Ben Swann and Peter Schiff discussed the news of China surpassing the United States as the world's largest economy. Peter explained why it's only a matter of time before China and many other countries jettison the dollar as the world's reserve currency. When that day comes, the US is in for a rude awakening.
Peter hopes that crisis will inspire Americans to re-embrace their free market roots and return to a sound currency backed by gold.
Follow along with this transcript of Peter's responses:
“I wasn't shocked by it. I've been expecting China's economy to surpass the United States'. Right now, it's only surpassed it when you adjust for purchasing power parity. But I think over the next ten years or so, it could surpass it without making those adjustments, just on a dollar level. I think that will happen when the Chinese abandon their currency peg, and allow their currency to rise. I think it will rise substantially against the dollar, and that will improve their economy. It will improve the purchasing power of their citizens, and it will allow China to truly surpass the United States. Frankly, they might have already done that if they hadn't adopted this foolish currency policy years ago.
“I don't know that we're getting used to [the idea that China is surpassing the the US on multiple economic levels]. But we're going to have to. Ultimately, it's going to mean a big diminishment in the standard of living for Americans when the Chinese reclaim their production for themselves, and stop exporting what they make to America, and stop loaning us all this money. If you look at the most recent trade figures, China just posted its largest trade surplus ever. At the same time, America just posted its biggest trade deficit ever for factory goods.
“China's economic growth is not thanks to our generosity in accepting all their output. It's their effort that produced it in the first place. It's Chinese factories, it's Chinese capital investment and Chinese labor that is growing the Chinese economy, not American consumption. I think, if anything, we're a drag on the Chinese economy. I think if China wasn't foolishly subsidizing American consumption, the Chinese would be enjoying falling domestic prices, and they would be buying all the goods that are turning out from Chinese factories. Their economy and standard of living would be much stronger as a result.
