SOCIALIST "BAILOUT" COULD SPARK COLLAPSE
By Cliff Kincaid
While many of the talking heads and pundits on TV have been providing calming words of reassurance about proposed federal intervention in the financial system, analyst Peter Schiff of Euro Pacific Capital has been accurately warning for years about a financial meltdown and says that the worst, if Congress eventually passes the “bailout” bill, is yet to come.
Asked for comment on current media coverage of the financial meltdown, he told Accuracy in Media, “Absent when they have me on, it’s pretty bad.”
Many commentators, Schiff said, are telling people that if the bailout doesn’t go forward, there will be an economic crisis. However, “if we do it, there will be a bigger crisis,” he predicts.
“The politicians want to make believe we can avoid paying the piper if we pass these bailouts,” he said. “It’s just not true. It’s going to collapse the currency. It’s going to make a worse economic crisis because the money they’re printing is not going to buy anything.”
While he continues to make a number of media appearances, he says that the CNBC cable network won’t have him on the air. “I predicted all this stuff, and they laughed at me,” he said. “So maybe they’re embarrassed.”
Schiff, who labels the proposed government takeover of the financial sector as socialism and refers to the Federal Reserve Board chairman as “Comrade Bernanke,” told AIM, “The government doesn’t have the authority to do any of this stuff. This whole bailout bill is illegal. They don’t have the authority to buy up mortgages. Nothing in the Constitution says they can do this.”
“Who needs Bolsheviks when you have the Fed?” he has written.
The author of “Crash Proof: How to Profit from the Coming Economic Collapse,” Schiff said that “The government doesn’t solve problems. It makes them bigger. So if we’re broke, which is the reality—that’s why these mortgages are not worth much because Americans can’t afford to pay the money back that they borrowed—the bottom line is we’ve borrowed and spent ourselves into bankruptcy following the government’s advice. They’re the ones that encouraged all this reckless borrowing and spending.”
Interviewed by AIM before the House of Representatives on Monday afternoon voted down the “bailout” scheme, at a time when it looked like the plan would actually pass, Schiff had shocking advice for ordinary Americans.
“The first thing you do if you have a mortgage is you stop making the payments,” he said. “That’s the number one thing for people who have mortgages based on this plan. And use that money to buy gold or stock up on food. You’re going to need it. Meanwhile, no one is going to kick you out of your house. You’re going to be able to live in your house for probably a year or two before the government calls you up to give you a lower mortgage because nobody is going to foreclose on you right now. Why would you foreclose? You sell the loan to the government. This plan is a huge moral hazard and it’s going to lead to a surge in mortgage delinquencies.”
While media reports and opinion polls demonstrated that the overwhelming majority of Americans were opposed to a socialist takeover of a major sector of the U.S. economy, many voices in the media were urging passage of the takeover plan.
In an article on his website, Schiff had praised House conservatives for trying to preserve American-style capitalism by resisting the scheme.
One of those conservatives, Republican Rep. Thaddeus McCotter of Michigan, who had referred to the plan as “dung,” declared that the bill’s “cosmetic changes” were not enough and that it should go down to defeat. The plan “is a socialist solution,” he said, “one that, by threatening hardworking Americans’ prosperity, unconscionably ransoms hardworking Americans’ money and reduces their liberty. As such, it is a generational threat to Americans’ liberty and prosperity.”
He explained, “Congress cannot re-inflate the bubble to save the American economy. The only responsible course is to incentivize private sector recapitalization so Wall Street pays to clean up its own mess; and provide—as an absolutely last resort—an appropriate insurance backstop that first and foremost protects the innocent American workers, consumers and taxpayers.”
On the Senate side, Republican Senator David Vitter of Louisiana said he would not support the plan, calling it “an unprecedented government bailout that will almost certainly pave the way” for even more federal involvement in the economy.
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He explained that the plan “requires people at Treasury to make tens of thousands of judgment calls about what they buy and for how much.” He said a real solution would include major reforms, such as breaking up government mortgage companies Fannie Mae and Freddie Mac, and demanding real cash down for all home purchases.
© 2008 Cliff Kincaid - All Rights Reserved