welcome to worlds apart it's a quick fix for a long and increasingly intoxicating addiction the united states may have avoided a deep hole but it keeps dragging the world into an average keep her dad hold is it still possible to break this vicious cycle to discuss that i'm now joined by an american investment broker and financial commentator peter schiff mr chef thank you very much for your time being i appreciate your being here now when i think about the kind of sick anomic relationship that the united states has with the rest of the world it reminds me of a family with an addict somebody who used to be

a pretty good reliable guy but slowly but surely developed this addiction to foreign debt and if this habit is definitely getting out of hand he's behavior he's getting more and more unpredictable and the rest of the family doesn't really know what to do with that because they can't leave like that any longer but they can't leave him along as well so he's saying this is an accurate metaphor yeah i mean it's very close to me it's almost like where the in law who's overstayed his welcome you know maybe he was a welcome house guest at one point but he stays around for a long time even eats all your food in the hogs the remote control you know if he doesn't clear clean up after a self i mean yeah i mean we have really almost a parasitic relationship i think at this point with the rest of the world with the world being the host and unfortunately america being the parasite because you know we don't have a balanced trading relationship. up america imports all sorts of goods valuable

consumer goods and resources and we export debt we export paper inflation we trade the world their valuable goods for the money that the fed prints and the only way that we can continue to sustain this artificial lifestyle is a lot as long as the world is willing to support it the world has to be willing to loan us money but never expect to get paid back in fact we just said with this whole debt ceiling charade that if we can't borrow more money we're going to default if the world ever wants their money back we will default staying with this theme of addiction if i may the united states as you just pointed out got its quick fix the debt ceiling was raised by yet another trillion dollars and i think it's all b.s. that the united states will continue to beijing and borrowing at least till early faberge why do you think the rest of the world keeps indulging these clearly and

house economic behavior well we're not going to stop in february either america is going to borrow as much money as the world is dumb enough to lend us that's the bottom line because we've already borrowed more money than we can possibly repay we can barely pay the interest the only reason we can pay the interest is because the rates are so low but when rates go up we won't even be able for the interest let alone the principle so it's a ponzi scheme we've told the world it's a ponzi scheme yet for some reason everybody continues to participate in the scam the question is how much longer will the rest of the world throw good money after bad because they don't want to admit the mistakes that they've made that they've loaned us all this money that they're not going to get back and i think one of the reasons why well doesn't really want to recognize the mistakes that it's made is because american politicians like most addicts keep promising that they're going to change you know just give us the money to do. and for these last those and to

morrow we will check into rehab and in this in in a similar fashion american politicians keep saying that you know we are going to rein in the expenditures we are going to increase the revenues but the debt to g.d.p. ratio keeps increasing so who do you think should take the initiative here is it the addict who has to act first or those who deliberately are not feed into the said diction no i believe that it's going to have to come from abroad is going to have to be the pressure brought about by our creditors u.s. politicians will never do the right thing in till they're forced to why should they ever cut government spending if the world is willing to continue to buy our bonds as long as the world is lending we're going to keep borrowing so it's not the debt ceiling will always raise that it's the lending ceiling the eventual collapse is going to be imposed upon us from abroad when the world doesn't want to buy our bonds anymore then the dollar is going to crash we're going to have a dollar crisis we're going to have a sovereign debt crisis and the party will come to an end but not on our terms

it'll be the world that finally imposes the discipline that our own leaders lack the integrity or the courage to adopt themselves but at the same time if if you look at the behavior of the major american lenders china russia other because there's of the american currency i think they've already attempted to wind themselves off the dollar but at the same time they're doing that in a very very slow fashion do you think that's the right strategy or are they just prolonging the pain yeah i think they're pulling the pain i think they're going to ultimately have to speed up the pace at which they try to get rid of their dollars i mean maybe they're hoping that they can get rid of them slowly enough to salvage the value i don't think that's going to happen because they actually end up having to buy more i think that they should try to spend them as quickly as they can before it's too late and also since a lot of our creditors. are also countries that have major trade surpluses with us

they don't want to acknowledge that they've been wasting their resources selling to a customer who can't pay china for example they want to buy our bonds to support our dollars so that american consumers can buy their products but we're not actually buying anything because we're getting those products for free because we can't really pay for them because we can't make exports that the chinese want and at some point i think countries are going to see the wisdom of allowing the dollar to collapse allowing their own currencies to rise allowing their own citizens to enjoy all those products that were previously given to america i heard you say previously that the united states isn't capable of repaying its debt to china which currently stands at if i'm not mistaken at one point three trillion dollars it could repay these down without significantly diluting the the value of the dollar through inflation a possibly even hyper inflation and that may seem like

