fannie Mae, Freddie Mac has been taken over by the government. SCHIFF: Already. LEEB: AIG is part of the government. They were not a government agency. They were the largest insurer in the country, right now before anything else; the government brings you mortgages and controls the mortgage on your house and the insurance. Let this go any further and the government will control all of the banks in the country and is that what you want? Is that what you want? SCHIFF: What I was coming on television years ago and predicting that Fannie and Freddie were going bankrupt. I knew they were going bankrupt and people thought that was crazy. It's because I understood the impact of the government on the markets. LEEB: You don't understand the impact of not doing it. SCHIFF: Yes, I do. LEEB: It's going to be bad. You're contradicting yourself.

Video Details

Duration: 9 minutes and 45 seconds
Country: United States
Language: English
Genre: None
Producer: KramerDSP
Director: KramerDSP
Views: 272
Posted by: kramerdsp on Sep 27, 2008

Peter Schiff, an economic advisor to Ron Paul, debates the bailouts on CNN's Your Money on Saturday, September 27th, 2008.

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