Economic gadfly Peter Schiff, president and CEO of Euro Pacific Capital, is coming out strong in response to the International Monetary Fund's World Economic Outlook. Released Tuesday, the IMF’s report said global growth would stall in 2013 if the pending “fiscal cliff” fully materialized.
While the outlook received little official comment in Washington, Schiff told The Breakout website on Wednesday that it’s not because we will go over the cliff that will lead to America’s financial ruin, but because we won’t go over it.
"It's not because we go over this phony fiscal cliff, it's probably because we don't go over that one because the government cancels the spending cuts, cancels the tax hikes, and instead we end up going over the real fiscal cliff further down the road,” Schiff, a frequent critic of government spending, said.
By “kicking the can down the road,” Schiff believes interest rates will spike and we won't be able to afford to pay the interest on the enormous amount of debt that we have.
"In fact, the real fiscal cliff comes when our creditors want their money back, and we don't have it," he states.
The Breakout notes Schiff says QE3 can only take us so far and the Federal Reserve's money printing will do so much destruction to the dollar through inflation, that we'll see a currency collapse like never before, which will force a dramatic and painful new way forward.
"Our economy is so screwed up from years and years and years of bad monetary and fiscal policy that it's going to be painful to correct that problem. But we have to do it," he says. "We can't keep avoiding the pain and in the process making the problem worse, because then we're just going to have even more pain in the future to fix an even bigger problem."
The Fed must stop printing money and politicians must create a real fiscal plan with budget cuts, tax reform and ultimately deficit reduction to avoid Schiff's predicted doomsday scenario, the website concludes. And it's not going to feel good. Schiff likens the pain of money withdrawal to that of an addict in detox.
"If we address these imbalances and let the economy restructure, people are going to lose their jobs in some sectors, some investors are going to lose money, it's going to feel bad for a lot of people for a short period of time, but it will be very constructive pain," he says. "The only way around this is to stop the presses, let interest rates go up, and they're going to have to go way up, and let the chips fall where they may."