a workable solution that when we in or rather a lose lose for all but i think in this case the american government will be faced with a choice who should bear this chong just pain in the long term whether it is the american lenders through facing a default or the american people sort of facing an inflation and i wonder if you were calling the shots who would you prefer the american people or the american deaths or well some of the american people own u.s. treasuries so it's not like all of our debt is owned by the chinese there are some americans that own those bonds but whether it's inflation or default the american people are going to suffer in the short run i think they'll suffer more through inflation than through default i mean ideally we would not obliterate our deaths by inflating them away i think are our restructuring is much better than inflating and i do believe that us bond holders are going to be asked to take pretty a. big haircut whether it's in

a restructuring our or through inflation but there's no way right if you're if you own u.s. treasuries and you're a foreigner i mean if you're in russia and you owe us treasuries politicians are going to put the interests of a russian bond holder ahead of an american voter so our foreign creditors are really low down on the totem pole of getting their money paid back i mean i would be surprised if we defaulted just on the bonds held by foreigners but not on those held by americans and believe me you know if push comes to shove do you think an american politician is going to say we need to raise taxes on average americans or we need to cut social security benefits because we need to pay china the interest on their bonnets why not more should we pay china back the principle because they don't want to roll of the that will never happen but we say mr ship when we are talking about america being addicted to foreign that's what we are really talking about is the american people being those addicts who through their you know

lifestyle choices through their political choices consumer habits what have you it is the american people who are ultimately called ing the rest of the world hostage by spending beyond that means i think you would agree with me that one of the main reasons why is the united states transition from being the world's greatest creditor to being the world's greatest debtor is because of the low or personal savings that americans used to have yes but you have to understand why that changed why did americans go from a nation of thrifty savers to a nation of reckless spenders and speculators it was because of the government it was because of the federal reserve it was because of the policies we put in place that corrupted our behavior that distorted our rationale and our way of thinking so we went from a great creditor a productive nation to a nation of debt based consumers and. but it's not because there's something

innately wrong with americans there's something wrong with our institutions there's something wrong with our government now yes we're responsible we elected those leaders that did this to us but right now the world is supporting that by financing it the world is making it possible for the fed to print all this money i mean our economy is so screwed up because we've been able to issue the world's reserve reserve currency we've been able to live beyond our means we're able to consume without producing we're able to pay for our imports by exporting our inflation mr shifa sense to me what you're saying is that everybody shares part part of the blame both the american people read the lifestyle the american politicians for that policy choices and the rest of the world for allowing this to happen but since we already address that cause let me ask you a question about one possible solution and that is something that you mentioned earlier inflation or hyperinflation and this is all of the say a very traumatic outcome for any society but at the end of the day it is one of

those things that if it doesn't kill you it makes you stronger and many countries including russia underwent hyperinflation sometimes at the bidding of america's prominent economists and it was a very painful experience for the country but at the end of the day it allows you to put your finances in order do you think that american politicians that are compulsive makers will have the courage to apply be surprised if they so generously give to other countries to its own people but i hope so you know hyperinflation is going to be worse than default and restructuring a legitimate you know deflationary collapse the problem for the united states is if we destroy the dollar's value and you know it's no longer going to be the reserve currency and americans all of a sudden they're in this shock therapy where we have to live within our means we can only consume to the extent that we produce arc of productive capacity has been so diminished over the years. we don't really know how to survive right now you

know we we don't have the factories they're gone we don't have the skilled and trained workforce yeah we have lots of young people with expensive philosophy degrees but they don't know how to do anything we'll have to have a real government shutdown so that we can have a start up of free market capitalism so you know we're in a big hole and so it's not going to be easy to get out of it and unless we can go back to our founding principles is going to be difficult to ever emerge as a successful powerful prominent nation mr schiff i really like how you can parents living within their means to their shock therapy but we have to take a short break now when we come back to the tragic comedy of the years the fault was sparked by strong disagreements over a bomb most universal healthcare reforms but why don't we ever see that kind of discussion when it comes to america's skyrocketing military spending that's coming up in a few moments on while the part. number

the first time i saw fox and i think a muscle pops came into being after i left leaving united states to live abroad when i first saw it i just thought what is this this is opinion t.v. there are no facts at all it's just opinion i personally i was really shocked at what has happened to my country because there's no news in this there's news station you know if you if you click around or you go through you know the major news websites say i agree i mean it tends to be the same story to a certain to a certain level or degree. and not much new information and clearly you know fox is business model and they're you know that it's not a secret is to. carry a conservative or republican agenda and their major goal if you watch their show is to really make sure obama. doesn't succeed as a democrat so it's

a business model they made a decision. to lift the dark design it's a big journey. one hundred and twenty three days. to do. the. really want to be. for sixty seven. you know record setting trip. their. numbers for the. olympic torch relay. on our.

