You have probably seen Peter Schiff on television, not once, but many times. Among the legions of indistinguishable talking heads out there, he stands out. He makes sense. He draws attention to reality. He is disregarding of the opinions and conventions that prevail on the financial news networks and just comes right out and says what few others are willing to say.
He gets away with it because he makes sense, is super articulate and is aggressive in getting his message out. Even if you don’t watch television (I don’t, not much), he has his own radio show, YouTube network, blog, social media accounts and much more. You could probably spend a good part of your day living alongside the mind of Schiff and still not hear it all.
He is also the author of How an Economy Grows and Why It Crashes. I assure you that there is nothing else like this on the market today. In many ways, it is a work of genius. Imagine learning the complexities of macroeconomics and the business cycle through a series of cleverly drawn cartoons that illustrate a kind of economic parable.
It’s great for kids, but also for adults. It was originally written by his father, Irwin Schiff, and became somewhat famous in the 1980s, but this new edition improves the original because the accompanying text reduces 100 years of scholarship into a plain-English explanation of economic development and the business cycle. The themes throughout are consistent: Production comes before consumption; debt is not substitute for saving; credit is no fix for debt; economic reality cannot be held at bay forever.
I had occasion to listen to a dinner lecture by Peter at the New Hampshire Liberty Forum. The conventional wisdom is that a dinner speech should be super short — think 20 minutes — because people are slosh-headed with wine and woozy from eating too much. I didn’t time his speech, but Peter might have spoken 100 minutes. Dreadful? On the contrary. Everyone sat in rapt attention. I did too. We could have sat there and listened another hour.
Incredibly, Schiff doesn’t use any notes when he speaks. He starts, and the speech rolls out of his mind like a carefully woven Persian rug. His cadence is unusual enough to entice the ear, never missing beat. His vocabulary is vast. His rhetorical method is as follows… He introduces a topic. He presents the conventional wisdom. He points out what is wrong with the convention, and then adds his spin. Then he piles on evidence to support his opinion until it becomes completely convincing. He provides a nice segue to another point and repeats the method.
His topic was very interesting this evening. He addressed the brain drain from the United States, the very alarming trend that is unique to our times. Everyone wants to talk about the immigration problem, but he says we have an emigration problem. The smartest and wealthiest and savviest young people are trying to get out.
Already in the U.K., the waiting list for giving up American citizenship is long and growing. Americans are also leaving for Mexico, Latin America, China and the Far East. Official data are extremely difficult to obtain, so most evidence of the larger trend is anecdotal, but no less real.
Why would anyone do this? American citizenship was once the ultimate asset. People came here for freedom, and they got it. More and more, citizenship is a liability. A major reason is that the U.S. is one of the few countries in the world that actually tracks down its citizens to force them to cough up taxes on income made in any country.
Instead of being a form of liberation, Schiff said, American citizenship is like a metal ring around your ankle that you can’t saw off. The only way is to give it up, but that turns out not to be so easy. The forms alone are $450, and the wait time can be interminable.
American citizenship also exposes foreign banks and institutions to unwelcome intrusions from American bureaucrats, who no longer care anything about borders. It’s as if wherever you go, you drag the American empire with you. This makes you something of a pariah to many foreign institutions. Apparently, American expatriates bump into this problem immediately when they attempt to open bank accounts and brokerage accounts, and even when trying to buy server space from foreign service providers.
As Schiff pointed out, this trend is a signal of larger problems in the United States. The unemployment issue is a huge one, especially among the young. Businesses don’t want to hire employees, which cost them far more than the salary. There are insurance mandates, payroll taxes, legal liabilities — not to mention the terrible risks associated with getting the wrong guy and then not being able to get rid of him.
How does this affect young people? It’s a disaster. Many newly graduated students are carrying debt in the six figures. They did what they were supposed to do, staying in good schools, obeying their teachers, getting good grades. But when they got out on the market, they found that they didn’t have the skills that businesses wanted and they had no work experience that demonstrated that they could bring value to a firm. So they started at a low salary that wasn’t even enough to service their existing debt load.
As if to underscore the point, just over the weekend, I met a young lawyer who had graduated from one of the best schools with excellent grades. She couldn’t find any position except that of a low-paying position as a public defender — a respectable job, but not one with upward mobility. But here’s the catch: She was carrying close to $400,000 in debt. And this is at the age of 25. Talk about demoralization!
But back to Schiff’s speech. The picture he paints of the American future is shockingly grim. The national debt, the regulations that grow and grow, the intrusive and intense tax enforcement, the spying and police impositions, the broken banking system, the shocking level of sheer phoniness in the financial world — all of it adds up to a dark picture.
The rich seem to understand this problem. A news cycle a few months ago mentioned that Mitt Romney keeps some assets in the Cayman Islands. Why would anyone do this, especially given the long reach of the American tax police? There are two factors: reducing legal liability in case of trouble and the general need for political diversification. It illustrates something very important: The smartest and wealthiest among the population no longer trust the future.
And compare with other countries! Contrary to what most Americans believe, other countries are freer, with lower effective taxes, less police intrusions, less spying, fewer regulations on small business. Schiff says that you don’t have to go far to find more freedom: Try one country to the north or one country to the south. And while many other countries such as Sweden and Finland are becoming freer, the United States is going the other way, and there are very few prospects for a turnaround.
Schiff is an important voice to alerting us about realities that many people are reluctant to face. To gain insight into a fundamental understanding of economic realities, I can highly recommend his How an Economy Grows and Why It Crashes. If something should ever happen to change the ideological culture in this country, this book can be an important tool for reintroducing people to sound economic thinking.
