then there's been a lot of talk about particularly you know from the fair from all sorts of different places can you give us your of us whether not there is a housing bubble out there well I'm questioning housing prices are up quite a bit I think it's important to note that fundamentals are also very strong we've got a growing economy jobs incomes we've got very low mortgage rates we've got demographics supporting housing growth we've got restricted supply in some places so it's certainly understandable the prices would go up but go up some I don't know whether prices are exactly where they should be but I I think it's fair to say that much of what's happened is supported by the strength of the economy tell me what is the worst-case scenario so we have so many economists coming on our air and saying oh this is a bubble and it's going to burst and this is going to be a real issue for the economy some say could even cause a recession at some point what is the worst-case scenario if in fact we were to see prices come down substantially across the country well I guess I don't buy your premise it's a pretty unlikely possibility we've never had a decline in house prices on a nationwide nationwide basis so what I think is more likely is that the house prices will slow maybe stabilize might slow consumption spending a bit I don't think it's gonna drive the economy too far from its full employment path though I'm hopeful that then I'm confident in fact that the bank regulators will will pay close attention to the kinds of loans are being made making sure that underwriting is done right but I do think that this is a mostly localized problem and that's something that's going to affect the national economy but we expect moderate growth going forward we believe that if the housing sector begins to stabilize and if some of the inventory Corrections that are still going on in manufacturing begin to be completed that there's a reasonable possibility that we'll see some strengthening of the economy sometime during the middle of the year our assessment is that there's not much indication at this point that subprime mortgage issues have spread into the broader mortgage market which still seems to be healthy and the lending side of that still seems to be healthy the global economy continues to be strong supported by solid economic growth abroad US exports should expand further coming quarters overall the US economy appears likely to expand at a moderate pace over the second half of 2007 with growth then strengthening a bit in 2008 to a rate close to the economy's underlying trends I am entirely sympathetic to the efforts of the Fed it was a very hard time and but you should know that I'm biased because before he was demoted Ben Bernanke was the chairman of the Princeton economics department so okay how does all this end that's the that's to quit first question is you know is this going to be in a recession and let me say with great certainty I don't know and nobody knows Peter Schiff he's president of Euro Pacific Capital gentlemen thanks for being here Peter I want to start with you although there are more and more people saying that the US economy will be in a recession next year it is still a minority position why do you think that a recession is coming just how bad is it going to be I think it's gonna be pretty bad and whether it starts in a seven or eight I think is immaterial and I also think it's gonna last not just for quarters but for years so the basic problem of the US economy is we have too much consumption and and borrowing and not enough production and savings and what's gonna happen is the American consumer is basically going to stop consuming and start rebuilding a savings especially when he sees his home equity evaporate and when you have the economy 70% consumption you can't address those imbalances without a recession you know rather than the recession being resisted it should really be embraced because the disease is all this debt financed consumption cure is that we stop consuming and start saving and producing again and that's a recession and sometimes you know medicine taste bad but you got to swallow it art Laffer you hearing me says the consumer is going to slow down in order to rebuild the savings and you know that two-thirds of the American economy is driven by the consumer do you believe that no I don't believe any of it whatsoever Michele excuse me but you know what he's saying is that savings is way down in this country but wealth has risen dramatically the United States economy has never been better shape there is no tax increase coming in the next couple of years monetary policy is spectacular we have freer trade than ever before and not only that but there are no incomes policies things here I think Peter is just totally off-base and I don't think it's going to be I mean I just don't know where he's getting his stuff this one of us is off base but it's definitely not me I mean it's not wealth that's increased in the last few years we haven't increased our productive capacity all that's increased is the paper values of US stocks and real estate but that's not real wealth no more than was wealth when you see the stock market come down and the real estate bubble burst all that phony wealth is going to evaporate and all that's going to be left is all the debt that we accumulated to foreigners Peter I'm going to bet with you on this one I'll bet you a penny on this one that if you'll sign a letter saying that if you're wrong you'll sign a letter that you were to me in this but you're just way off base there is nothing out there that tells us we're gonna have a nice slow down but it's not gonna be alright let me ask you this question will Holmes be worth more or less in 2007 tunnel what do you think Lucie place has got about ten percent here's why because you were to come into a regular normal market and a regular normal mortgage that's a battle car appreciation you get into home prices up 10% in the coming year Peter what do you say well today's home prices are completely unsustainable they were bid up to these artificial Heights by a combination of temporarily low adjustment rate mortgage payments by a complete you know absence of any lending standards and by speculative buying and what's going to happen in 2007 is a lot of these artificially low arm payments are going to be reset upward you're gonna start to see both the government and the lenders reimposing lending standards and tightening up on credit and you're gonna see a lot of the speculative buyers turn into sellers and these sky-high real estate prices are gonna come crashing back down to earth I first will have no idea what Peter Schiff is talking about I agree with Tom I think they're gonna be up probably up to about 10 percent what artificial lending standard are you talking about it's what Peter those are the profits that people have in real estate are gonna vanish just like the prophets and in the dot-coms in 1999-2000 it's a fantasy people can't sell their house the inventories are exploding all over the country houses are on the market for six months a year there's no bidders the price will fall through the floor loud and clear from all of our pallets we think about subprime is tiny subprime is a tiny tiny blip it's not tiny and again it's not just subprime it's the entire mortgage market right everything all right well Tracy you're disagreeing was simply wrong well you're simply wrong about that I'm not an economy we have yes we don't have a more efficient economy yes we have a bubble economy we're borrowing from abroad they consume that's not efficiency what do you think gold is saying well you know first of all you just described the US market is being bulletproof and I think gold is telling us that it's about to get shot full of holes I also I think I might just maybe take a little issue with the other guest here I mean in I mean the whole concept of the this US economy is teetering on recession you know with all due respect I think is is absurd it's completely absurd because excuse me sir let me let me finish I think the stock market generally speaking does not give false positives or false negatives in 2000 this stock market doesn't give false signals well we're scible well how are the consumers served by having the value of their money the value of their wages and their savings diminished I don't think that has any impact and the Fed doesn't have any impact on that at all I think those who aren't familiar with you this has been your prediction for how many decades now well not not decades but it's certainly been my my prediction for the last seven or eight years and I've been dead on right if you have sure look what's happened since 2000 so I think as more and more people are starting to see that Wall Street is conning them you know and hey if these guys can be so wrong about Enron so we're on the wrong about worldcom so long about wrong about Cisco or any of these companies that we're so heavily touted why can't they be wrong about the whole thing about they're about what they're saying about the economy about what they're saying about the market and they are wrong don't believe that the propaganda and that's what it is when you're listening to an analyst on a lot of these popular financial shows are these the mainstream Wall Street firms you're not getting investment advice you're getting propaganda the field policy in and it's not it's not working at all and we don't change anything with if we got in this trouble because we had low interest rates getting businessmen and savers to do the wrong thing just doing more of the wrong thing continuously I can't see how this is going to be helpful my question to you mr. chairman is this what will it take for you to say to yourself could I be wrong you know what if I'm mistaken you know how long is this gonna go on $19.00 what if say in five years from now we're in a deep deep slump with your definition of inflation what if we have high prices going in the economy is very very weak and unemployment is high would you say to yourself then well maybe I really messed up maybe I was on the wrong track maybe the free market people were right maybe Keynes was wrong would you ever consider that or