I enjoyed this book even though I was previously aware of its economic arguments and suggestions for portfolio allocations. Mr. Schiff is passionate and sincere and that tone comes across in the book.For that, thank the excellent John Downes who has co-written several other good business books. Many other reveiwers here discuss the contents of the book so I won't go there. I worked as a bullion dealer in the 1970's so this is my second "crash" cycle.Many people thought the US would collapse in the 70's due to inflation and a national debt of $1 Trillion dollars. Many thought gold would zoom to the moon.Instead, gold crashed and languished for over 20 years. That's because the US was able to shift gears.
Reagan pulled the US economy up from its tailspin by switching from printing money to issuing debt.He took advantage of the low US debt/GDP ratio to inflate debt by selling bonds to Americans and foreigners. It accomplished the same thing - letting the economy expand with a near infinite supply of cash liquidity.George W Bush then doubled the US national debt to $10 Trillion in only eight years.Low interest rates sucked in the public who took on enormous personal debt.
The US now can't rapidly inflate because the dollar would collapse and can't take on more debt because investors doubt it can be repaid in sound money. People don't accept the possibility of an economic crash because they think the US/Bernake/Fed will always be able to pull another rabbit from the hat.This complacency will lead to disaster for most investors.
The US is tapped out on debt both public and personal. The US has so debased the dollar that it has fallen tremendously since Bush II took office and continued the pattern of reckless spending.
If you don't want to believe Schiff when he warns of what's ahead then listen to Greenspan as he touts his recent autobiography. He states directly that the US will have inflation for the next 25 years. He says the outlook for stocks, bonds, and the general economy is 'gloomy' for the forseable future.He says the dollar will likely lose its reserve currency status. This is "The Maestro" talking. He says it's going to be bad. Schiff tells you how bad and what to do about it.
Some people here crticize Schiff for touting his firm's services. So what. He tells readers what to do, but most won't act for themselves. So, he provides the service. Currently, gold is at 725 (September 2007). That's not cheap, but it won't be cheaper in 2009. The US will have to reduce the rate of gov't spending and that will feed back into jobs and consumption.I doubt that the dollar will totally collapse, but when it's all said and done, we'll get a combination of "manageable" inflation and rising interest rates.Most other nations will also inflate as they prop up their economies and scramble to get their share of the world's increasingly costly oil.
The only asset that trumps oil is gold.Bite the bullet and get your share. Reduce your US stock exposure and don't go within 20 miles of a long-term bond. Your financial advisor will be of little help in these matters. Their loyalty is to commissions. You'll have to start thinking for yourself and acting on it even though it will make your stomach churn and give you a migraine.
I'd suggest a general portfolio of 25% gold (ETF or coins), 50% cash, and 25% international stock index fund.If inflation is gradual, the foreign stock will keep pace. If war or rapid inflation strikes, gold will win big.Hold cash to provide liquidity and to take advantage of opportunity. You shouldn't have to wait too long. The politicians will paper things over until the 2008 election. At least hold enough gold to offset declining purchasing power of a fixed pension.If you need 30k a year to live on, then hold that much gold - at least. Live cheap and get out of debt.
Peter Schiff's book is certainly worth reading. We'll see the truth of that within a few years.
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