Peter Schiff: the dollar is going to fall like a stone

Interesting debate between Peter Schiff and Ron Shah on CNBC below.  Peter Schiff is claims the dollar is going to fall like a stone whereas Ron Shah of Jina Ventures is clueless and states Indian and Chinese Markets “need American Management expertise”.  To some extent I agree with Ron however that both China and India have grown a bubble to some extent.  Only Peter Schiff refers to Brazil and China events of last week, rightly so.

Just as Peter Schiff I think the debt growth of the US is problematic to the dollar.  The rhetoric question Felix Salmon raises on Reuters “Can America default?” is off topic however.  Of course America will not default.  What will happen however is that the whole world will realise that the US will never pay back its debts.  Today the US has 11 trillion  US$ in debt.  Just like a household taking a loan the parameter which counts is the abolity to pay back that loan.  In a household this is defined by the income of the household in the case of US debt this is defined by tax collection.  The US government collects 3 trillion US$ in taxes.  However, it borrows every year more because of  spending.  Today 30% of the US tax collection is used to service the debt (pay interests).  If the US continues to spend every year more, soon 50% of the tax collection will be used to pay down intrests.  This means taxes will increase even further and eventually this cycle will strangle the US economy sooner than later.

Tags: brazilian real