Peter Schiff lays out for RT the future he sees for both Greece and China. As China abandons its communist past, he sees the Eastern country continuing to grow as an economy and world trade partner. Meanwhile, Greece’s debt crisis and basically socialist leadership is a stark reminder of the problems facing the West.
Â
Follow along with this transcript:
RT:Â What the options would be for Greece if it leaves the eurozone. Could Greece become the free market paradise of Europe like Singapore or Hong Kong in Asia?
Peter: Not with its current leadership, unless they do an about face and surprise everybody. Because if you listen to the rhetoric, they’re not free market guys. They’re socialists over there. I don’t see much hope for Greece in that respect. You might think the best hope would be to stay in the eurozone, where they have some discipline, and where they have a currency that people have some confidence in. Even though people haven’t been too confident in the euro recently, I think they’d have a lot more confidence in the euro than the resurrected drachma…
RT:Â What is the likelihood of the drachma coming back?
Peter: I think they keep that card out there, but I think they’re very reluctant to play it, because again, it’s not going to go very well for the Greeks if they try to return to a drachma that nobody is going to want. I also think it will be a powerful example for other countries that might be thinking of following in their footsteps to rethink that and get their economic houses in order to stay in the eurozone, rather than be exiled to a currency that collapses in value. Because runaway inflation is not going to solve the problems in Greece.
But the real problem was why was Greece able to borrow so much money in the first place? That was because of the moral hazard that was inherent in that system, which should have been dealt with back then. They still have yet to deal with it. There needs to be the idea that there is no backstop for sovereigns in Europe. That the ECB will not bail out a government that borrows beyond its capacity to repay, so that interest rates have to reflect the various risks associated with different countries. If you’re Italy or you’re Spain, you’ve got to borrow at a much higher rate than Germany, because there’s a better chance that there will be a default.
