The United States could become the next Greece, a bankrupt economy and an insolvent government, if the country maintains the current path. When politicians promise the moon without sufficient funding then this is what you get, says Peter Schiff, CEO of Euro Pacific Capital.
Speaking in an interview with Newsmax on Monday, Schiff noted that the only difference between Greece and the U.S. is that creditors have finally realized that Athens is broke. For some reason, “America’s creditors are still delusional.”
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“They still think that we’re good for our debts and the only reason that delusion is possible is because interest rates are still at zero,” said Schiff. “[If] interest rates ever allowed to rise, it would become obvious that we can’t pay our bills and we would have a crisis similar to what Greece is looking at now.”
This is why, suggests Schiff, the U.S. has to look to Greece as an economic lesson.
“This is what happens when politicians promise more than their taxpayers can pay,” he added. “Politicians on both sides of the Atlantic are guilty of this. They pander [to] the voters, they make all sorts of promises and when the bills come due, it’s a crisis and they’re going to come due in more countries than Greece.”
Eventually, the bills will come due in the U.S., but those bill will be a lot more than what the country can afford to pay. And quantitative easing from the Federal Reserve has become the issue because the central bank monetized government debt. This leads to excessive money printing.
Unfortunately, the same thing will happen in Greece once they leave the European Union and adopt the drachma, the Greek currency. Since Greeks don’t want to make any serious reforms, like pension payments, everything will be worth a lot less.
“That’s the fate that awaits Greece if they return to the drachma,” Schiff stated. “The Greeks don’t want to accept cuts to their pensions, but if they end up getting their pensions in drachma instead of euros, those pension payments will be worth a lot less.”
Again, the same thing will occur in the U.S., except it won’t change currencies.
“We’re not going to change currencies, but the only way the U.S. government can make good on its obligations is to print the money,” Schiff posited. “When they do that, the money is not going to have very much value when the Social Security recipients or the bondholders ultimately get paid.”
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