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on May 27, 2012
*A full summary of this book is available here: An Executive Summary of Peter Schiff's 'The Real Crash': 'America's Coming Bankruptcy--How to Save Yourself and... (Paperback) - Common

The main argument: Since the housing and financial crash of 2008, America's recovery has been tepid at best. Unemployment has remained high; manufacturing has not returned; personal savings are as low as they've ever been, and personal debt as high; housing is still a mess, and banking not much better; and, to top it all off, government debt is awe-inspiring and seems completely insoluble. According to financial investor, commentator and author Peter Schiff, while all of this is certainly disheartening, it should not come as much of a surprise. Indeed, Schiff argues that all of this economic slumping is a natural result of America's misguided economic policies; including especially the Federal Reserve's manipulation of interest rates, the government's uncontrollable borrowing, and, in connection with this, the maintaining (and even expansion) of unsustainable social programs . For Schiff, these same policies led directly to the crash of '08 (which he correctly and very famously predicted), and are leading the U.S. directly into an even worse crash now. In his new book `The Real Crash: America's Coming Bankruptcy--how to Save Yourself and Your Country' Schiff outlines how America got itself into this mess in the first place, what the end game is likely to be, and what the nation and its citizens should do to make the coming unpleasantness the least unpleasant as possible.

The main problem--and where most of the other problems begin--according to Schiff, is the Fed's manipulation of interest rates. By interfering with the free market value of money, and making it cheaper than the market would dictate, the Fed encourages financial bubbles that then necessarily pop. When a bubble pops, the market needs to correct itself; however, over the past 20 years, the Fed has not really allowed this correction to take place, as every time a bubble pops the Fed has lowered the interest rate even further, causing more money to enter the system and a new bubble to form. First it was dot-com stocks, then it was housing, and now it is government spending.

As a matter of fact, while government spending has reached new and mind-boggling heights in the recent past, it has actually been ballooning in this direction for years, spurred on largely by the low-interest rates that the Fed has provided. The government has used this borrowed money to maintain and extend social programs (such as Social Security and Medicare), and, more recently, bailout packages for failing businesses and entire industries. All the while, the government has been going deeper and deeper into debt. A big part of what has allowed the American government to borrow as much as it has (and to keep on borrowing now) is the fact that the American dollar is the world's reserve currency, which means it is always in demand, and hence people and organizations have been willing to act as creditors in order to get it. For Schiff, though, the sheer size of the debt, and the fact that it is running away faster and faster everyday (and has no realistic chance of ever being repaid) will sooner or later turn investors away from considering the American dollar a valuable reserve--at which point it will lose its status as the world's reserve, and investors will stop investing in it.

At this point, the American government will have but two options. It can either declare bankruptcy, or it can print the money it needs to pay its debt. In either case, an enormous crash will result, for in the first case, an astronomical sum of money that the economy had assumed existed will suddenly be wiped away, and in the latter case hyperinflation will set in, and the American dollar will be whittled down to worthless.

At this point, the country will be forced to start over. For Schiff, this may not be such a bad thing, for, according to him, the nation has simply put itself in an unsustainable position, and the sooner it starts over the better. At that time, Schiff argues, America can finally get back to the small government and free-market forces that the country's founding fathers designed the nation around. While much of the book is focused on how the country can do this now, before the crash hits (in such areas as banking & finance, taxation, healthcare, education, the military, et. al.), Schiff very much believes that nothing can actually prevent the crash from coming, and that therefore, most of the rebuilding will have to be done after The Real Crash.

The book is very easy to read and the arguments laid out clearly and concisely, and backed up with both theory and historical evidence (though a little more of the latter would have been nice, on occasion). The author has done well to bring libertarian views into the mainstream. A full summary of the book is available here: An Executive Summary of Peter Schiff's 'The Real Crash': 'America's Coming Bankruptcy--How to Save Yourself and... (Paperback) - Common
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on May 25, 2012
This book may be useful to someone who has not read Schiff's other books, or who does not listen to his TV appearances or his own radio show. However, I was immensely disappointed to find out that this book is not very helpful in any practical sense.

The reason for that is that there is a single chapter (out of 28!) where he discusses how to protect your wealth from this new crash, and even that is pretty generic.

Mostly the book is his political beliefs in why we need restructuring of our money and system. I agree with most of that. However, I have read the majority of this before in not just one, but THREE other Schiff books! It's a rehash for cash, apparently, timed to take advantage of the economy and markets souring this summer.

Anyone who listens to his web radio program has already heard virtually all of this. But the title and subtitle are very misleading. It is not mostly about the crash, and it is virtually not at all about "how to save yourself", other than the suggestion perhaps to vote for Ron Paul or others like him.