welcome back to worlds apart from here discussing the years addiction to foreign debt with investment broker peter schiff mr shape just before we went to break we're talking about addiction being a matter for for what is happening with the u.s. economy and where i would like to introduce yet another comparison and that's one is to the theatre of the absurd that reaches a genre where actors rarely say what they mean and the main narrative usually lacks in logic and if you look at the what is happening in the united states it is a controversy with very strong credit ratings double and triple h. but at the same time it's also a country that count fades that's hers and that cannot pay its own people now we also hear politicians talking about avoiding this major crisis but in fact the crisis has only been made worse by adding another trillion. dollars to the debt

ceiling it is as if everything has been turned upside down yeah it is the theater of the of certain anybody who puts any stock in those ratings u.s. treasuries are junk bonds it doesn't matter what standard and poor's or moody's says or fitch in fact since the federal government sued standard and poor's i believe because standard and poor's downgraded from aaa to double a plus nobody is ever going to downgrade u.s. treasuries again even if they were in default i think they would still be a aaa but you know you have to look beyond that nonsense i mean president obama said that we had to raise the debt ceiling because america always pays its bills so that's a lie we never pay our bills that's why we have seventeen trillion dollars of debt that's unpaid bills what the president wanted to do was raise the debt ceiling so we can go on not paying our bills because the truth is we can't afford to pay our bills that's why we have to borrow more money and if we save a big theater of the observed matter for i think the title for this play was

obamacare and while i understand that it has very little to do with the actual problem i think many for in there is an extremely surprised why and mary can get sore worked up about how to care something that i understand is very expensive but at the same time something that is crucial for survival but at the same time we never get similar debates on let's say military spending which is exorbitant and most americans would probably be able to do without it why are america's priorities so mixed up well there's no question that we overspend on the national defense i mean we're spending money that we don't need to spend but health care was not always expensive in america it was it was very inexpensive until the government got involved with medicaid and medicare and all this the government created this problem so the reason we had such it is. efficient overpriced health care system

was because of all the government involvement that screwed up the free market if the free market was allowed to work in health care health care would be plentiful and inexpensive and instead of recognizing that fact and getting government out of health care so that market forces could come back in we expanded the problems we got government even more involved and now health care is going to be even more expensive after obamacare than it was before well mr speaking about market forces i was listening to your rap cast the other day and you were arguing that women in america should pay more for house insurance because they go to the doctors more often than they happen to be they want to bring children into this world and knowing how much the united states bans on wars over seas on regime changes in all those various places what have you it really comes across as penny wise and pound foolish well under the rules of obamacare insurance companies can't discriminate

based on gender but we know that women of certain age groups are going to use a lot more health care than men mainly it's young women women in their twenty's and thirty's are more expensive to insure than men but when they get older it might be different but women young women in america they get cheaper car insurance because they're women if they buy life insurance they get a cheaper life insurance because they're women so sometimes being a woman works in your favor and sometimes it doesn't but that's because the market is trying to assess risk to have an efficient insurance system but when the government comes in and mandates that the insurance companies can't price risk accurately but they have to miss price it that makes the whole thing less efficient everybody ends up paying more absolutely but what i cannot understand is why would americans and your south focus so much on how. care rather than turning your

attention to some are other fields where you're spent much much more and surely maybe market mechanisms are not given free reign here but i think this is an issue that could wait a little and the e.u. would benefit much more if you would address your attention to something that takes so much of your resources like for example we're spending well i health care unfortunately does take a lot of resources and the reason we're so preoccupied with it is because it's so screwed up but how did our healthcare system get so it's root upas government screwed on so well government is so involved in that sector but they screwed up other sectors they screwed up education look at how expensive our colleges are yet look at how little our graduates know i mean the government has corrupted everything it's gotten involved it ok let me phrase my question bit differently i know that you are not a big fan of president obama and like many you criticize him for his and decisiveness and yet a couple of weeks ago we witnessed him acting extremely swiftly on the on the issue

of syria he was ready to bomb that country within days without even waiting for the un report that he had on this particular issue arguably much more crucial to the well being of your country he keeps kicking the can down the road and i think the united states could save much more if you just awarded a war of to rather than denying some of your citizens universal health care don't you think so there's no shortage of pocker see in washington and politicians do things for political reasons i was very critical of our intentions to get involved in syria and i'm glad that the president wasn't able to carry out that threat but you know the reason we're able to do this is because we have the reserve currency if the rest of the world wasn't buying up our bonds we could afford to maintain this empire we would have. to cut military spending so it's amazing that you have

