The noted Liberal financial magazine Forbes has the following little tidbit.
"We are going to go through one of the most trying financial times in U.S. history, including the Great Depression," Schiff says.
"The basic problem," Schiff states, "is that Americans don't produce enough, and don't save enough." Indeed, over the past 15 years, the savings rate has fallen from over 6% to less than 1% in recent quarters. As a result, the goods that we are consuming are being supplied to us by foreigners. Not only are they producing the goods, but they are lending us the money to buy them, and, in doing so, are driving the U.S. deeper and deeper into debt to the rest of the world, Schiff says.
"We are using dollars that we print to exchange for goods that we don't produce. We have to borrow from abroad as there are no domestic sources of savings, so the value of those dollars will continue to fall."
How bad will it get? "Very bad," Schiff says. The dollar will fall a lot lower than it already has -- dropping by perhaps 50% against the Japanese and Chinese currencies. How will the government respond? Could efforts to forestall the currency decline have a perverse -- and ultimately negative -- effect? No matter what the outcome, Americans will have to consume a lot less and save a lot more. Spending on cars, clothing and electronics will all drop dramatically -- perhaps right out of the economy.
"The further into the future this starts, the worse it will be for Americans," Schiff says.
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