Peter has already won many over. For the vast majority of readers they fit that description, making the book fairly pointless. Unfortunately he is less interested in nuts/bolts investing advice these days than the politics surrounding the issue.

Not a worthless purchase, but for me it was a big disappointment.
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on August 11, 2014
I am only about 15 months late getting this review posted but I must say that in the meantime my opinion has not changed. Several parts of this book were very interesting and make perfect sense (the part on education, for example) and there are parts that if one had followed the investment advice would have been deleterious to your financial health.

I have followed Mr. Schiff's work for years as well as that of his former business associate, Mr. Pento. While much of what they write I believe, it may not happen for another 20 years and following their advice would have cost an investor quite a bit of money during the period 2009-2014. Again, I have read many other books by Mr. Schiff along with his articles that used to appear on a regular basis on the Financial Sense website.

The biggest problem with Peter's work, ultimately, is that he is a zealot on and adheres to a certain way of investing no matter what the current circumstances may be. Have I bought shares in companies he recommended? Yes. Do I believe the US dollar is being devalued? Yes. Do I believe one should own stocks/currency not denominated in US Dollars? Yes, but to a certain extent.

One has to be flexible when investing and sometimes leave your dogma at the door, for a while anyway, to make money. I understand one of the motivating factors that drives Mr. Schiff so against the Federales but hey, it happened a long time ago.

The last point I will make is that reading many of Schiff's and Pento's works one comes away with just a feeling that they are waiting to take particular glee when the average citizen falls into the abyss just so they can say "I told you so". There just seems to be a "nasty" quality that percolates throughout their books under the surface.
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on January 9, 2014
Dear potential reader,
I have always "appreciated" Peter Schiff for standing up to the talking heads on CNBC and the media in general. He WAS right about the first go around in 2008. Unfortunately, there is NOTHING in this book of any real value. It’s one of those; take advantage of the “cred” from the first success to make more money for yourself. I guess I would do the same if I were in his shoes although I really thought he was different than the rest of the Wall Street brats. This book is really just a set up to get you to call his investment firm to handle your money; pure and simple. Don’t waste your money; nothing new or eye opening. Anyone saying such has obviously had their head in the sand for the past 5 years. To say I’m completely disappointed in Peter Schiff is a mild understatement. I would really like to get my money back as I also bought his first book, but he earned it the first time around; not this time. I want my money back.
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on June 9, 2012
Schiff has a good history of predicting and understanding our financial situation. He doesn't just "claim" he knew what was coming in 2008. It's well documented. He was also recognized in an economics paper by Bezemer as one of only a handful who accurately documented the situation prior to its occurrence.

That doesn't mean he is completely right in his predictions, of course, but it certainly makes him worth listening to. He does a nice job in this book of providing examples of how a free-market system would not have allowed such enormous errors to build up unchecked (bad ideas fail eventually if there is no other force to prop them up). His solutions are very logical and need to be closely examined, especially by anyone who thinks the government can change reality by legislating it away.

However, I think the likelihood of his solutions being implemented are small: simply because they include acknowledging living through a few years of pain. Politicians that recognize reality won't stay in office, so our pain is coming in a more sudden and violent way (violent meaning figuratively, not necessarily literally).

Therefore I would have liked to have seen more in-depth discussion of personal investment protection. Particularly, I would like to hear him comment on how the situation might be different if China is not in as good of condition as he thinks they are. I'm guessing that weaknesses in China would change the inflation expectation, but wish Peter would have commented on this.
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on March 22, 2016
The problem is, Peter Schiff promoted his book as how to protect yourself from the crash, which is very serious stuff, and why it will happen is well described. But what gives him the authority to finish telling us why the problem exists and blather on with everything that's wrong with America's Federal Government? I didn't buy a book on that subject, but I got one with Mr. Schiff's personal views on how we should rebuild America to the extent of whether birth control is moral or Israel is to be supported, or all sorts of utterly non-sequitur issues? I appreciate what he says about the Fed and how politicians have enabled them, but to promote his Libertarian agenda at the expense of those who believed him enough to buy his book, only to be let down at his duplicity at being suckered in and then getting a lengthy, and boring, dose of his politics, was a real let down. Out of a 405 page book we don't get any advice on protecting our wealth until page 368. And part of how to do so is to invest in his funds and buy gold through his company.
Libertarian politics are great, generally for wealthy and successful people who have decided they don't need government except when it is convenient. I would look at Ayn Rand, and her 'magum opus' Atlas Shrugged. It's the bible of Libertarians. Ayn Rand came from an extreme socialist environment and was so glad to be free in America she wrote off ALL government. Vehemently. Yet when she was older and her books were no longer selling and she ran out of cash she was collecting social security, and she was being cared for by medicaid. It sure is nice to have government to fall back on when you get to an oops situation in life.
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on June 9, 2012
At the outset, it must be said that "The Real Crash" is not an investment book, perhaps because Schiff's investment strategy hasn't changed in the past decade, but it is more of a blueprint of how to put the economy on the road to recovery.

