Schiff: America is Already Bankrupt | Breakout - Yahoo! Finance

Peter Schiff makes it clear, up front, why he's not trying to save America from fiscal disaster. He's not un-American, he's just too late. "We're already bankrupt," Schiff declares in the attached clip. "Better to acknowledge that fact than to pretend we're not."

The author of the new book The Real Crash says it's the stimulus that got us into this mess, or at least exacerbated the one we already had. Because of the Feds effectively zero percent interest rate policy the U.S., both as individuals and a collective, spends, borrows, and generally wastes far too much while saving nothing.

"We can't have real economic growth until interest rates go up," says Schiff. "If we admit we're bankrupt and at least restructure, we can start repairing the damage and preparing the economy for real growth."

The man who forecast the end of the housing bubble in his book Crash Proof says the housing implosion wasn't his primary concern. "I was worried about what was going to happen when the government tried to reflate the bubble." The ensuing meltdown is going to result from the cure, not the original disease.

Schiff says the Congressional Budget Office (CBO) got it exactly backwards when they issued warnings that the U.S. would slip into recession if we reached the debt ceiling early in 2013. America literally can't cut spending fast enough; a recession now beats a depression later.

"Right now the government can spend as much as it wants because it can borrow." But there's a limit. Once U.S. interest rates are forced higher by concerned lenders, the party is going to be over for the U.S. Of course, there's no actual deadline for when those rate spikes happen. Currency and debt are relative, and the U.S. remains a relatively safe bet.

"The worst that can probably happen in the short run, if you're trying to keep the bubble going, would be some kind of resolution in Europe. If Europe actually gets its house in order, then we're really in trouble."

As Schiff views it, America's in much worse shape than Europe. What's saving us is that the problems over there are providing enough of a distraction?or are at least making the U.S. look good enough by comparison?that the Fed can keep rates near nil.

According to Schiff, the hangover from our money party will be hellish.

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