Peter Schiff on CNBC World 7/7/2017
Transcript : ok let's get our next guest in that
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leadership CEO of euro pacific capital
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he doing this from toronto in Puerto
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Rico and peter schiff of course that for
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the predicted the financial crisis as
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far back as 2006 appear to have you on
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the show I'd love to get your comment
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here about department there again just
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read the quote here it's saying that if
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things go wrong we could find ourselves
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at the beginning beginning of a lengthy
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decline and dollar had the money and a
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rapid rise in interest rates and
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inflation and global banks I mean you
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agree
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well it's going to happen regardless
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whether things go right or wrong I think
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it's inevitable at this point so it's
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not a question of will that happen it's
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just a question of when it's a question
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of when ok let's talk about the trade
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deficit very quickly because even
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numbers that you know don't don't get a
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whole lot of attention usually but this
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year because of the focus on the trade
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deficit from the Trump administration a
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lot of people paying attention to it the
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trade balance negative for the 41st year
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in a row
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how effective do you think that Donald
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Trump policy will be in narrowing that
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gap s
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well so far not always sure what the
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policy is going to be I don't think that
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terrorists are necessarily going to do
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it i think what the problem is that
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America you know we don't save and often
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so we don't have the capital available
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to make the investments that are
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necessary to finance production our
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taxes are too high or regular that the
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regulations are too many so we need
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substantial deregulation we need lower
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taxes but in order to finance that we
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need a smaller government so major
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reforms have to take place you know
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meanwhile the trade depth that we had
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last year was the largest I think it's
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for years it's over 500 billion dollars
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and there are a lot of people out there
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that don't think a trade deficit is a
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bad thing because they think the trade
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deficit is enabling a capital account
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surplus but a capital account surplus is
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not a good thing it means you're selling
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off your assets are going into debt and
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your trading partners are accumulating
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asked that's in exchange for the
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products they sell you so you don't want
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to go into debt you don't want to be
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obligated to pay interest and dividends
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to your trading partners you want to run
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a surplus and you want to get richer you
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want to accumulate assets but we're not
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doing that and I don't think that we're
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going to achieve a meaningful reduction
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in our trade deficits simply by
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negotiating better deals we have to get
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to the real heart of why America is so
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uncompetitive and it's yet to be seen
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whether the Trump administration is
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actually going to be able to achieve
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that net and I wanted to get your
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thinking on the trading dynamics right
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now we've gotta start getting a record
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tonight do you think that investors are
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placing too much of the best on Trump's
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policies in this expansion real physical
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agenda
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yes I do and I think they're overlooking
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the contractionary impact of rising
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interest rates not necessarily just a
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red the rates of the Fed controls but
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look at what happened to the long end of
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the bond market since Trump was elected
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and even though you know we did get that
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big reaction in the market at the end of
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last year so far this year in 2017 the
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that was not making much in the way of
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games that's up maybe another one
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percent but nobody no one is talking
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about boulders up seven percent so far
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in 2017 you know there's a gdxj is an
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index of junior gold mining stocks it's
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up
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thirty-three percent this year just as
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january first and meanwhile the dollar
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is starting to go down it hasn't gone
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down to that much yet against the euro
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but you look at the australian dollar i
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think it's up six percent or so this
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year against the US dollar but i think
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the dollar starting to roll over
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gold was breaking out gold stocks are
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really started to move so i think most
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investors are missing what's really
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going on up because they are fixated on
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the doubt the emerging markets are
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starting to starting to improve and I
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think those trends will continue
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throughout the year and anyone who knows
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that shift stick to take anyone in his
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village really closely knows you're an
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absolute gold bola in the core of your
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heart and tell me how do you think the
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Fed responsibility to this expansion
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real physical agenda especially at the
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peak of the cycle is well teta we're
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getting the stimulus at a time when we
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don't really need it
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well we never needed stimulus because
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this stimulus is actually a sedative
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everything the Federal Reserve did to
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stimulate the economy undermine the
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economy that's the reason that Donald
