I turned 30 at the beginning of this year and with this new decade decided it was time to start investing my money for the future. I once had it described to me that lower-class people ‘spend’ their money, middle-class people ‘manage’ their money, and upper-class people ‘invest’ their money. The more you think about it, the more it seems to ring true. So, although I am somewhere in the lower middle-class, I liked the idea of someday having wealth, so I decided to start investing.
I had seen Peter Schiff’s videos of himself talking to people at the Occupy Wall Street rally in 2011 and figured he would be a good place to start my economic education. In the videos, he is holding a microphone and standing next to a large sign saying “I am the 1%. Let’s talk.” A millionaire who is willing to spend a day humbling himself to an emotional group of middle-to-lower-class protesters seems like a person who’s opinions should be heard.
Schiff has studied economics for a long time and from that point of view, The Real Crash is excellent. He has done his homework diligently and clearly shows that the numbers don’t lie; America is flat broke. Our federal government has been going into the red for decades and currently holds debt in the tens of trillions of dollars. He reveals how Social Security is basically a Ponzi scheme who’s only safety net is the printing press inside the Federal Reserve that is perpetually producing new money. He shed’s light on the nonsense that is estate and gift taxes. Basically, when you die and pass your assets along to your children, the government has decided that it gets a piece. That is simply tyrannical! Same with the outlaw on prostitution. If two consenting adults want to transact money for sex, the government should keep its nose out of their business. Why is it that if you set up a camera and call it pornography, it’s legal? This is hypocrisy at it’s finest.
The problem, I find, is that Schiff is strictly an economist, and as soon as you open your moral compass, a lot of the “issues” become more complex. Social Security feeds, clothes, and provides roofs for millions of retired people. Schiff argues that essentially all governmental regulations of the economy should be abolished, but the fact remains that some are in place for reasons of morality – like measures taken by the EPA to ensure the longevity of our shared ecosystems despite not being cost-effective. Clearly we must find compromise, but the journey to doing so will be rough.
Something I took away from this book was the importance of saving. We live in a culture that is spend, spend, spend, as the media and economic news consistently encourage us to do. Schiff contends: “Consumption is the ultimate goal of all economic activity. You work or invest so that later on, you can consume more. Consumption is not the means, it’s the end.” Schiff argues that the opposite strategy should be employed and people should save, save, save. On this he writes: “Savings is the key to economic growth, as it finances capital investment, which leads to job creation and increased output of goods and services.” Obviously, both must be employed simultaneously for the economy to function, but the dichotomy is far too tilted towards spending and must be weighted back towards saving, so that a truer balance can be found. The overwhelming evidence for this, I believe, is clear. American’s have been increasingly living paycheck to paycheck, barely making ends meet, yet how many of those same people have multiple televisions in their house, season tickets to their favorite sports teams, and take lavish vacations to far off destinations? We are quick to spend money on lifestyle accessories and slow to save for a rainy day. How many people knowingly rack up exorbitant credit card debt and then simply walk away? Sure, their credit rating will take a hit, but their 72” plasma tv and memories of spending Oktoberfest in Germany are worth it. (It’s not quite as simple as this, especially once debt collectors get involved, but people are consistently able to get away from large portions of their debt with a little negotiation.) The government, in effect, is doing the same thing except it cannot walk away. Eventually, sooner or later, someone is going to have to pay.
While Schiff boldly contends that nearly all governmental regulations should be abolished and their bodies closed down, there are some truly grey areas that need careful consideration. For one example, the creation and implementation of the Equal Employment Opportunity Commission. This commission was set up to ensure that traditionally marginalized groups (black, female, disabled, gay, muslim, etc.) were considered equally on the basis of employment. This is a noble cause. When employers are not truthful in their reasoning for hiring or firing an employee of a marginalized group, they are not living up to our American standard of ethics and equality. The EEOC is meant to hold them accountable. But let’s consider the actual effects of this implementation. If you’re a large company, your HR and legal departments can handle disgruntled employees regardless of whether they are represented by the EEOC or not. If the employee’s complaints are legitimate, the company can afford to make amends. If the complaints are not legitimate, they can afford the legal trials. If, however, you’re a small, perhaps family run business, the risks are much higher. Every employee hired may potentially be an employee you must fire (or promote, for that matter.) What happens if you hire a black person, but then you must fire them because they are a bad worker? That person could then sue you for wrongful termination based on discrimination of skin color. It would inevitably be a hard fought battle in court, with the small business having to pay their way in time and money that they may not have. Perhaps this disgruntled employee wins their case, and the sum of money demanded by the court for reparations is large enough to force the family to close their business. The same way that firing an individual for being black is wrong, so is someone bankrupting a private business because they feel aggrieved (and in this case, was fired for being a bad employee.) So, you’re a small business owner and you’re faced with the inherent risk of hiring a new employee. You never truly know how someone will perform until they actually have the job. You have two applicants, and, all else being equal, one is a white guy and one is represented by the EEOC. Whom do you pick? It’s a tough choice to be presented with, with no clear answer. Should we then dissolve the EEOC? What about all those racist business owners? What if we continue to keep the EEOC active. How can we differentiate between legitimate profiling of marginalized people and those who are bad employees taking advantage of a system that will in a majority of cases reward them? Unfortunately, this is not the only space where dignified policy has led to moral grey area.
It is interesting how a book about the economy has led me to a moral predicament. In reflection, however, it seems to make some sense. If human beings made all their decisions from strictly an economic perspective, things would probably be running pretty smoothly. But we don’t. We are arguably more concerned with what is deemed right and wrong than we are with whether our budgets add up. And so they don’t add up at all. And that’s a big problem.
As the Fed continues to print more and more money to keep up with our nation’s expenses, the value of the dollar continues to go down. This book is titled The Real Crash because Schiff foresees an economic crash the likes of which we have never seen. He called the 2008 housing crash a warm up, and, after reading this book, I am afraid to admit that he might be right. The main event could be just around the corner.