Excerpted from Yahoo Finance:
According to CEO and Chief Global Strategist of Euro Pacific Capital Peter Schiff, the U.S. economy is heading for an economic crash that will make 2008 look like a walk in the park. Stimulus programs can delay this day of reckoning, but only for so long and only at the expense of making the eventual meltdown much, much worse.
"We've got a much bigger collapse coming, and not just of the markets but of the economy," Schiff says in the above clip. "It's like what you're seeing in Europe right now, only worse." In this nightmare scenario detailed in The Real Crash: America's Coming Bankruptcy, the current economic pause is actually the beginning of a material slowdown or recession into year end.
At that point, the Federal Reserve will unleash a third round of Quantitative Easing — weakening the dollar without jump-starting the economy. As a result of dollar weakness, import prices rise, pressing the margins of corporate America. Lower margins lead to heavy layoffs, sending millions of workers into unemployment during a time when they can least afford it. Banks fail, housing collapses, and taxes are raised in a futile effort to give the tapped-out government the capital to try yet more futile stimulus.
"That's when it really is going to get interesting, because that's when we hit our real fiscal cliff, when we're going to have to slash — and I mean slash — government spending," says Schiff. So what should investors do to protect themselves?
Schiff has three suggestions:
1. Get Out of Treasuries
The U.S. dollar is going to get trashed in Schiff's scenario. Should inflation tick up to even 5%, a level much lower than that seen in the early 1980s, bond owners would have 3.5% less buying power at the end of every year.
2. Own the Right Stocks
Exporters and multi-national corporations will benefit from a weak dollar. Better still would be to buy foreign stocks and avoid the U.S. entirely.
3. Buy Silver and Gold
Schiff says the recent weakness in these precious metals is just a pause as we wait for the other shoe to drop. Most of those on Main Street haven't even taken positions yet in gold or silver. Once they start dropping bonds and looking for a place to hide, the price of these metals will soar.
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