As global stock markets crash in the backdrop of a soaring gold price, Euro Pacific Capital CEO Peter Schiff unleashed a series of salvos on the Obama Administration in the handling of the budget crisis, and slammed billionaire investor Warren Buffett for encouraging continued profligate policies of the White House and, by implication, the Congress.
Standard & Poor’s downgrade of U.S. debt kicked off a firestorm of financial and political calamity that has now required an all out damage control operation from the White House and the government’s go-to “private sector” operative Warren Buffet.
“In Wall Street parlance, any downgrade means get the hell out … If they [rating agencies] go from a Strong Buy to a Buy, it means, you know, look out below,” Schiff told Max Keiser of Russia Today’s Keiser Report.
“What S&P is saying, as far as I’m concerned, is get out of U.S. debt, any dollar-denominated debt, because what they’re really downgrading is not Treasury bonds, but the dollar.”
And, immediately after the S&P downgrade, investors fled the dollar—in mass. As U.S. Treasuries soared (dollar positive), gold sailed past Treasuries (dollar negative), turning what seemed like a dollar-positive event into a catastrophein the dollar in purchasing power against the ultimate currency, gold.
Even the Wall Street Journal headlined an article on Monday, following the rating agency’s announcement of a U.S. downgrade on Friday, heralded U.S. Treasuries as the “gold standard” of debt, in a well-place position atop Yahoo’s financial news feed. The orchestrated response, crafted over the weekend, couldn’t be more obvious to those following closely the 3-year-long slow-motion global financial crisis.
Of course, the U.S. has other options apart from defaulting in a manner Argentina, Mexico or German had defaulted in the past. Instead, it appears the U.S. has predictably chosen to inflate its way out of overburdening debt, which Schiff said, is the point of S&P’s downgrade.
“Because S&P knows—as Alan Greenspan said, and Warren Buffett said—they don’t have to default, they can print,” Schiff explained. “But that’s worse, especially if you’re a bondholder; you get paid back in Monopoly money.”
In complete agreement with European leaders, Schiff went on to ridicule a rating agency system that rates the world’s largest creditor, China, below the world’s largest debtor, the U.S.
“Why is China, the world’s biggest creditor nation—we owe China trillions—how could they be rated AA-, and we’re rated AA+?” Schiff asked, rhetorically. ”What kind of twilight world is the world’s biggest debtor a bigger risk [meant to say, better risk] than world’s biggest creditor?”
Then, in a typical Schiff rapid-fire rant, U.S. Treasury Secretary Timothy Geithner entered Schiff’s sites.
Geithner, who said S&P made a math error in its calculations of projected U.S. deficits, calling the error a “$2 trillion mistake,” only serves as a red herring, or a canard, as Keiser put it in his question to Schiff about Geithner’s comments.
Schiff responded to Geithner’s comment by pointing out that the Congressional Budget Office (CBO), a political arm of the White House, had made grandiose growth and unrealistically low inflation assumptions in its forecast, which Schiff implied, were nothing more than typical self-serving propaganda budget forecasts out of Washington.
“The reality is that we are going back to recession,” Schiff scoffed. “So you take all those rosy scenarios and throw them in the trash can where they belong. The budget deficit is going to be much worse than both the Administration and S&P believe. So they’re all wrong on the math.”
And on the subject of Warren Buffett’s comment following the S&P downgrade announcement, in which, he said U.S. Treasuries should hold a “AAAA rating,” Schiff again commented by implying that Buffett is a has-been, a kept man of the rigged system, and has become more of a humorous sideshow during the crisis than a man whose comments should actually be taken to heart by investors.
Buffett’s opinion is “moronic,” said Schiff. In his advanced age, “senility is catching up with Warren.”