Peter Schiff Bashes "Feeble And Fictitious" Budget Deal

Tyler Durden's picture

David Stockman's exclamation at the "betrayal" realized within the latest so-called "festerng fiscal" budget deal is taken a step further with Peter Schiff's head-shaking diatribe on Congress' inability to show that it is truly "capable of tackling our chronic and dangerous debt problems." So America blissfully sails on, ignoring the obvious fiscal, monetary, and financial shoals that lay ahead in plain sight. I believe that will continue this dangerous course until powers outside the United States finally force the issue by refusing to expand their holding of U.S. debt. That will finally bring on the debt and currency crisis that we have created by our current cowardice.

Submitted by Peter Schiff via Euro Pacific Capital,

They Bravely Chickened Out

Earlier this week Congress tried to show that it is capable of tackling our chronic and dangerous debt problems. Despite the great fanfare I believe they have accomplished almost nothing. Supporters say that the budget truce created by Republican Representative Paul Ryan and Democratic Senator Patty Murray will provide the economy with badly needed certainty. But I think the only surety this feeble and fictitious deal offers is that Washington will never make any real moves to change the trajectory of our finances, and that future solutions will be forced on us by calamity rather than agreement.

There can be little doubt that the deal resulted from a decision by Republicans, who may be still traumatized by the public relations drubbing they took with the government shutdown, to make the 2014 and 2016 elections a simple referendum on Obamacare. Given the ongoing failures of the President's signature health care plan, and the likelihood that new problems and outrages will come to light in the near future, the Republicans have decided to clear the field of any obstacles that could distract voters from their anger with Obama and his defenders in Congress. The GOP smells a political winner and all other issues can wait. It is no accident the Republican press conference on the budget deal was dominated by prepared remarks focusing on the ills of Obamacare. 

Although he had crafted his reputation as a hard nosed deficit hawk, Paul Ryan claimed that the agreement advances core Republican principles of deficit reduction and tax containment. While technically true, the claim is substantively hollow. In my opinion the more honest Republicans are arguing that the Party is simply making a tactical retreat in order to make a major charge in the years ahead. They argue that Republicans will need majorities in both houses in 2014, and the White House in 2016, in order to pass meaningful reforms in taxing and spending. This has convinced them to prioritize short term politics over long term goals. I believe that this strategy is wishful thinking at best. It magnifies both the GOP's electoral prospects (especially after alienating the energetic wing of their party) and their willingness to make politically difficult decisions if they were to gain majority power (recent Bush Administration history should provide ample evidence of the party's true colors). Their strategy suggests that Republicans (just like the Democrats) have just two priorities: hold onto their own jobs, and to make their own party a majority so as to increase their currency among lobbyists and donors. This is politics at its most meaningless.  I believe public approval ratings for Congress have fallen to single digit levels not because of the heightened partisanship, but because of blatant cowardice and dishonesty. Their dereliction of responsibility will not translate to respect or popularity. Real fiscal conservatives should continue to focus on the dangers that we continue to face and look to constructive solutions. Honesty, consistency and courage are the only real options. 

In the meantime we are given yet another opportunity to bask in Washington's naked cynicism. Congress proposes cuts in the future while eliminating cuts in the present that it promised to make in the past! The Congressional Budget Office (which many believe is too optimistic) projects that over the next 10 years the Federal government will create $6.38 trillion in new publicly held debt (intra-governmental debt is excluded from the projections). This week's deal is projected to trim just $22 billion over that time frame, or just 3 tenths of 1 percent of this growth. This rounding error is not even as good as that. The $22 billion in savings comes from replacing $63 billion in automatic "sequestration" cuts that were slated to occur over the next two years, with $85 billion in cuts spread over 10 years. As we have seen on countless occasions, long term policies rarely occur as planned, since future legislators consistently prioritize their own political needs over the promises made by predecessors.

The lack of new taxes, which is the deal's other apparent virtue, is merely a semantic achievement. The bill includes billions of dollars in new Federal airline passenger "user fees" (the exact difference between a "fee" and a "tax" may be just as hard to define as the difference between Obamacare "taxes" and a "penalties" that required a Supreme Court case to decide). But just like a tax, these fees will take more money directly from consumer's wallets. The bigger issue is the trillions that the government will likely take indirectly through debt and inflation.

