In this time of economic turmoil, people seem to reference “economists” as if there’s almost always a consensus among them. I know one economist who stands apart from the pack, both in his understanding of the economy and in his ability to predict the direction we are heading. If you search for “who predicted the economic crisis” on either Google or YouTube, this economist will appear as the first listing. He is currently running for the U.S. Senate in Connecticut and is considered a good friend of the freedom movement. His name is Peter Schiff.
There’s a video on YouTube called “Peter Schiff was Right 2006-2007(2nd Edition)” which summarizes Schiff’s rise to an iconic status in the freedom movement. He was predicting the current financial meltdown far ahead of the crisis and at the time he was laughed at for those predictions. Even leading ecProxy-Connection: keep-alive
omists laughed at him for saying that there was an imminent housing crisis that would go well beyond the sub-prime market. Time after time he was pushed aside as being off-base, inaccurate and even mildly crazy.
We can now see that Schiff was spot on. Though as bad as things are now, Schiff has predicted that things will worsen with the current policies. People are still laughing at him and his predictions.
Among the problems Schiff sees is the Federal Reserve. At the beginning of former President Bush’s first term in office the country was facing a recession. Alan Greenspan was the chair of the Federal Reserve and decided to lower the interest rate to 1 percent to try to stimulate growth. It worked, but the price of borrowing money being that low led to the creation of a bubble — the housing bubble.
The housing bubble burst right as Obama was coming into office and the current chair of the Federal Reserve, Ben Bernanke, has been doing exactly what Alan Greenspan did under Bush: lower the interest rate. This time the interest rate is even lower than it was before — it’s near 0 percent. Such an interest rate is made possible by the powers of the Federal Reserve. Low interest rates encourage spending over savings, but that’s exactly our problem: too much spending and not enough saving. The housing crisis was caused by too many people buying houses they couldn’t afford, made possible in part by the Federal Reserve but also through government guarantees to institutions like Fannie Mae and Freddie Mac, that would later hemorrhage taxpayer money.
Interestingly, the chairman of the Senate Committee on Banking, Housing and Urban affairs is Chris Dodd, who is from Schiff’s home state of Connecticut. Schiff sees a lot of policies coming out of Congress and Dodd’s committee in particular as being integral parts of the crisis we are currently facing, a crisis that will become even worse if we don’t turn things around. This has created an opportunity for Schiff to step up to the plate, go to Congress and try to change the things he sees as harming the American public. It seems nobody in Congress is willing to face the reality of our recession. Instead, they’re trying to re-inflate the bubble again by encouraging more spending through programs like the stimulus plan and cash for clunkers. Both these programs have put Americans deeper into debt, which is digging our hole even deeper. It’s time we work our way out of this hole through savings.
If you’re interested in learning more about what Schiff thinks about the economy and the government’s effect on it, he posts video blogs regularly on the YouTube channel SchiffReport. He explains time and time again how he looks at the current economic and political situation and understands how the actions we are taking now will affect our future. What he says is typically not the mainstream view, but with his accuracy in predicting the current crisis, I think it would be foolish to dismiss his predictions for the future. Sometimes the truth can be difficult to face, but the sooner we do, the better off we’ll be in the long run.
Aaron Berk is a computer engineering junior and Mustang Daily political columnist.