In November of 2006, Peter Schiff provided an hour-long speech to Mortgage Bankers. Apparently, he was the contrarian opinion at the time. With 20/20 hindsight, many of Peter's specific predictions have come true.

I believe in limited-government, freedom, capitalism, sound-money, the rule of law, all the concepts believed by the Founding Fathers when they first created this Republic. Unfortunately, few - if any - of those principles are applicable in the modern American economy.

Now, I want to talk mainly today about the real estate market and the mortgage market 'cause I know that's most relevant to the people in this room. But let me first talk about the broader economic picture and where we are as a nation.

You know, sure, we were first formed as a Republic a couple hundred years ago. The reason that we prospered, the reason that we became the world's wealthiest creditor nation, back in 1980 anyway, was because we have a comparative advantage and economic freedom. Taxes were much lower, the government was much less intrusive here in America than were the kings and despots all over Europe. So the American colonies and our new country prospered.

And we certainly borrowed a lot of money from the Europeans in the 19th century, but what we did with that money, we invested that money in factories, in infrastructure. We made capital investments. And by taking that money and building factories, we became the world's leading manufacturer and exporter of high quality, low cost consumer goods. Even though we eventually paid the highest wages in the world, American products were still the cheapest in price and the highest in quality.

And because we made productive use of the money that we borrowed from the Europeans, we were able to repay the debt. You see, when you borrow money and build a factory, the factory produces consumer goods. The consumer goods are sold. We sold those consumer goods: automobiles, sewing machines, dishwashers... we sold all these goods to the Europeans, and we paid off our debts. And we went from a debtor nation to a creditor nation.

And by 1980, we were not only the world's greatest creditor nation, but we had more foreign assets that were own by Americans than all the other creditor nations in the world combined. We were the world's biggest lender around the world. We lent money, you know, Americans were wealthy lenders, we had a high savings rate.

All that is different in modern America. Today, the United States is not the world's largest creditor nation; we're not even a creditor nation. We're not even a creditor nation. We're the world's largest debtor nation. In fact, we owe more than all the other debtor nations in the world combined.

We no longer flood the world with high-quality, low-cost, manufactured goods. We flood the world with our paper currency... our IOUs because we no longer possess the industrial might or the capability of producing those goods ourselves.

Instead of being the world's biggest lender, we're the world's biggest borrowers. The United States routinely borrows from the poorest countries in the world.

Now according to modern economic thinking, this new state of affairs is somehow sustainable and a viable economic symbiotic relationship between America and the rest of the world. The relationship is: America consumes... and everybody else produces. America borrows... and everybody else saves. And, you know, on the surface, potentially that argument could make sense: without American consumption, what would all these Chinese do for jobs?

As was pointed out by Barry, it's not about jobs. It's about consumption; it's about standard-of-living. We don't want jobs to work; we want jobs to consume... so we can have a higher standard of living. The fact that the Chinese get jobs in exchange for the products they give us doesn't do any good for the Chinese. The Chinese are perfectly capable of consuming their output themselves. They don't need their government to artificially suppress the exchange rate of the yuan so they could artificially elevate the value of the dollar so that Americans get to consume all the goods that the Chinese could have consumed, had not been for that monetary policy.

But this current dynamic where we don't save and we don't produce is not viable. It's no more viable than the economic model that existed in the 1990's with respect to internet stocks or technology companies, where Wall Street had people believe that stock prices could rise regardless of the fact that the companies had no earnings, paid no dividends... without any regard to any fundamental measure of valuation. We were told that it was a new era, and we saw what happened there. And the same Wall Street economists who told us that the internet era was a new era are now telling us that this current era of American consumption and global production is viable, and it's not.

Let me give you a quick little analogy and move onto another subject. But to describe this dynamic, assume that a group of cast-aways are stranded on an island. Let's say five of them are Asian, and one of them is an American. And they're stranded on this island, they have to divvy up the workload. So one of the Asians is given the job of hunting - looking for meat. Another one is going to be fishing, trying to catch fish. Another one is in charge of scourging the island for vegetation. Still another one gets the job of looking for wood, to build a fire and cook the meal. And then it comes down to the American, they sell, "Well, what job are we going to assign the American?" Well, the American gets assigned the job of eating.

And so at the end of the day, all these Asians gather around this big table after a hard day of hunting, foraging, and fishing and they prepare to feed this American - who did nothing all day but sun himself on the beach. He had a service economy.

In any event, a modern economist who was looking at this island's economy would say, "Ah, the American is the key to the whole thing. Without that American and his ravenous appetite, these poor Asians would have nothing to do all day... they'd all be unemployed." Well the reality is: the Asians are perfectly capable of consuming the food themselves. Now perhaps if they didn't have to spend all day long feeding this fat American, they wouldn't have to work as hard. Maybe they could pursue other interests that they had. The best thing they can do to improve their own standard of living, is to kick that American off the island. Of course, when that happens, that American's in trouble because he doesn't have five Asians doing all his work.

You know, it reminds me a lot of that book, "Tom Sawyer." You know, where Tom is able to convince all of his friends to whitewash his fence for him. And to not only do that, but pay him for the privilege. Because Tom Sawyer got his friends so convinced that there was so much joy in this toil that it was worth paying him, and so he got the world to pay him to do his chores. And little did Samuel Clemens realize that that little passage in that book would become the basis for the global economy. Where American convinced a billion Chinese to paint our fence and to pay us for the privilege. That's going to end.