The good news for Washington watchers is that this deal could finally bring to an end the redundant "can-kicking" exercises that have frustrated the Beltway over the last few years. Going forward all the major players have agreed to pretend that the can just doesn't exist. In making this leap they are similar to Wall Street investors who ignore the economy's obvious dependence on the Federal Reserve's Quantitative Easing program as well as the dangers that will result from any draw down of the Fed's $4 trillion balance sheet.

The recent slew of employment and GDP reports have convinced the vast majority of market watchers that the Fed will begin tapering its $85 billion per month bond purchases either later this month or possibly by March of 2014. Many also expect that the program will be fully wound down by the end of next year. However, that has not caused any widespread concerns that the current record prices of U.S. markets are in danger. Additionally, given the Fed's current centrality in the market for both Treasury and Mortgage bonds, I believe the market has failed to adequately allow for severe spikes in interest rates if the Fed were to reduce its purchasing activities. With little fanfare yields on the 10 year and 30 year Treasury bonds are already approaching multi-year highs. Few are sparing thoughts for yield spikes that could result if the Fed were to slow, or stop, its buying binge.

So America blissfully sails on, ignoring the obvious fiscal, monetary, and financial shoals that lay ahead in plain sight. I believe that will continue this dangerous course until powers outside the United States finally force the issue by refusing to expand their holding of U.S. debt. That will finally bring on the debt and currency crisis that we have created by our current cowardice.

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Truther's picture

"That will finally bring on the debt and currency crisis that we have created by our current cowardice."

These Bitchez never learn Peter....Don't waste your breath. Fuck'em all.

Hedgetard55's picture

Hopefully, the SHTF AFTER Xmas so the "boyz" can bank their big bonuses.

DoChenRollingBearing's picture

You can dump all over The Bearing and you can dump all over Rush Limbaugh, but he NAILED this.  Citing a very recent Wash. Post story about "Power Zip Codes" (Zip Codes where BOTH Income and Educational Achievement are very high), he postulated that because DC (home of many of the HIGHEST Power Zip Codes) attracts smart people looking for (and getting) mucho dinero, then that is the reason why government will never shrink.

All of these smart people go to DC to milk the cow (lobbyists, etc.).  The Republicans have finally made it obvious that they have betrayed the principles they espouse.


So, what to do?  Gold, fishez!

NoDebt's picture

DCRB- since when did intelligence have anything to do with earnings?  I'm and idiot and I do OK.  With 10 more IQ points I could probably be Warren Buffet.... or living under a bridge.  I've met geniuses that can't figure out how to unlock their own front door to go outside.  And I've met some pretty "simple" people worth millions (by their own hand).

Please don't confuse intelligence with sociopathy.  It doesn't take a lot of brain cells to realize that government power can make people (by the millions) do stuff for you that you couldn't otherwise make them do.

Proof:  Congressman Hank Johnson (D - GA) said that if too many people went to Guam the island might be in danger of tipping over and capsizing.  On tape, dead-serious, in a Congressional hearing.  April 2010.  Anyone could cite additional examples.  Bags of hammers, almost all of them (your average ZH'er is probably smarter and more roundly informed than your average Congressman).  Yet there they are, seated at the table of governmental power.


Anusocracy's picture

Slightly off topic, but Progressive Liberal Jonathan Haidt,, moral psychologist, called libertarians the smartest, most consistent, people out there.

And, after the upcoming rupture of our economic and political surreality, the most often correct.

All Risk No Reward's picture

Schiff is part of the problem.  He never discusses the fraud of Debt Money Tyranny...  prima facia fraud and it only takes fifth grade math and some self-confidence to figure it out...

Debt Money Tyranny

As for pimping gold, apparently, Schiff never considered that the trillionaires will buy up almost all the gold in order to impoverish all the dumb *sses that would walk right into their trap.

It isn't like that approach isn't part of their historical arsenal...