In the first few chapters Schiff examines what he sees as the root problems of the US economy, which are mainly the enormous national debt that can only be serviced due to the artificially low interest rates. The main argument is that interest rates will be raised sooner or later. It's rather naïve to expect interest rates to remain at near zero levels forever. The reason for the rise in interest rates could be the change in perception of investors who will no longer view US bonds as a safe haven, or it could be a spike in inflation due to all the money printing done by the Fed to keep the rates low, which in turn will force the Fed to raise them. Nonetheless, higher interest rates are coming. And when they do, the national debt will be unserviceable, which will push the US government into default.

According to Schiff, an outright default is unlikely; a more likely scenario is that the Fed will intentionally try to keep inflation high in order to inflate the debt away and to keep the banks afloat.

After laying down the problems, Schiff goes on to tackle what he views as the main obstacles to recovery. Firstly, Schiff proposes that the US declares bankruptcy, which is coming sooner or later. Therefore, we might as well face this problem now rather than later. Second, letting the market set interest rates and not the Fed. Thirdly, reform Social Security, Medicare, etc. All in all, the underlining theme is to cut back government involvement as much as possible.

Schiff's ideas are nothing new to people who believe in small government, however, he has to ability to convey ideas in a very enjoyable and simple way. Even if you disagree with some of the ideas put forward, it is always useful to be aware of some "unconventional" ideas, especially in such uncharted times.
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on May 22, 2012
I came across this book just as I finished reading Paul Krugman's latest offering - End This Depression Now. It is clear that Krugman does't understand what money is and wouldn't dream of considering that the Federal Reserve IS the problem. Luckily for us Schiff does, providing us with simple common sense solutions based on sound economics. The solutions are indeed nasty but the alternative is frightening to imagine. Economics in One Lesson by Henry Hazlitt tells us that Politicians will always think short-term whilst wearing blinkers to the big picture so we can conclude that Schiff's advice will be ignored. Protect yourself accordingly.
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on June 8, 2012
Some of the negative criticisms of this book claim that Schiff is recycling material from previous books. That may very well be the case but -- as I have never read any of his previous books -- that was no concern to me.

The central thesis of this book is that the crash of 2008 was not the "real" crash that Schiff had predicted. That crash is coming and its effect on America will be as bad or worse than the Great Depression.

Schiff is a Libertarian and many of his arguments are quite convincing. He focuses on our expanding 16-trillion-dollar debt and how neither political party is going to do anything about it. He points out that America's answer to everything is to simply inflated the dollar and one day the dollar-bubble -- like all other bubbles -- will burst.

His advice is tough but it is pretty consistent with Libertarian thinking: end entitlements and end the minimum wage. Americans should save more, produce more, and consume less.

His personal financial advice is a bit harder to accept. I'm suspicious of investing in gold. Also, he recommends buying ammunition. That seems a bit silly to me. I'm reading another book on finance that points out that, if we are in a Mad Max future where the police force no longer provides protection, your stock portfolio will be the least of your problems.
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on October 28, 2012
As above: The whole thing comes across as a series of broadsides (education, social security, tax law, compliance costs for small businessmen, banking).

I have a lot of questions about this author.

1. At first I wondered: "What is he trained in?" It's clear that the economists have not known what they are talking about for a long time--if ever-- (and Schiff does quote Paul Krugman's idiocy abundantly-- ever notice how every idiotic economic argument seems to always lead back to him?). Nassim Nicholas Taleb has demonstrated to us that economists often don't know what they are talking about, and so this well educated and intelligent amateur (Schiff) offers a well reasoned perspective. (For the same reason that someone who is trained as an engineer could take apart these common misperceptions and tell us where they fail-- general intelligence.)

2. Some of Schiff's arguments seem prima facie oversimplified. He says that the US has traded production for consumption. So, the trade deficit is because the US doesn't produce anything anymore (a very populist argument). But trade deficits have to be recycled to buy something (real estate? treasurys? financial instruments?). So is the US really producing nothing? Later, he goes into more detail in his tax section, but if he had organized the book better (telling us how he was going to set up the argument), then that would have helped to win us over earlier.

