Peter Schiff and economist James Galbraith showed up on CNBC today for a somewhat maddening debate about the seriousness of the US deficit. We say maddening because the two are so far apart on the issue that debate is impossible, and both of them are largely informed by ideology rather than a rational debate about what’s happening right now.
Bottom line: Galbraith has absolutely no fear about the deficit because we can print, and he notes that long-term rates are low. Schiff says the US government is a subprime borrower.
What’s interesting is when they talk about Greece. Schiff says the US is the next Greece. Galbraith says the difference is that Greece is a member of the euro and doesn’t control its currency (it can’t print).
The key line though is when Schiff says: “The fact that Greece can’t print money is a good thing.”
This is the aha line that reveals Schiff’s true ideology. It’s better to have an inflexible currency where you’re forced to default, rather than have the ability to print and inflate. Essentially Greece is under a modern version of the gold standard — it doesn’t have a currency, it just has a supply of euros that it doesn’t control, much like any country would be if its currency were gold.
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