Tom Woods interviewed Peter Schiff this week. Woods is a senior fellow at the Mises Institute, a New York Times bestselling author, and a well-respected voice of Austrian Economics. He and Peter had a friendly conversation about the broader economic problems facing the world and what investors can do to prepare.
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Follow along with this partial transcript:
Tom:Â Paul Krugman mentioned you in a column sometime ago, and you responded. What did he say and what did you say?
Peter: You know, he mentioned me again just a couple days ago. So I’m now his favorite punching bag. He used to refer to me without actually naming me, but now he actually says “Peter Schiff.†The most recent criticism… was because Yahoo! Finance had an interview with me where I was predicting the result of QE in Europe would be inflation. Of course, he was laughing, he said, ‘Look. [Peter] has been saying that for years.’ But the very goal of QE in Europe is to create inflation. So that would be a success. They supposedly want inflation. What I said, is that I think before the end of the year they may be too successful. I think the one thing they will be able to do is lift the official inflation rate. I don’t think they’re going to create jobs or economic growth. But I do think they’ll get a CPI above 2%. I think that could be problematic, because then they have to end the QE program, because then they have to keep inflation below 2% in the eurozone.
Tom:Â What are your thoughts on the development in Greece?
Peter: The reason that America is a republic and not a democracy is because our founding fathers were historians, and they studied the ancient Greek democracies and what an abysmal failure they were. Greece is giving us another example of why democracy doesn’t work. This is what the Greeks vote for. They vote for socialism. That’s not going to work.
Tom: It seems like it’s going to fail pretty badly because of how severe their economic condition is. Do you think this may have at least a silver lining of discrediting leftism or can leftism ever be discredited with these people?
Peter: I don’t know, but you’d think it should already be with all the spectacular failures. The problem is the right doesn’t really give a good contrasting element, because we have adopted so many of the failed policies in what masquerades as capitalism these days. Everybody thinks that Europe needs Greece. I think they need them like a hole in the head. They’d be better off to let them leave. They had to cheat just to get into the eurozone, now they’ve got everybody hostage. I think what should have happened… They never should have been bailed out in the first place. That was a mistake. Greece should have been allowed to default on its bonds, but remain part of the euro. I think that would have been a much better situation, because bond holders would have been dealt a loss. People would now realize that you have to worry about the ability of taxpayers to repay the money you’re loaning them. You’re not going to have a central bank with a safety net. Then maybe there wouldn’t have been any reforms enforced upon Greece by Europe. Basically, Greece didn’t default, and then Europe imposed these requirements that everybody is protesting. But if they didn’t have any bailout money whatsoever, and Greece just defaulted. They would have then been shut out of the bond markets. Then they would have had to impose the austerity on themselves. That probably would have been much easier for the Greeks to accept, rather than austerity imposed by the Germans. That austerity might have worked. It might have been big cuts in government spending, freeing up their labor markets, and reforms that would have actually worked. Not what they’re contemplating now, which is just to grow government even bigger.