3. In the first part of the book, his structure was just chaotic. What was he talking about? It was hard to know. Under-investment? Fractional reserve banking at insufficient fractions? Trade deficits? Wall Street? Mercantilism? Malinvestment? The gold standard? Seigniorage? I wish he would have picked one topic and stuck with it-- or at the very least gave us a good index. He did focus for a couple of pages on the government not knowing what it is doing in the context of regulating the money supply, but to be honest this was not new. Milton Friedman has already done a much more thorough (and organized) job of that in Capitalism and Freedom: Fortieth Anniversary Edition.

4. By the second part, he is also talking about Things That We Should Already Know. Compliance costs make it too expensive to hire workers. Productive jobs are better than make-work jobs. Anti discrimination laws may sometimes have the opposite of the intended effect. A lot of this infomration could be found in two places (and in a better way by two people who were/are trained to talk about these things): Basic Economics: A Common Sense Guide to the Economy/Applied Economics: Thinking Beyond Stage One. (Thomas Sowell). Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics. (Henry Hazlitt). Schiff also would have us believe that skills are falling and productivity is *falling*, yet does not show us any evidence of that. He says that he will get to it in a later chapter (but then why bring it up at all if it is only to be resolved several chapters later?).

5. Further in, the book could have become something about banking (another broadside). Everyone seems to have an idea about the line that "banking deregulation was a bad idea," but no one knows specifically what was deregulated. This book talks about that a little bit. He could have talked about it a little more and made it a section of a book (and cut out the Libertarian Manifesto).

The book really picked up when he got into compliance costs in the context of the financial services industry (earlier he had told us about compliance costs in the context of hiring workers that were simple and obvious). The strongest part of that section was when he quoted Alan Greenspan from 1973 and then again 30 years later. (Eric Hoffer noted half a century ago that the position of men of words depends on where do they stand with respect to the levers of power. So it is no surprise that Alan Greenspan would deride central bankers when he was "out of the loop," but pontificate on their wisdom 30 years later.)

I think what Schiff was trying to say (and a lot of gold standard advocates have been trying to say) and are misunderstood over is: The point of a gold standard is to not allow the money supply to be managed by a central bank, because it is very likely that they don't know what they are doing. Milton Friedman's proposition to keep money supply increases at a constant and automatic rate is logically equivalent to the Gold Standard Argument.

There was a good description of deflation and why the common argument is not so good. He also explains the vested interest in Keynesian economics of people like Paul Krugman. That was another new and useful thing that took a few reads to understand.

Schiff cleared up difference between direct and indirect taxes and in the process gave a neat history of taxes in the United States. There were some very thoughtful arguments about the difference between taxes on capital vs taxes on labor. Apparently taxes on the former are much more regressive but on the latter are much more progressive (which brings into the question the veracity of the populism of people who call for "taxes on the wealthy."). That section was worth rereading several times in order to understand the logic. There was also a great section on legal logic behind Social Security. (Is it a tax? Is it insurance? Is it a savings plan? Is it an entitlement? Is it ever any of these things twice?)

There was some discussion of things that have been covered in Glenn Harlan's broadside The Higher Education Bubble (Encounter Broadside). Schiff's discussion was a bit more complete because he folded in the topic of third party payments and told some of the truth on B. Hussein Obama's disingenuous Healthcare bill (that consolidated loan powers under the Department of Education?).

The whole 10th chapter gets a bit distracted with the author's writing a Libertarian Manifesto about sundry issues (drugs, prostitution, abortion, states' rights) but not clearly showing us how this would resolve US budget issues. Lots of irrelevant waffle-- but well written.

The 11th chapter was not focused. He talked about the US debt in terms of the average bonds maturity's ability to precipitate a crisis (i.e., there could be 5 trillion worth of debt that needed to be rolled over at any particular moment that couldn't be), but he wasn't detailed enough. He gave us a reasonable scenario of how that might play out, but not enough quantitative information about how it actually *did* play out in other countries. In fact, he gets downright weird when he talks about differential haircuts for creditors (foreign vs. domestic) in the case of a haircut. (I guess for trillions of dollars, we are going to sit down and haggle with every single bond-owner over how much they should get.)

Verdict: Ultimately, his analysis leads to the same conclusion as James Rickards' (Currency Wars: The Making of the Next Global Crisis), and that is that governments are going to engage in a series of competitive devaluations leading to catastrophic consequences. (The US dollar can only be abused so much.) Since Rickard's analysis was more thorough and I believe his, I will have to imagine that much of what Schiff says is also believable. Nonetheless, it is not quite worth the new Kindle price. If you can find a friend willing to go in with you half, then buy it. Otherwise, leave it.
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