Cross of Gold - read it...  the Banksters were pimping "trickle down econmics" in the '90s...  the 1890s...

Getting 9/10s of the way there and turning everything over to the criminal Global Monetary Power Cabal is not good enough.

Only the individual will defend individual rights, so get busy learning rhetoric and start convincing people to just say no to their Muppetry.

Thank You for Arguing (I'm not the author, just a reader who appreciates good entry level writing on a critical subject)

Try to avoid Money Power corporate front Amazon, if possible.  You are financing our destruction when you do so.  If that's your only option, bite your lip, do it and work overtime to expose these criminals.

LetThemEatRand's picture

Love you, man, and I'm not your downvote.  But there a helluva lot of smart and wealthy people in places other than Washington.  Here's another Rush quote below.   Does anyone believe that Obama is assaulting bankers?  Rush is a brilliant man and knows how to make a strong argument, but at the end of the day he's a tool for the very people who control both Teams.   He's right that smart people are going to Washington to milk the cow that he works for, but that's like saying that smart people go to Palo Alto to milk the computer cow.  It's true, but what does it mean other than that some smart people know to follow money?  At the end of the day, he's trying to convince people simply to elect the other Team to keep the paradigm going.

"To some people, banker is a code word for Jewish; and guess who Obama is assaulting? He's assaulting bankers. He's assaulting money people. And a lot of those people on Wall Street are Jewish. So I wonder if there's – if there's starting to be some buyer's remorse there."

Let that sink in for a minute.  Forget the Jewish stuff.  It's just there to distract and make headlines.  The important point is this:  Does anyone other than a Team player really believe that Obama has it out for bankers?  And does anyone believe that lobbyists care who is in power?


Anusocracy's picture

The idiot Republicans are beginning to make the French look heroic.

Boris Alatovkrap's picture

Idiot Republican political class is accomplish impossible?

LetThemEatRand's picture

Perfectly stupid immovable object meeting perfectly idiotic irrestible force.  Les Miserables ensues.  Apres theatre, le pain.  Qu'ils mangent de la Rand.

Boris Alatovkrap's picture

Plus ce change, plus ce le meme chose.

drdolittle's picture

You're right, they say one thing and do another. Does anyone think the obama regime is the most transparent? Or the cheney regime didn't get us involvd in foreign wars and nation building. If the next guy tells us he's going to inflate the debt away then I'll sell all my possessions, cause it'll be deflation city.

Crawdaddy's picture

El Rushbo is a goat herder who's job it is to establish the boundaries of what constitutes acceptable thinking on the Red team side.

There was a time not long ago when Ed Schultz and Chris Matthews were considered acceptable guest hosts on his show. Rush, like his old guest hosts, is just another carnival barker front man defending the establishment Big Guv guys. They are there to keep the shit disturbed and supply distractions to deflect attention from who really runs the joint.

kridkrid's picture

Nice post. This is the piece that people have a hard time getting their arms around. Part of the reason... the carnival barkers from both sides do appeal to reason in their critiques of the "other side". Their message becomes alluring when you accept the world as it is framed by our masters. I wonder, sometimes, which of the carnival barkers realize it's a con and accept their role in the con and which ones are themselves simply duped.

Crawdaddy's picture

I'd say all of them who have reached any sort of prominence know it is a con, mainly because a true believer would blow out before they reached prominence. A true believer with radio/tv talent ends up with a very narrow channel to get their views out there.

marathonman's picture

El Rushbo never talked about the Fed and how it controls the entire political system until after 2012 when the QE to infinity policy was inescapable.  Maybe he really believes the red team blue team stuff.  Maybe he never really understood how things 'really' worked to begin with.  Or maybe he's found a profitable niche and just never mentions the real deal.  IDK. 

DoChenRollingBearing's picture

@ mis amigos above!

I do NOT mean to imply that wealth makes you smart (or the other way around, etc.).  The data are clear about one thing though: there are LOTS of smarts and LOTS of dough being made in and around DC.

All that money means that they are ALL in a game to get more.  Proof?  Almost everyone wants more money!

They go to DC to get it.  With bigger .gov, the more they can get.

