May 31, 2012
"Is the U.S. debt now insurmountable?" asks Richard Deaver host of Morning Magazine on KRMS in Osage Beach, Missouri of his guest Craig R. Smith. To which Craig replied offering five possible solutions.
"We can try to 1) grow our way out, 2) cut spending (austerity), 3) default or restructure, 4) inflate our way out, or 5) continue down the path of 'financial repression' using negative interest rates to mask the problem," said Smith.
"The problem is that we are rushing toward a fiscal cliff at the end of 2012 when tax cuts expire. The most likely option is that the Fed and government will attempt to inflate their way out, judging it as the path of least resistance," explained Smith.
"Will this further push the world away from maintaining the U.S. dollar as the world's reserve currency?", asks Richard.
"Precisely. The Fed wants inflation while saying their biggest fear is deflation. Inflation punishes savers and rewards debtors. Deflation punishes debtors, of which our nation has become the leader," replied Smith.
"The problem is that an economy is like a lung, it needs to inflate AND deflate. If there is never any deflation eventually, just like a lung, an economy will burst," explains Smith. "Debt and financial repression have postponed the consequences, but not indefinitely."
"The key to solving the debt crisis is to be willing to sacrifice the present for the sake of the future," said Smith, "similar to what Richard had to do in his personal life to advance his career. We the People must move out of our comfort zone to give hope to our kids and grandkids."
A caller chimed in reminding Rich and Craig that comparisons with the 1930s depression are flawed, due to the moral and cultural slide in the U.S. over the last 80 years.
"Your caller is right on the money," said Smith. "In the 1930s we were a nation of producers and savers, but today we have become a nation of consumers and borrowers. Sadly our policy makers do not take this into account and thus they are running us all toward a cliff right now. But there is hope, if you have a plan, which we have laid out in our latest book, The Inflation Deception, offering seven strategies to reverse course before it is too late."
Rich's final comment, after Craig offered a free review copy of the book to listeners by calling 800-630-1494, was simply this: "Next time I feel depressed and am ready to jump off a bridge, first I will call Craig Smith to give me hope for the future."