Peter Schiff writes:

“In the past two weeks I was treated to two particularly moronic public statements from market experts.

Last week, during an interview on CNBC, Dennis Gartman, editor of the highly regarded Gartman Letter, asserted that the storage currency of choice among drug traffickers, arms dealers, and the Russian Mafia had switched from $100 dollar US bills to €500 Euro notes. Gartman proclaimed the development to be bullish for the U.S. economy and bearish for the Euro zone. Say what?

Gartman’s “logic” was that when the dormant $100 bills sitting in attaché cases, safety deposit boxes, and mattresses returned to America, the additional spending would boost the US economy. Conversely, he asserted, the removal of euros from circulation would hurt the euro-zone economies. Basically, Gartman’s comments boiled down to the belief that economic growth can be created by introducing more money into circulation. Or, more precisely, that inflation creates prosperity.

The reality is that Americans receive a huge subsidy as a result of U.S. currency being stashed away in foreign suitcases. It’s like writing checks that no one cashes. Dollars circulating abroad do not bid up consumer prices at home, which results in Americans having more goods to consume at lower prices. If the hoarded bills were to suddenly return to domestic circulation, the result would not be more growth but only higher prices and interest rates. Alternatively, were those dollars deposited in foreign bank accounts, Americans would be required to pay interest on balances that previously earned nothing.

Any way you slice it, the fact that criminals are moving from dollars to euros is a negative development for an American economy accustomed to the subsidy. In addition, it reveals the diminishing prestige of the dollar and the increasing concerns others have for its reliability as a dependable store of value. Because cash under a mattress earns no interest, the only consideration given is it’s preservation of purchasing power. The fact that criminals increasingly prefer euros to dollars speaks volumes. If only Gartman had the good sense to listen.”