RIP Republican Party ideals.  Rush had this one right.

Freddie's picture

Paul Ryan is a pro-amnesty stooge for the NWO.  Patty Murray is supposedly one of the dumbest people in Congress.

Crawdaddy's picture

Damn right Freddie. Almost all of the pro amnesty people, especially the present house and senate leadership, all have something else in common as well. Where do they go to church?

Fortunately, they are as incompetent as they are arrogant. This is at least slowing their progress. Things have gotten so bad for the NWO Executive branch team's agenda, they had to bring in a new/old Jesuit (John Podesta) to sort things out.

Vendetta's picture

"The Republicans have finally made it obvious that they have betrayed the principles they espouse."

You mean the principles of fiscal conservatism they espouse?  I don't disagree with you but its been obvious to me for many, many years.   There are solutions that don't require making children in the US possibly starve but it would take true courage and leadership by either political party but neither of them possess those qualities.  Of course, such solutions, if implemented, would probably result in some serious blowback to individual politicians by the monied interests for taking their feeding trough away.  I have seen first hand the corrupt forces that feed at that trough ... when they pulled the plug on their particular interest in their corrupted businesses (sold out)... they immediately went into local politics and joined the business roundtable groups in their respective cities.

AmCockerSpaniel's picture

"Cowardice" and or  "GREED"

ZH Snob's picture

how did they sneak this one through?  looks like they finally figured out they look less foolish if they just agree on a quick and dirty back room deal.

Oldwood's picture

Exactly! They see their popularity numbers crashing and realize if they would just stop calling each other names, everything will be fine. No one is really paying attention to the real numbers and those that are, are extremist whack jobs or enablers busily trying to bury the numbers with meaningless bullshit. We will all be "winning" soon!

NoDebt's picture

Agree completely.

Now onto more important things.... like the 2014 election distraction from the overall decline.

It really is amazing when you think about it.  The unstoppable decline of an emprire.  They all go pretty much the same way- decay from within.  We all know it.  History is replete with examples.  Yet the course seems unalterable while it's happening.  

CrashisOptimistic's picture

I go much futher.

It's the overall decline of civilization.  America is not special.  It's everywhere.

AUD's picture

Yes, the pollies here in Australia have recently voted to do away with the debt 'ceiling', because they think they are the final arbiters of what is productive or quality debt. In other words, they believe they are Gods.

Vendetta's picture

I find it remarkable how US politicians of either party and their minions have, over the years, ceded so much of America's greatest strength (manufacturing) to China. 

Milestones's picture

Agree NoDebt-- on to more important things; such as in the article maker Frountrunning just above this article. Fot those who believe the Gubermint account of 9/11 check out the story bring some insight to bear on SAUDIA'S involvment in the mentioned "event of the decade". 

Just suggesting ya might want to take a peek at the allegations mentioned. I know little of the NYC Post but that is the source of the article but it mentions names,places and dates. Check it out. I have never seen it before.              Milestones

Leonardo Fibonacci2's picture

But we have Obama as a President in da house, the White House.  Aren't we lucky!!!!  

kridkrid's picture

Government debt is a red herring. The monetary system is the problem. It's a Ponzi scheme, more or less. Government debt is merely the bottom floor on a system that will collapse. Math is a bitch that way.

Al Gorerhythm's picture

Consider that the system is a Ponzi and that the US rests at the apex. Next conider the tiers of membership. If you consider how the expansion of debt payments filter up and who is paying for it, then the Ponzi is hardly in its death throes. The masses of corraled debt slaves have little choice other than to keep paying their tithe and keep droning their wat to work to pay for it. 

kridkrid's picture

But the ponzi is always in need of the next rung is suckers (those willing to take on the debt) and that rung needs to be larger than the one just before it. The system doesn't care who owns the debt, only that it can continue to roll forward at ever increasing numbers. Consumers are tapped out, corporations are tapped out, the explosion of govt debt ( a global phenomenon) will represent the last frontier, I believe. What else is there? The end is near.