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Trump is president because all the
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stimulus made the economy so sick me
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what we need to stimulate is not stock
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prices are real estate prices or bond
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prices but real economic growth and that
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comes from under product consumption
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from savings from capital investment and
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that comes from higher interest rates
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that's what we needed all along with
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higher interest rates but we got a
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monetary heroin instead and so the
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economy never got healthy it's sicker
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than ever and that is the problem and i
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do believe that the Federal Reserve is
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going to ignore rising inflation as that
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manifest and consumer prices i don't
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believe that that will be the case on
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the other side of the Atlantic I think
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that will be enough pressure from the
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Bundesbank on the ECB that they're going
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to have to take away some of their
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stimulus just as the Fed is adding so I
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think you're going to see tighter
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monetary policy in Europe and you're
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gonna get looser monetary policy in the
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u.s. because the Fed is going to try to
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artificially prop up the economy as it
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weekends with uh eventually dialing back
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to rate high talk eventually cutting
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rates and going back to Cuba for none of
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this is going to work but it is going to
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accelerate the decline of the dollar and
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you know bring about the the problems
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that the hedge fund manager alluded to
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with respect to what would happen if
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things go wrong because there's no other
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way that they could go but wrong
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okay and also just wanted to ask you
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about the topic du jour Akiko and I were
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talking about this earlier which is
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under dodd-frank are you concerned about
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the ambiguity surrounding the plan to
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scale back dodd-frank and what does it
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present when it comes to risk in your
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view
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well dodd-frank was a bad idea I mean
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look at it was named after Chris Dodd
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and barney frank two of the most
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influential members of Congress that
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helped to create the financial crisis
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because they protected fannie mae and
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freddie mac and they resisted all
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efforts to rein them in the financial
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crisis was not caused by a lack of
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regulation but by the central bank by
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alan greenspan keeping rates too low and
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by the moral hazards of a fannie and
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freddie and government-guaranteed bank
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accounts oh god Frank did nothing to
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mitigate the prospects for future
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financial crisis of anything it is
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accelerated them because what we needed
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to do in the aftermath of the 2008
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crisis was to take power away from the
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Fed in the government instead they got
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more but what scares me is to the extent
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that we do manage to roll back some of
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the regulation that never should have
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been enacted and when the inevitable
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financial crisis hits to the extent that
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happens after this deregulation I can
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already hear the left now blaming the
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crisis on that deregulation that crisis
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is inevitable it's going to happen
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whether we get rid of dodd-frank or not
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but it was bad legislation and we should
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get rid of it but when we do it is not
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going to be the reason that we have
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another financial crisis the reason is
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is going to be the Fed the same the same
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reason that we had the first one is why
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the second one is good even worse and
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Peter you said that investors are sort
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of missing the bigger picture here
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they're so fixated on the dell and that
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level there you mentioned emerging
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markets as a potential spacer where are
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you seeing the opportunities outside of
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the US
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yeah i mean they're happening in many
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countries just like if you remember when
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a bill clinton was president and when
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his president he ended and george bush
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came in there was a lot of optimism that
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the rally in the US stock market would
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continue that the strength of the dollar
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would continue and instead everything
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reversed if you remember the emerging
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markets had a lot of difficulties in the
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late nineteen nineties with the asian
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economic meltdown in 97 and there are a
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lot of things happening outside the
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united states so emerging markets really
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got beat up
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I also in in South America or Latin
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America but that all changed 2001 as the
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US stock market went down money started
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to flow back into those areas and people
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made a lot of money in emerging markets
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and commodities in precious metals you
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in oil and agriculture and I think the
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same dynamics are lining up again
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only I think that President Trump has
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inherited a much bigger bubble up from
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Obama than the one that Bush inherited
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from clinton and so I think that dollars
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gone a lot lower this time and I think
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commodity prices could go a lot higher
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so there's a much more bigger profit
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potential now I then there was back then
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in the right markets ok feet are gonna
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have to leave it on that no it's always
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good to get your insights peter schiff
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joining us from euro pacific capital
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