If you thought what’s happening in Greece could never happen here, think again. While government officials try to soothe investors’ fears with a lot of happy talk, new indicators suggest the United States could be on the verge of an economic collapse. At least, that’s the view of renowned investor Peter Schiff.
“What’s happening in Greece and what’s happening in Puerto Rico is going to happen in the United States.” He said in an interview with Reason Magazine. The CEO of Euro Pacific Capital blamed politicians on high debt and economic collapse. (Source: reason.tv, last accessed July 21, 2015.)
“When interest rates are low, the politicians can keep on borrowing and keep on pretending they can pay them back. But once the Greek creditors began to question the solvency of Greece they demanded higher interest rates, the same situation is going to take place in the United States.”
Over the last seven years, the Federal Reserve has kept interest rates near zero to encourage politicians and investors to borrow money. When interest rates are low, the debt is relatively manageable. But Schiff argues that as soon as the interest rate goes higher, the country becomes insolvent. That is the scenario which took place in Greece and it is likely going to happen in the U.S.
Schiff stated, “The minute our creditors figure out we are in the same position as Greece or Puerto Rico, they’re going to demand higher interest rates from us and we can’t pay either.”
However, Schiff admitted there were some differences between Greece and the U.S. When he was asked about the Greece situation and whether or not the country would default, he remains certain that the over-indebted country would miss future debt payments. The U.S., in contrast, doesn’t face the same risk because it can print its own money. But printing money, he argues, has its own problems.
“If you pay everyone by printing money, the real loss in purchasing money will be even greater.”