Al Gorerhythm's picture

The next rung of suckers are being bonded at birth. They are already earmarked to pay the debts of their fathers. The crux of the matter is; yes, we are all tapped out but we have a mob of politicians enabling the growth of this debt through deficit spending. There is no oversight or choke on their behaviour. They are spending your money on making themselves seem important enough to be indispensable. As long as they can create debt (deficit spending to maintain THEIR lifestyle), they will. Now that the FED is purchasing 80% of government bonds, this can go on until the FED owns all of our children's futures. They do now. They are printing money to bribe our "Representatives". These guys are there to protect themselves and we are their ticket.

Barry McBear's picture

Well said kridkrid.  While I agree the end is near, I think near is relative.  They could drag this out for decades, 20-30 years.  It's in the best interest of all the players in the game for the ponzi to continue.  It's not like a small time ponzi, like Madoff, where the authorities will step in to expose it at some point.  In this case, the authorities will do everything in their power to keep it going.  They can and will change the rules at will and the public is only too willing to believe what they're told.

drdolittle's picture

Hence the government's continually increasing debt

marathonman's picture

Just checked my birth certificate and it was indeed issued by the American BankNote Company.  It is a bond on birth for the US to tax my wages to pay the IMF for US debt.

OwnSilverPlayMusic's picture

Deficits don't matter...until they do

Anusocracy's picture

The mental deficits most politicians have matter a whole lot.

Every day they are ruining the lives of those not at the top a little bit more.

Reaper's picture

This is the same deal a promising-to-reform alcoholic gives. We spend (drink) more for the next two years and, then, in future years will reduce spending (drinking) to compensate for our increased spending (drinking) now. Ryan has sugar plums of higher office in the House or the Presidency dancing in his little brain. The present Congress cannot compel future Congresses to cut the budget. A Republican House, Senate and Presidency didn't reduce spending under the first six years of Bush, nor in the last two of Bush with a Democrat Congress. Only a fool would trust either party to reduce spending. We need a fiscal collapse to bring sanity.

Beam Me Up Scotty's picture

I like how the current republicans say, we just need to get majorites in congress again and the WH back and everything will get put back on track.  YA RIGHT!!

Vendetta's picture

"We need a fiscal collapse to bring sanity"

The question is really how long can they keep the current insanity going?  It has been 5, going on 6, years since the initial collapse

yogibear's picture

Washington DC has gone Chicago style. Spending, budgets, etc.

Expect the same results with the Chicago gang running things.

alentia's picture

Chicago gangs dont print money

Chicago gangs run responsible budgets.

I would not dare to compare.

stant's picture

word on the street is during the last debt mess the russians and china threatened them, and it wasnt finacial in nature.

q99x2's picture

Have faith that the FED knows how to suck every last ounce of wealth out of the United States of America before they light the match.

They are bankers. That's what bankers do.

hairball48's picture

Peter is my not so  humble redneck opinion. I can't wait until the bond market turns and goes tits up. I'm looking forward to how the nitwits in the financial news "explain" what happens when TSHF. Should be entertaining.


Who'll be last last out the door when the sale begins?

CrashisOptimistic's picture

How is this possible when the Fed can buy all the bonds it likes?

The Fed is a guaranteed bidder.  Further, the entire world would suffer if the US bond market went bidless, and because there is nowhere else for various entities to park money in that magnitude, this scenario isn't possible.

STOP THIS.  Just stop thinking numbers on a screen are EVER going to be allowed to kill people.  The numbers will simply be changed.  By decree.  Look at everything done in 2008 and 2009.  The system would have collapsed then.  They just stopped that by decree. 

GM bondholders were told they have no claim on assets, and labor unions did.  The first QE was done.  QE around the world was done. 

Stop thinking money this or that is going to kill millions.  It won't.  Ever.  It won't be allowed to.

Now physics is a different matter.

hairball48's picture

"How is this possible when the Fed can buy all the bonds it likes?"

If the Fed becomes the only bidder for U$Treasuries, then the U$Dollar itself is done, finished, worthless. Nobody knows or can predict when that "moment" will happen.

That's why those who know say, "The Fed can continue to buy/monetize U$Treasury securities...until they can't.

Maybe I mssed something but I thought most of y'all knew that?