our big creditors whether in russia or china criticizing what we're doing but the only reason we can do it is because you're lending us the money if the world stopped financing our military we couldn't afford to get so involved in so many places around the world the only reason we can support maintain this massive military complex is because we can borrow the money to pay for so you can make a play your financing it well that may be a good point and i wonder how long do you think politicians president obama and the republicans i think there are just as complacent here how long do you think they will keep kicking the can down the road i mean is it just a matter of waiting until next the next elections or i mean when somebody will do something about that in your they they will kick the can down that road intil the bondholders bring the road to an end they will know we will never stop procrastinating you know if you know a friend who has who is overweight and they keep telling you that they're going to

start their diet next week you know why do they want to start it next week if they're not going to actually do it otherwise they would just start right now that the government will talk they we will assure everybody that we're going to get our fiscal house in order we just had the opportunity to do that and we didn't in fact we redefined the problem is far as we're concerned the debts not the problem it's the ceiling the problem is that we can't borrow an unlimited amount of money because that's really what we want to do so what essentially you're saying is that the united states will continue acting as an addict promising that it's going to come clean and never doing it in the long term now i know if you werent named dr doom for predicting the two thousand and eight crisis and it it is evident from this interview that your forecasts are not becoming. any more optimistic i wonder if the big crisis big looming crisis that you've been alluding to in this interview and many other. if this crisis indeed happens how would it compared to the one that

we experienced back in two thousand and eight well for america is going to be significantly larger because it's going to involve a crash of the dollar and the u.s. bond market during the eight the two thousand and eight financial crisis the dollar in the u.s. bond market gain value so that was a giant cushion for american citizens that enabled the bailouts and all the government stimulus but when with when the when the crisis is in our currency and our bond market we don't have that so for america it's going to be significant significantly worse for the rest of the world it depends on how they react if the world feels they have to try to prop us up and lend us even more money in the crisis then then our pain will be exported but i think that to the extent that the world wakes up and learns from the mistakes of the past doesn't repeat what they did wrong in two thousand and eight it could be very liberating for the rest of the world it could be a huge benefit for our creditors and so my hope is that american citizen is that we

then do the right thing we get the right message we get our act together we readopt the principles of sound money and limited government we start shutting down a lot of government for real not a phony government shutdown but legitimately start shutting down all those institutions that have undermined our economic freedoms in our productivity for years and if or rather that when that happens what is your contingency plan where do you keep your money you know i've got my money invested abroad i've got a lot of gold and silver commodities i do have some u.s. investments i own a lot of oil here in the united states but you know i haven't left i mean i still live here and still live in america so i'm hoping for the best i hope it doesn't get so bad that people have to leave i know there are people who are leaving their freight of what might happen in this economic catastrophe in a in a hyper inflationary environment what type of civil unrest there might be. so there

are people are leaving me are saying that you still have some hold. it keeping some of your money in the amharic and instruments but i wonder if he if he even did believe that this giant ponzi scheme to reach here alluded earlier it collapses why do you think there would be some save haven't because the world is a very interconnected these days and if something happens in the united states with the degree to which the rest of the world is invested in the united states why do you think those assets that you are investing in will still be safe well remember if i'm looking for a dollar collapse where the dollar really loses its role as a reserve currency or is it is significantly marked down in value that's a very different situation because of i own the currencies or assets outside the u.s. they're going to automatically rise in value but what you have to understand is right now the america is a net drain on the global economy because we consume more than we produce we're borrowing more than we save which means the rest of the world has to suffer because

they have to support this they have to subsidize this and so when the dollar goes down and america's loupe americans lose their purchasing power advantage relative to everybody else the world is now going to be awash in resources awash in consumer goods that were previously being used by americans are now going to be freed up and enjoyed by other people so it's not terrible for the people who have been bearing the burden to have that burden removed i mean everybody has it backwards they think we do the world a favor by consuming everything and borrowing it but it's the other way around ok mr safe i hope our viewers take your advice unfortunately this is all we have time for it thank you very much for being here and if you like a program please join us again same place same time here larry.

to. the outside to an active camps have plotted out where patients are forced that in the aftermath of the first strike never turn the world's attention to the places that some jobs go a lot of our times. the

way. the end.

the last few weeks have inflicted completely unnecessary damage on our economy u.s. narrowly escapes to fall with congress raising the bar and limit and ending the government shutdown but many worry the temporary fix may only lead to another debt ceiling crisis around the corner. a new round of austerity imposed by the two thousand and fourteen budget triggers the violence on the streets of rome as protesters take on police after massive anti-government rallies across the city. japanese authorities tried to dispel citizens fears sparked by radiation levels at the fukushima power plant hitting a record high plus. part of the. over there.