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The Real Crash by Peter Schiff shows ways to guide the
global economy and the United States in particular out of
the current cycle of real estate and debt bubbles which
have grown over the past decades.

Schiff points toward local problems like the California
growing budget deficit occasioned by things like paying the
City Manager a salary of nearly a million dollars per year.
In addition, the author points to the fact that the U.S. is not
manufacturing consumer goods as in the past. There is too
much consumption from imports and this is being done on
borrowed money.

In an unusual statement, he says that wages must fall to
reduce unemployment materially. This statement is
followed up with a call to reduce hyperinterventionism
and numerous overseas military bases which are costly
and unnecessary. The author has a point here because
the dual wars in Iraq and Afghanistan occasioned the
huge budget deficits (in large part) which could take a
decade to reduce.

Schiff provides plenty of cures to make things right again.
The U.S. needs to boost exports by 30% just to balance the
trade deficit. The current Administration has projected a
tremendous gain in exports by 2014.

Schiff believes that the money supply should be tightened
allowing interest rates to rise. At the same time, government
budgets should be slashed to bring the budget into balance.
Schiff believes that the government should buy gold and that
Americans should invest in strong currencies like the
Swiss Franc and Aussie Dollar.

The U.S. already has a 400 or more years stock of coal, as well as
natural gas and other valuable commodities and minerals. Our stock
of patents and intellectual property is the envy of the world.
These facts are not emphasized by Schiff in his analysis.

The Federal Reserve has pursued a low interest rate policy
implementation in recent years. This policy has been criticized
by Schiff. Raising rates could restrict the growth in consumer
spending which is just beginning to show signs of increasing after
the Great Recession. The author goes on to state that President Hoover
made a mistake in not allowing the free market to function.
President Roosevelt compounded this error and the Great
Depression grew more out of control than it needed to be.

Schiff believes that the payroll tax should be ended to put more
money into the hands of consumers. Assuming that this could be
accomplished, what stops people from making bad investments
like the recent real estate bubble? In addition, private companies
don't always honor their pension obligations and many employees
never see any pension vestiture whatsoever despite years of service.

Schiff believes that all regulation kills jobs; however, economists
like Dr. Milton Friedman admit to the need for some regulation.

In Free To Choose, Milton Friedman stated:
"Self love will lead sellers to deceive their consumers. They will take
advantage of their customers' innocence and ignorance to overcharge
them and pass off on them shoddy products. They will cajole customers
to buy goods they do not want. In addition, the critics have pointed out,
if you leave it to the market, the outcome may affect people other than
those directly involved. It may affect the air we breathe, the water we
drink, the safety of the foods we eat. The market must, it is said,
be supplemented by other arrangements in order to protect the consumer
from himself and from avaricious sellers, and to protect all of us from
the spillover neighborhood effects of market transactions."

In the current environment, margin requirements are badly needed
for financial products like derivatives. The author ignores this
regulatory need. Schiff doesn't like the Federal Reserve;however,
he has admitted that an independent central bank is preferable
over a purely political control of central banking or
foreign bourses.

Schiff would like to abolish the income tax and replace it with a
consumption tax. Taxpayers and businesses spend 6 billion hours
on tax compliance and $430 billion dollars a year on tax filing.
The author has a point here because consumption taxes would
penalize waste more stringently in favor of conservation. In
addition, a consumption tax would draw a contribution from the
underground economy which pays virtually no taxes at all.

Schiff believes that higher education in elite private schools
is worth the expenditure. He believes that parents should not
push students to go to college because the opportunity costs
of foregoing work opportunities are considerable. The author
fails to discuss trade education in any great depth.

There is disagreement here because a college education produces
higher earnings over a high school degree during the course of
a career. In addition, many employers still believe that college
is valuable for entering employees. At some point, the baby
boomers will be retiring and thousands of professionals in
every field will be needed immediately. Training professional
licensees for public practice can take up to a decade or more.

Schiff believes that investors should invest in Aussie,
Singapore, Hong Kong, New Zealand, Switzerland, Netherlands
and Canadian stocks. He points out that gold purchased in the
year 2000 appreciated 550% in price.

The Real Crash by Peter Schiff has value in beginning a very
necessary conversation on ways to balance the budget deficits
and bring prosperity back to the United States and indeed the
world economy. The presentation warrants discussion by
intellectuals in virtually every discipline, as well as the
general public.

Article first published as <a href='[...]'>Book Review: The Real Crash: America's Coming Bankruptcy - How To Save Yourself And Your Country by Peter Schiff</a> on Blogcritics.
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