Peter Schiff explained “What Happens Next.” This article takes his “likely sequence of events” and expands the discussion.

His sequence:

1.Bear Market
3.Deficits explode
4.Return of ZIRP and QE
5.Dollar tanks
6.Gold [and silver] soars
7.CPI spikes
8.Long-term rates rise
9.Federal Reserve is forced to hike rates during a recession
10.A financial crisis without stimulus or bailouts.

Expanding on his sequence:

BEAR MARKET: Bear markets happen often. Markets, whether stocks, bonds, sugar, crude oil or gold, rise too far and too fast and correct, sometime violently. An arbitrary definition of a bear market is a 20% decline. Larger corrections are common. Examples:

•NASDAQ 100 Index dropped 84% after the 2000 bubble.
•Crude oil dropped 76% during 2008 from its all-time high of $147.
•Silver dropped 93% in the decade following its all-time high in 1980 over $50.
•Deutsche Bank fell 90% since 2007.

RECESSION: Recessions often parallel bear markets in stocks and occur every five to ten years. Sometimes they are brief downturns where loans default, credit is tightened and businesses trim excess costs. The economy prospers after the recession until the next one arrives.

Pump too much credit into the economy (created by central banking and fractional reserve banking) and mal-investments expand. A recession cleanses the excess. But in 2008 the Fed “papered over” the problems and didn’t allow liquidation of bad debts, insolvent big banks and weak businesses. Instead the Fed created dollars from nothing and gave loans to big banks, insiders and the politically connected. Loan examples:

•Citigroup $2.513 trillion (Yes, $Trillions!)
•Bank of America $1.344 trillion
•Goldman Sachs $814 billion

DEFICITS EXPLODE: Recessions weaken the economy, businesses lose profits, pay less in taxes and the government must borrow the shortfall. Individuals lose their jobs, receive unemployment compensation, claim disability and collect Social Security. The government receives less tax revenue and pays out more in benefits. Deficits explode higher.

RETURN OF ZIRP AND QE: The central bank could allow banks to fail, tighten credit, increase interest rates and nurse the economy back to health over years, maybe decades. Will this happen? OF COURSE NOT! The Fed protects the big banks and treats the middle class as “milk cows” who feed banks and the political and financial elite. ZIRP and QE direct dollars to the big banks and create higher prices for everyone. If the Fed does not dissolve, expect QE and higher prices.

DOLLAR TANKS: Feed a huge number of new dollars into the economy and each dollar buys less, so prices rise. The dollar falls in purchasing power for everything we need. “Inflate or Die!”