Amid all the calls for government bailouts and consumer spending to prop up the global economy and stock markets, Peter Schiff leads a growing list of contrarians who say frivolous spending will only make things worse.
Mr. Schiff, who heads up Connecticut-based Euro Pacific Capital, was dubbed "Dr. Doom" on CNBC television in 2004 when he warned that getting Americans into houses they couldn't afford would cripple the financial system.
Mr. Schiff doubts that borrowing to spend -- by government, businesses or consumers -- will end the United States recession, which is spilling over into Canada. Confused, U.S. treasury secretary Henry Paulson switched horses in mid-stream, from buying toxic mortgages to giving banks and homeowners bailouts. And the Canadian government was so befuddled as to what might work, it announced no stimulus.
In an economy with no growth, governments can go into surplus by raising personal and business taxes and by reducing spending. Or the government can run a deficit by reducing taxes and increasing spending. The prudent strategy is usually felt to be spending as much as you can while producing a balanced budget.
Similarly, personal finance experts suggest individuals can help the economy by spending as much as they can as long as they pay off their credit every month to avoid paying interest.
On Bloomberg television, Mr. Schiff said: "Everything the (U.S.) government is doing now, and everything the Obama government is going to do when it takes over, is making the situation worse.
"We got into this mess because we borrowed and spent too much money. The solution isn't going into deeper debt to encourage Americans to borrow even more money, we need a serious recession and the government needs to get out of the way and let it happen. We need higher interest rates, we need more savings, we need more production. The problem is for years we borrowed money we couldn't repay. We ran up trillions of dollars of debt, and now we're too broke to pay it back.
"We have a phoney economy that's been propped up by foreign governments and foreign workers who have produced the stuff that we bought, and lent us the money to buy it. We need to recreate a viable economy in this country again, and unfortunately that comes with a lot of pain."
On BNN in Canada, Mr. Schiff said Americans "still think the government can solve these problems by printing money, by borrowing money, by trying to encourage more reckless borrowing and consumption, which really is at the root of this problem.
"If interest rates rise and asset prices fall, Americans will start saving money again, will have money for businesses to borrow, entrepreneurs will take the capital and invest it in factories and plants and equipment, we'll become more productive and eventually we'll be able to consume more.... Right now we're not producing anything and we're living beyond our means."
