Review of The Real Crash: How to Save Yourself and Your Country, by Peter Schiff

In this hard-hitting book, Peter Schiff tells the truth: The U.S. government, as well as many state and local governments, are up their ears in debt. He also denounces the use of gimmicks such as quantitative easing (the electronic version of printing money) and holding Federal Reserve (the Fed) interest rates artificially low so that people invest and take out loans rather than, God forbid, save money. The economic damage is compounded by a hideously complicated tax code and by laws and regulations that ostensibly help workers, but end up harming them instead. Schiff also trashes higher education for high prices and not much return on investment, and suggests that many people would be better off learning a trade. (This is what I’m doing now: my political science degree didn’t get me anywhere, so I obtained my CompTIA A+ certificate – and now I have a new job!) The text is interspersed with "Crashproof Yourself" hints for readers. It’s also written in a very clear style – no stereotype academic/economist jargon here.

Schiff is absolutely right. Too many laws and regulations strangle individual initiative. Federalist #62, thought to have been written by either James Madison or Alexander Hamilton, warned that “It will be of little avail to the people, that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man, who knows what the law is to-day, can guess what it will be to-morrow.” The sheer number of laws and regulations at all levels of government have made this warning a reality. Excessive licensing requirements are one example of laws and regulations run amuck.

Excessive licensing requirements make it harder for people to find work. Furthermore, there is a national security imperative to getting rid of excess laws and regulations. With less laws, there is less potential for blackmail. If recruiters for the military, the intelligence agencies, and law enforcement agencies had any sense, they would start demanding that the prohibition on drugs and commercial sex be ended, so that they could have a wider pool of talent to choose from.

Schiff's solutions are easy to talk about and politically (not technically) difficult to implement: Allow interest rates to climb, stop quantitative easing, and get rid of many laws and rules and regulations. He also calls for throwing out the income tax and replacing it with a national sales tax (punish consumption, not work and saving), augmented by user fees (such as toll roads) and tariffs.

Out of all these, the most important to tackle is the return to honest money. The Fed should allow interest rates to go up. This will promote saving, which is the true source of wealth. The target inflation rate should be zero, not two percent. Yes, it is government policy to erode the value of everyone’s money – mine and yours -- by two percent every year. Inflation, which constantly erodes savings and the value of a paycheck, is a regressive tax -- that is, a tax which hits poor people harder than rich people. If we must have a tax code and a regulatory state which drives everyone crazy but provides employment for hordes of accountants, lawyers, lobbyists, and various types of government employees (could that be the real reason? Nope – nothing to see here, move along, folks), then at least let it be paid for by sound money.

I wish that his chapter on health care had included a "Crashproof Yourself" section on taking care of yourself. None of us chooses our genes, but we can all choose what we put in our bodies and we can all choose to exercise and get enough sleep. Choosing wisely can save a lot of money!

If Democrats were really interested in helping the poor, they would call for deregulation and sound money. If the Republicans were really interested in helping working people, they would call for deregulation (not just of big corporations, but of drugs and commercial sex) and for sound money. The Democrats are blatantly statist, while the Republicans at least pretend to be in favor of deregulation and sound money. However, I don’t expect that either party will put Peter Schiff’s prescriptions into practice.

I learned a lot from this book. I heartily recommend it. For the record, I am not one of Peter Schiff's clients, nor do I hold any financial interest in his brokerage firm or other enterprises.

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