As a non-expert in the matter, I don't know how finally to determine how correct Peter Schiff is when he predicts calamity for the U.S. economy due to a future collapse of the dollar.
The argument he posits about the fundamentals of the U.S. economy - namely, those described in the "six Asians and an American are stranded on an island" analogy - strikes me as quite persuasive.
At bottom, the accuracy of Mr. Schiff's prediction seems to hinge on the likelihood that foreign debtors will change their minds about further lending to the United States.
Thus, how likely is it that, sometime in the relatively near term, foreign lenders will stop lending to the U.S.?
[For those who haven't heard this analogy: Six Asians and an American are stranded on an island. The first day, they divide up responsibilities. The American is assigned to eating. One of the Asians is assigned to fishing, another to foraging, yet another to hunting, etc. At the end of each day, they gather on the beach, where the American eats the food produced by all the Asians, leaving enough crumbs for the Asians to eat and be able to go back out the next day for more food.
Economists (ahem, NON-AUSTRIAN economists) would look at this situation and conclude "Hey, without the American, the island economy would surely collapse, because without his demand for food, none of the Asians would have a job." Of course, in reality, the island economy would in no way collapse, Indeed, the standard of living for each Asian would immediately increase dramatically if they were to boot the American from the island.]
I can definitely see the pull between inflation and deflation. In Schiff's world though deflation was never a possibility. In fact in late 2007 he devoted a article on it saying no way consumer prices would fall. His ego is too big to say he was wrong.
I had gold and silver before Europac and haven't sold it. I think that it will hold value and its the ultimate financial insurance.
meambobbo:Bob Murphy has daily articles on this site about why he disagrees with Schiff's analysis of the trade deficit. I suggest starting here. His conclusions are that manufacturing can be overrated and that perpetual, sustainable, and healthy trade deficits are possible.
Actually there was more of a communication problem between them rather then an actual disagreement. Murphy doesn't believe deficits are allways good, and Schiff doesn't believe deficits are always bad. Both of them agree that the current deficit is bad. There's an interview with Schiff by Tim Swanson where this comes up.
Tim: Writers such as Bob Murphy had given you a hard time on what seemed to be your anti-trade deficit views, though Murphy has since admitted that you are right in your assessment of our current mess. Do you think a trade deficit is always bad for a country? Peter: No. Trade deficits are OK under certain circumstance. 1. An emerging nation imports capital goods necessary to enhance its productivity. 2. A developed nation, with a current account surplus, uses some of its investment income to finance the purchases of additional consumer goods from abroad. The problem with our deficit is that we import consumer goods we can not afford to pay for with either exports or foreign earnings. As such we accumulate external liabilities that we will never be able to repay and our nation's future productive capacity continues to deteriorate. We are de-industrializing and are condemning ourselves and future generations to falling standards of living.
Peter: No. Trade deficits are OK under certain circumstance. 1. An emerging nation imports capital goods necessary to enhance its productivity. 2. A developed nation, with a current account surplus, uses some of its investment income to finance the purchases of additional consumer goods from abroad.
The problem with our deficit is that we import consumer goods we can not afford to pay for with either exports or foreign earnings. As such we accumulate external liabilities that we will never be able to repay and our nation's future productive capacity continues to deteriorate. We are de-industrializing and are condemning ourselves and future generations to falling standards of living.
For those of you who are interested, this forum thread caught my attention and so I put together a short article that looks at the Murphy vs Shiff argument in a bit more detail: http://mises.org/Community/blogs/jimmy/archive/2008/12/13/murphy-vs-schiff.aspx
It may well be that there was some miscommunication between Schiff and Murphy on the matter but the fundamental question itself is interesting, which is what I've attempted to find a solution to in the article.